Finance Act 1997 (c. 16)

(The document as of February, 2008)

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(b) incurred those expenses out of the emoluments of that office or employment.

(3) Section 200B shall not apply in the case of any expenditure incurred in paying or reimbursing the cost of providing the employee with, or with the use of, any asset except where--

(a) the asset is provided or made available for use only in the course of the training;

(b) the asset is provided or made available for use in the course of the training and in the performance of the duties of the employee's office or employment but not for any other use;

(d) the asset consists in something made by the employee in the course of the training or incorporated into something so made.

(4) Section 200B shall apply in the case of expenditure in connection with anything that is a qualifying course of training for the purposes of section 588 to the extent only that section 588(1) does not have effect.

(5) Section 200B shall not apply in the case of any expenditure incurred in enabling the employee to meet, or in reimbursing him for, any payment in respect of which there is an entitlement to relief under section 32 of the [1991 c. 31.] Finance Act 1991 (vocational training).

(6) In subsection (1) above the reference to enjoying facilities or benefits for entertainment or recreational purposes includes a reference to enjoying them in the course of any leisure activity.

(7) In this section--

"employment inducement", in relation to the employee, means an inducement to remain in, or to accept, any office or employment with the employer or a person connected with the employer;
"subsistence" includes food and drink and temporary living accommodation; and
"training materials" means stationery, books or other written material, audio or video tapes, compact disks or floppy disks.

(8) Section 839 (meaning of "connected person") applies for the purposes of this section.

200D Other work-related training

(1) For the purposes of Schedule E, where--

(a) any person ("the employee") who holds an office or employment under another ("the employer") is provided by reason of that office or employment with any benefit,

(b) that benefit consists in any work-related training or is provided in connection with any such training, and

(c) the amount which (apart from this section and sections 200B and 200C) would be included in respect of that benefit in the emoluments of the employee ("the chargeable amount") is or includes an amount that does not represent expenditure incurred by the employer,

the questions whether and to what extent those emoluments shall in fact be taken to include an amount in respect of that benefit shall be determined in accordance with those sections as if the benefit had been provided by means of a payment by the employer of an amount equal to the whole of the chargeable amount.

(2) In this section "work-related training" has the same meaning as in section 200B. "

(2) In section 200A(3)(b) of that Act (definition of a qualifying absence from home), the word "either" before sub-paragraph (i) shall be omitted and, at the end of sub-paragraph (ii), there shall be inserted " or

(iii) expenses the amount of which, having been paid or reimbursed by the person under whom he holds that office or employment, is excluded from his emoluments in pursuance of section 200B, or

(iv) expenses the amount of which would be so excluded if it were so paid or reimbursed. "

(3) This section applies for the year 1997-98 and subsequent years of assessment.

Relieved expenditure, losses etc.

64 Postponed company donations to charity

(1) In section 339 of the Taxes Act 1988 (company donations to charity), after subsection (7) there shall be inserted the following subsections--

" (7AA) Where--

(a) a covenanted donation to a charity is made by a company which is wholly owned by a charity,

(b) the requirements of subsection (7) above for that donation to be regarded as a charge on income are satisfied,

(c) the disposition or covenant under which the donation is made required it to be made in an accounting period of the company which ended before the time when it is in fact made, and

(d) the donation is made within nine months of the end of that period,

the donation shall be deemed for the purposes of section 338 to be a charge on income paid in the accounting period in which it was required to be made, and not in any later period.

(7AB) For the purposes of this section a company is wholly owned by a charity if it is either--

(a) a company with an ordinary share capital every part of which is owned by a charity (whether or not the same charity); or

(b) a company limited by guarantee in whose case every person who--

(i) is beneficially entitled to participate in the divisible profits of the company, or

(ii) will be beneficially entitled to share in any net assets of the company available for distribution on its winding up,

is or must be a charity or a company wholly owned by a charity.

(7AC) For the purposes of subsection (7AB) above ordinary share capital of a company shall be taken to be owned by a charity if there is a charity which--

(a) within the meaning of section 838 directly or indirectly owns that share capital; or

(b) would be taken so to own that share capital if references in that section to a body corporate included references to a charity which is not a body corporate. "

(2) This section has effect in relation to donations made in accounting periods beginning on or after 1st April 1997.

65 National Insurance contributions

(1) Section 617 of the Taxes Act 1988 (social security benefits and contributions) shall be amended as follows.

(2) In subsection (3) (which provides that, subject to subsection (4) and (5), no relief or deduction shall be given in respect of National Insurance contributions) the words "and (5)" shall be omitted in consequence of the repeal of subsection (5) by section 147 of the [1996 c. 8.] Finance Act 1996.

(3) For subsection (4) (exception from subsection (3) for secondary Class 1 contributions which are allowable as a deduction in certain computations) there shall be substituted--

" (4) Subsection (3) above shall not apply to a contribution if it is a secondary Class 1 contribution or Class 1A contribution (within the meaning of Part I of either of those Acts) and is allowable--

(a) as a deduction in computing profits or gains;

(b) as expenses of management deductible under section 75 or under that section as applied by section 76;

(d) as a deduction under section 198 from the emoluments of an office or employment; or

(e) as a deduction under section 332(3)(a) from the profits, fees or emoluments of the profession or vocation of a clergyman or minister of any religious denomination. "

(4) Subsection (2) above has effect in relation to the year 1996-97 and subsequent years of assessment.

(5) Subsection (3) above has effect in relation to contributions paid on or after 26th November 1996.

66 Expenditure on production wells etc

(1) After section 91B of the Taxes Act 1988 there shall be inserted the following section--

" 91C Mineral exploration and access

Where--

(a) a person carrying on a trade incurs expenditure on mineral exploration and access as defined in section 121(1) of the [1990 c. 1.] Capital Allowances Act 1990 in an area or group of sands in which the presence of mineral deposits in commercial quantities has already been established, and

(b) if the presence in that area or group of sands of mineral deposits in commercial quantities had not already been established, that expenditure would not have been allowed to be deducted in computing the profits or gains of the trade for the purposes of tax,

that expenditure shall not be so deducted. "

(2) In section 115 of the Capital Allowances Act 1990 (certain expenditure on purchased assets treated as expenditure on mineral exploration and access if attributable to previous trader's expenditure on mineral exploration and access), after subsection (2) there shall be inserted the following subsection--

" (2A) Expenditure incurred by the previous trader which is or has been deducted in computing, for the purposes of tax, the profits or gains of a trade carried on by him shall not be treated as expenditure on mineral exploration and access for the purposes of subsection (1)(b). "

(3) Subsection (1) above applies to expenditure which--

(a) is incurred on or after 26th November 1996; but

(b) is not incurred before 26th November 1997 in pursuance of a contract entered into before 26th November 1996.

(4) The reference in subsection (3) above to expenditure incurred in pursuance of a contract entered into before 26th November 1996 does not, in the case of a contract varied on or after that date, include a reference to so much of any expenditure of the sort described in section 91C of the Taxes Act 1988 as exceeds the amount of expenditure of that sort that would have been incurred if that contract had not been so varied.

(5) Subsection (2) above applies in relation to claims made on or after 26th November 1996.

67 Annuity business of insurance companies

(1) In section 437 of the Taxes Act 1988 (extent to which payments in respect of new annuities are to be treated as charges on income), for subsections (1A) and (1B) there shall be substituted the following subsection--

" (1A) In the computation, otherwise than in accordance with the provisions applicable to Case I of Schedule D, of the profits for any accounting period of a company's life assurance business, new annuities paid by the company in that period shall be brought into account by treating an amount equal to the income limit for that period as a sum disbursed as expenses of management of the company for that period. "

(2) In subsection (1C) of that section (interpretation of section), after "this section" there shall be inserted "(but subject to subsections (1CA) to (1CD) below)"; and after that subsection there shall be inserted the following subsections--

" (1CA) Where a new annuity ("the actual annuity") is a steep-reduction annuity, the income limit for an accounting period of the company paying the annuity shall be computed for the purposes of this section as if--

(a) the contract providing for the actual annuity provided instead for the annuities identified by subsections (1CB) and (1CC) below; and

(b) the consideration for each of those annuities were to be determined by the making of a just and reasonable apportionment of the consideration for the actual annuity.

(1CB) The annuities mentioned in subsection (1CA)(a) above are--

(a) an annuity the payments in respect of which are confined to the payments in respect of the actual annuity that fall to be made before the earliest time for the making in respect of the actual annuity of a reduced payment such as is mentioned in section 437A(1)(c); and

(b) subject to subsection (1CC) below, an annuity the payments in respect of which are all the payments in respect of the actual annuity other than those mentioned in paragraph (a) above.

(1CC) Where an annuity identified by paragraph (b) of subsection (1CB) above ("the later annuity") would itself be a steep-reduction annuity, the annuities mentioned in subsection (1CA)(a) above--

(a) shall not include the later annuity; but

(b) shall include, instead, the annuities which would be identified by subsection (1CB) above (with as many further applications of this subsection as may be necessary for securing that none of the annuities mentioned in subsection (1CA)(a) above is a steep-reduction annuity) if references in that subsection to the actual annuity were references to the later annuity.

(1CD) Subsections (1CA) to (1CC) above shall be construed in accordance with section 437A. "

(3) After that section there shall be inserted the following section--

" 437A Meaning of "steep-reduction annuity" etc

(1) For the purposes of section 437 an annuity is a steep-reduction annuity if--

(a) the amount of any payment in respect of the annuity (but not the term of the annuity) depends on any contingency other than the duration of a human life or lives;

(b) the annuitant is entitled in respect of the annuity to payments of different amounts at different times; and

(c) those payments include a payment ("a reduced payment") of an amount which is substantially smaller than the amount of at least one of the earlier payments in respect of that annuity to which the annuitant is entitled.

(2) Where there are different intervals between payments to which an annuitant is entitled in respect of any annuity, the question whether or not the conditions in subsection (1)(b) and (c) above are satisfied in the case of that annuity shall be determined by assuming--

(a) that the annuitant's entitlement, after the first payment, to payments in respect of that annuity is an entitlement to payments at yearly intervals on the anniversary of the first payment; and

(b) that the amount to which the annuitant is assumed to be entitled on each such anniversary is equal to the annuitant's assumed entitlement for the year ending with that anniversary.

(3) For the purposes of subsection (2) above an annuitant's assumed entitlement for any year shall be determined as follows--

(a) the annuitant's entitlement to each payment in respect of the annuity shall be taken to accrue at a constant rate during the interval between the previous payment and that payment; and

(b) his assumed entitlement for any year shall be taken to be equal to the aggregate of the amounts which, in accordance with paragraph (a) above, are treated as accruing in that year.

(4) In the case of an annuity to which subsection (2) above applies, the reference in section 437(1CB)(a) to the making of a reduced payment shall be construed as if it were a reference to the making of a payment in respect of that annuity which (applying subsection (3)(a) above) is taken to accrue at a rate that is substantially less than the rate at which at least one of the earlier payments in respect of that annuity is taken to accrue.

(5) Where--

(a) any question arises for the purposes of this section whether the amount of any payment in respect of any annuity--

(i) is substantially smaller than the amount of, or

(ii) accrues at a rate substantially less than,

an earlier payment in respect of that annuity, and

(b) the annuitant or, as the case may be, every annuitant is an individual who is beneficially entitled to all the rights conferred on him as such an annuitant,

that question shall be determined without regard to so much of the difference between the amounts or rates as is referable to a reduction falling to be made as a result of the occurrence of a death.

(6) Where the amount of any one or more of the payments to which an annuitant is entitled in respect of an annuity depends on any contingency, his entitlement to payments in respect of that annuity shall be determined for the purposes of section 437(1CA) to (1CC) and this section according to whatever (applying any relevant actuarial principles) is the most likely outcome in relation to that contingency.

(7) Where any agreement or arrangement has effect for varying the rights of an annuitant in relation to a payment in respect of any annuity, that payment shall be taken, for the purposes of section 437(1CA) to (1CC) and this section, to be a payment of the amount to which the annuitant is entitled in accordance with that agreement or arrangement.

(8) References in this section to a contingency include references to a contingency that consists wholly or partly in the exercise by any person of any option. "

(4) Section 434B(2) of that Act (treatment of annuities paid by an insurance company) shall cease to have effect and accordingly--

(a) in section 76(2A)(b) of that Act (limit on expenses of management of insurance companies), the word "and" shall be inserted at the end of sub-paragraph (ii), and sub-paragraph (iv) (together with the word "and" immediately preceding it) shall be omitted; and

(b) in section 337(2B) of that Act, for "the references in sections 338(2) and 434B(2)" there shall be substituted "the reference in section 338(2)".

(5) In paragraph 9B of Schedule 19AC to that Act (subsection (3) inserted in section 434B in relation to overseas life insurance companies), for the words from the beginning to "An" there shall be substituted--

" 9B The following section shall be treated as inserted after section 434A--

" 434AA Treatment of annuities

An " . "

(6) In sub-paragraph (1) of paragraph 16 of Schedule 7 to the [1991 c. 31.] Finance Act 1991 (which makes transitional provision for annuities under contracts made in accounting periods beginning before 1st January 1992), for the words before paragraph (a) there shall be substituted--

" (1) In the computation, otherwise than in accordance with the provisions applicable to Case I of Schedule D, of the profits for any accounting period of an insurance company's life assurance business, an amount equal to the lesser of the following amounts shall be treated (if it is not nil) as a sum disbursed as expenses of management of the company for that period, that is to say-- " .

(7) Subsections (1) and (4) to (6) above have effect in relation to accounting periods beginning after 5th March 1997.

(8) Subsections (2) and (3) above have effect in relation to accounting periods ending on or after 5th March 1997 but do not affect the computation of the capital elements contained in any annuity payments made before that date.

68 Consortium claims for group relief

In section 410 of the Taxes Act 1988 (group relief not available in certain cases including those where a person, either alone or with connected persons, controls 75% or more of the voting rights in a company owned by a consortium), in the definition of "connected persons" in subsection (5) after "in accordance with section 839" there shall be inserted "but as if subsection (7) of that section (persons acting together to control a company are connected) were omitted".

Distributions etc.

69 Special treatment for certain distributions

Schedule 7 to this Act (which makes provision for the treatment of distributions arising on the purchase etc. by a company of its own shares and for cases where a distribution has a connection with a transaction in securities) shall have effect.

70 Distributions of exempt funds

(1) In subsection (5) of section 236 of the Taxes Act 1988 (meaning of "relevant profits")--

(a) in paragraph (a), after "franked investment income" there shall be inserted "and foreign income dividends"; and

(b) in paragraph (b), for "and franked investment income" there shall be substituted ", franked investment income and foreign income dividends".

(2) After subsection (7) of that section there shall be inserted the following subsection--

" (8) In this section "foreign income dividends" shall be construed in accordance with Chapter VA of Part VI. "

(3) This section has effect (subject to subsection (4) below) for the purposes of computing the relevant profits (within the meaning of section 236 of the Taxes Act 1988) arising to a company in any period falling wholly or partly after 7th October 1996.

(4) No foreign income dividend paid before 8th October 1996 shall be included or, as the case may be, excluded by virtue of this section from any such profits as are mentioned in subsection (3) above.

71 Set-off against franked investment income

Section 242 of the Taxes Act 1988 (set-off of losses against surplus franked investment income) shall have effect, and be deemed always to have had effect, as if at the end of paragraph (c) of subsection (6) (power to carry set-off forward) there were inserted " and

(d) in relation to relief given in respect of amounts available to be set against profits under section 83 of the [1996 c. 8.] Finance Act 1996 or paragraph 4 of Schedule 11 to that Act or under section 131(4) of the [1993 c. 34.] Finance Act 1993 (which are provisions relating to deficits on loan relationships, foreign exchange losses and losses on certain financial instruments); " .

72 FIDs paid to unauthorised unit trusts

(1) In section 246D(5) of the Taxes Act 1988 (section 233(1) and (1A) of that Act not to apply to FIDs paid to individuals, personal representatives or certain trustees), after "representatives" there shall be inserted ", a foreign income dividend paid to the trustees of a unit trust scheme to which section 469 applies".

(2) This section has effect in relation to distributions made on or after 26th November 1996.

73 Tax advantages to include tax credits

(1) In section 709 of the Taxes Act 1988 (meaning of "tax advantage" etc. in Chapter I of Part XVII of that Act), after subsection (2) there shall be inserted the following subsection--

" (2A) In this Chapter references to a relief and to a repayment of tax include, respectively, references to a tax credit and to a payment of any amount in respect of a tax credit. "

(2) This section--

(a) has effect for the purposes of the application of provisions of Chapter I of Part XVII of the Taxes Act 1988 in relation to chargeable periods ending at any time, including times before the passing of this Act, but

(b) without prejudice to the construction of that Chapter apart from this section, does not apply in the case of a tax credit in respect of a distribution made before 8th October 1996.

Investments etc.

74 Enterprise investment scheme

Schedule 8 to this Act (which amends the provisions in Chapter III of Part VII of the Taxes Act 1988 about the companies which are qualifying companies for the purposes of the enterprise investment scheme and makes related amendments to that Chapter) shall have effect.

75 Venture capital trusts

(1) Section 842AA of the Taxes Act 1988 (venture capital trusts) shall have effect, and be deemed always to have had effect, with the following subsections inserted after subsection (5)--

" (5A) Subsection (5B) below applies where--

(a) there has been an issue of ordinary share capital of a company ("the first issue"),

(b) an approval of that company for the purposes of this section has taken effect on or before the day of the making of the first issue, and

(5B) Where this subsection applies, the use to which the money raised by the further issue is put, and the use of any money deriving from that use, shall be disregarded in determining whether any of the conditions specified in subsection (2)(b) and (c) above are, have been or will be fulfilled in relation to--

(a) the accounting period in which the further issue is made; or

(b) any later accounting period ending no more than three years after the making of the further issue. "

(2) Subsection (6) of that section (withdrawal of approval) shall have effect, and be deemed always to have had effect, with the insertion of the following paragraph before the word "or" at the end of paragraph (c)--

" (ca) in a case where the use of any money falls to be disregarded for any accounting period in accordance with subsection (5B) above--

(i) that the first accounting period of the company for which the use of that money will not be disregarded will be a period in relation to which a condition specified in subsection (2) above will fail to be fulfilled; or

(ii) that the company has not fulfilled such other conditions as may be prescribed by regulations made by the Board in relation to, or to any part of, an accounting period for which the use of that money falls to be disregarded; " .

(3) Schedule 9 to this Act (which amends the provisions of Schedule 28B to the Taxes Act 1988 defining "qualifying holdings") shall have effect.

76 Stock lending and manufactured payments

Schedule 10 to this Act (which makes provision for the treatment for the purposes of income tax, corporation tax and capital gains tax of stock lending arrangements and manufactured payments) shall have effect.

77 Bond washing and repos

(1) After subsection (2A) of section 731 of the Taxes Act 1988 (disapplication of bond washing rules where buyer has to make manufactured payment) there shall be inserted the following subsections--

" (2B) Subject to subsection (2E) below, where there is a repo agreement in relation to any securities--

(a) neither--

(i) the purchase of the securities by the interim holder from the original owner, nor

(ii) the repurchase of the securities by the original owner,

shall be a purchase of those securities for the purposes of subsection (2) above; and

(b) neither--

(i) the sale of the securities by the original owner to the interim holder, nor

(ii) the sale by the interim holder under which the securities are bought back by the original owner,

shall be taken for the purposes of subsection (2) above to be a subsequent sale of securities previously purchased by the seller.

(2C) Accordingly, where there is a repo agreement, the securities repurchased by the original owner shall be treated for the purposes of subsection (2) above (to the extent that that would not otherwise be the case) as if they were the same as, and were purchased by the original owner at the same time as, the securities sold by him to the interim holder.

(2D) For the purposes of subsections (2B) and (2C) above there is a repo agreement in relation to any securities if there is an agreement in pursuance of which a person ("the original owner") sells the securities to another ("the interim holder") and, in pursuance of that agreement or a related agreement, the original owner--

(a) is required to buy back the securities;

(b) will be required to buy them back on the exercise by the interim holder of an option conferred by the agreement or related agreement; or

(c) is entitled, in pursuance of any obligation arising on a person's becoming entitled to receive an amount in respect of the redemption of those securities, to receive from the interim holder an amount equal to the amount of the entitlement.

(2E) Subsections (2B) and (2C) above do not apply if--

(a) the agreement or agreements under which the arrangements are made for the sale and repurchase of the securities are not such as would be entered into by persons dealing with each other at arm's length; or

(b) any of the benefits or risks arising from fluctuations, before the securities are repurchased, in the market value of the securities in question accrues to or falls on the interim holder.

(2F) Section 730B applies for the purposes of subsections (2B) to (2E) above as it applies for the purposes of section 730A. "

(2) This section applies in relation to cases in which the interest becomes payable on or after the day on which this Act is passed.

78 National Savings Bank interest

(1) In section 349(3) of the Taxes Act 1988 (cases where yearly interest may be paid without deduction of tax), after paragraph (b) there shall be inserted the following paragraph--

" (ba) to interest paid on deposits with the National Savings Bank; or " .

(2) This section applies to interest whenever paid (including interest paid before the day on which this Act is passed).

79 Payments under certain life insurance policies

(1) In this section "relevant excepted benefit" means so much of any qualifying payment under a relevant life insurance policy as--

(a) is a sum falling, but for this section, to be treated for the purposes of the Tax Acts as an amount of interest or as an annual payment;

(b) is not a sum paid or falling to be paid by virtue of provisions of that policy which, taken alone, would constitute a different sort of policy; and

(i) any other part of that qualifying payment, or

(ii) the whole or any part of any other qualifying payment under the policy.

(2) For the purposes of subsection (1)(c) above, interest on the whole or any part of a qualifying payment under a policy ("the relevant amount") is interest for late payment if it is interest for a period beginning on or after the date of the occurrence of the event or contingency as a result of the occurrence of which the relevant amount falls to be paid.

(3) The Tax Acts shall have effect, and be deemed always to have had effect, as if--

(a) a relevant excepted benefit were neither an amount of interest nor an annual payment;

(b) the payments which are relevant capital payments for the purposes of section 541 of the Taxes Act 1988 (computation of gain in the case of life policies) included the payment of a relevant excepted benefit;

(i) except in a case falling within sub-paragraph (ii) below, of a part of the rights conferred by the policy in question; and

(ii) in a case where the payment of the benefit (or of that benefit together with any interest falling within subsection (1)(c) above) comprises the whole of the last payment to be made under the policy, of all of the remaining rights so conferred;

and

(d) the value of the part or rights treated as surrendered on the payment of a relevant excepted benefit were equal to the amount of the payment.

(4) For the purposes of this section a qualifying payment under a relevant life insurance policy is any amount which has been or is to be paid under that policy by the insurer.

(5) In this section "relevant life insurance policy" means any contract of insurance (whenever effected) which--

(a) is of a description applying to contracts the effecting and carrying out of which falls within Class I or III of the classes of long term business specified in Schedule 1 to the [1982 c. 50.] Insurance Companies Act 1982; and

(b) is neither--

(i) an annuity contract, nor

(ii) a contract effected in the course of a company's pension business (within the meaning given by section 431B of the Taxes Act 1988 or the corresponding enactment in force when the contract was effected).

(6) In subsection (1)(b) above, the reference to a different sort of policy is a reference to any contract of a description applying to contracts the effecting and carrying out of which falls within any class of business specified in Schedule 1 or 2 to the [1982 c. 50.] Insurance Companies Act 1982 other than the Classes I and III specified in Schedule 1.

(7) This section shall be deemed to have had effect, for the purposes of the cases to which the enactments applied, in relation to enactments directly or indirectly re-enacted in the Tax Acts, as it has effect in relation to those Acts.

(8) For the purposes of subsection (7) above the reference in subsection (3)(b) above to section 541 of the Taxes Act 1988 shall be taken to include a reference to any corresponding provision contained in the enactments directly or indirectly re-enacted in the Tax Acts.

80 Futures and options: transactions with guaranteed returns

(1) After section 127 of the Taxes Act 1988 there shall be inserted the following section--

" 127A Futures and options: transactions with guaranteed returns

Schedule 5AA (which makes provision for the taxation of the profits and gains arising from transactions in futures and options that are designed to produce guaranteed returns) shall have effect. "

(2) After Schedule 5 to that Act there shall be inserted, as Schedule 5AA to that Act, the Schedule set out in Schedule 11 to this Act.

(3) In section 128 of that Act (profits arising from commodity and financial futures etc. to be taxed only under the provisions relating to chargeable gains)--

(a) after the word "which", where it first occurs, there shall be inserted "is not chargeable to tax in accordance with Schedule 5AA and"; and

(b) for "that Schedule" there shall be substituted "Schedule D".

(4) In section 399 of that Act (withdrawal of loss relief for losses from dealing in futures etc.), after subsection (1) there shall be inserted the following subsection--

" (1A) Subsection (1) above does not apply to a loss arising from a transaction to which Schedule 5AA applies. "

(5) In section 469(9) of that Act (sections 686 and 687 disapplied in relation to unauthorised unit trusts), at the end there shall inserted "except as respects income to which section 686 is treated as applying by virtue of paragraph 7 of Schedule 5AA."

(6) Subject to subsection (7) below, this section and Schedule 11 to this Act shall have effect, and be deemed to have had effect, for chargeable periods ending on or after 5th March 1997 in relation to profits and gains realised, and losses sustained, on or after that date.

(7) In relation to profits and gains realised, and losses sustained, on or after 5th March 1997, paragraph 1(6) and (7) of the Schedule 5AA to the Taxes Act 1988 (rule against double counting) inserted by this section shall be deemed to have had effect for chargeable periods beginning before that date (as well as for those beginning on or after that date).

Transfer of assets abroad

81 Transfer of assets abroad

(1) After section 739(1) of the Taxes Act 1988 (prevention of avoidance of income tax by means of transfer of assets with or without associated operations) there shall be inserted the following subsection--

" (1A) Nothing in subsection (1) above shall be taken to imply that the provisions of subsections (2) and (3) below apply only if--

(a) the individual in question was ordinarily resident in the United Kingdom at the time when the transfer was made; or

(b) the avoiding of liability to income tax is the purpose, or one of the purposes, for which the transfer was effected. "

(2) This section applies irrespective of when the transfer or associated operations took place, but applies only to income arising on or after 26th November 1996.

Leasing and loan arrangements

82 Finance leases and loans

Schedule 12 to this Act (which makes provision about arrangements such as are treated for certain accounting purposes as finance leases or loans) shall have effect.

83 Loan relationships: transitions

(1) Chapter II of Part IV of the [1996 c. 8.] Finance Act 1996 (loan relationships) shall be amended as follows.

(2) In subsection (5) of section 90 (changes in accounting methods), before the word "and" at the end of paragraph (a) there shall be inserted the following paragraph--

" (aa) the relationship is one to which the company in question is still a party at the end of the period or part of a period for which the accruals basis of accounting is used, " .

(3) In that subsection for the words after paragraph (b) there shall be substituted--

" that amount shall be computed using for the closing value as at the end of that period or part of a period the amount specified in subsection (6) below. "

(4) For subsection (6) of that section (amounts used for computations under subsection (5)) there shall be substituted the following subsection--

" (6) That amount is--

(a) in a case to which subsection (3) above applies, the amount taken for the purposes of subsection (3)(a)(ii) above to be the closing value as at the end of the period for which the accruals basis of accounting is used; and

(b) in a case to which subsection (2) above applies, the amount which, without the making of the assumptions mentioned in subsection (4) above, would be taken to be the closing value as at the end of the part of the period for which that basis is used. "

(5) Subsections (2) to (4) above apply where the period or part of a period for which the superseded accounting method is or was used is a period ending on or after 14th November 1996.

(6) Schedule 13 to this Act (which contains amendments of the transitional provisions in Schedule 15 to the Finance Act 1996) shall have effect.

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