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(2) In the Table in section 98 of the Management Act (penalties in respect of certain information provisions), immediately before the entry in the second column relating to section 124(3) of the Taxes Act 1988 there shall be inserted the following entry--"regulations under section 51B;".'.-- [Mr. Nelson.]
Brought up, read the First and Second time, and added to the Bill.
New clause 10
Treatment of price differential on sale and repurchase of securities
`.--(1) After section 730 of the Taxes Act 1988 there shall be inserted the following sections--
"Treatment of price differential on sale and repurchase of securities
730A.--(1) Subject to subsection (8) below, this section applies where--
(a) a person (`the original owner') has transferred any securities to another person (`the interim holder') under an agreement to sell them;
(b) the original owner or a person connected with him is required to buy them back either--
(i) in pursuance of an obligation to do so imposed by that agreement or by any related agreement, or
(ii) in consequence of the exercise of an option acquired under that agreement or any related agreement;
and
(c) the sale price and the repurchase price are different. (2) The difference between the sale price and the repurchase price shall be treated for the purposes of the Tax Acts--
(a) where the repurchase price is more than the sale price, as a payment of interest made by the repurchaser on a deemed loan from the interim holder of an amount equal to the sale price; and
(b) where the sale price is more than the repurchase price, as a payment of interest made by the interim holder on a deemed loan from the repurchaser of an amount equal to the repurchase price. (3) Where any amount is deemed under subsection (2) above to be a payment of interest, that payment shall be deemed for the purposes of the Tax Acts to be one that becomes due at the time when the repurchase price becomes due and, accordingly, is treated as paid when that price is paid.
(4) Where any amount is deemed under subsection (2) above to be a payment of interest, the repurchase price shall be treated for the purposes of the Tax Acts (other than this section and sections 737A and 737C) and (in cases where section 263A of the 1992 Act does not apply) for the purposes of the 1992 Act--
(a) in a case falling within paragraph (a) of that subsection, as reduced by the amount of the deemed payment; and
(b) in a case falling within paragraph (b) of that subsection, as increased by the amount of the deemed payment.
(5) For the purposes of section 209(2)(d) and (da) any amount which is deemed under subsection (2)(a) above to be a payment of interest shall be deemed to be interest in respect of securities issued by the repurchaser and held by the interim holder.
(6) Any amount which--
(a) is deemed under subsection (2) above to be a payment of interest, and
(b) does not fall (apart from this subsection) to be treated as yearly interest,
shall be treated for the purposes of section 338 as if the reference to yearly interest in subsection (3)(a) of that section included a reference to that amount.
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(7) The Treasury may by regulations provide for any amount which is deemed under subsection (2) above to be received as a payment of interest to be treated, in such circumstances and to such extent as may be described in the regulations, as comprised in income that is eligible for relief from tax by virtue of section 438, 592(2), 608(2)(a), 613(4), 614(2), (3) or (4), 620(6) or 643(2).(8) Except where regulations under section 737E otherwise provide, this section does not apply if--
(a) the agreement or agreements under which provision is made for the sale and repurchase are not such as would be entered into by persons dealing with each other at arm's length; or
(b) all of the benefits or risks arising from fluctuations, before the repurchase takes place, in the market value of the securities sold accrue to, or fall on, the interim holder.
(9) In this section references to the repurchase price are to be construed- -
(a) in cases where section 737A applies, and
(b) in cases where section 737A would apply if it were in force in relation to the securities in question,
as references to the repurchase price which is or, as the case may be, would be applicable by virtue of section 737C(3)(b), (9) or (11)(c).
Interpretation of section 730A
730B.--(1) For the purposes of section 730A agreements are related if they are entered into in pursuance of the same arrangement (regardless of the date on which either agreement is entered into). (2) References in section 730A to buying back securities-- (a) shall include references to buying similar securities; and (b) in relation to a person connected with the original owner, shall include references to buying securities sold by the original owner or similar securities,
notwithstanding (in each case) that the securities bought have not previously been held by the purchaser; and references in that section to repurchase or to a repurchaser shall be construed accordingly. (3) In section 730A and this section `securities' has the same meaning as in section 737A.
(4) For the purposes of this section securities are similar if they entitle their holders--
(a) to the same rights against the same persons as to capital, interest and dividends, and
(b) to the same remedies for the enforcement of those rights, notwithstanding any difference in the total nominal amounts of the respective securities or in the form in which they are held or the manner in which they can be transferred.
(5) Section 839 (connected persons) applies for the purposes of section 730A."
(2) In section 729 of that Act (sale and repurchase of securities), after subsection (5) there shall be inserted the following subsection--
"(5A) This section shall not apply where section 737A applies; and this section shall be disregarded in determining whether the condition in subsection (2)(b) of that section is fulfilled in any case."
(3) In subsections (3)(b), (9) and (11)(c) of section 737C of that Act (adjustment of repurchase price), for "the Tax Acts other than section 737A and of the 1992 Act" there shall be substituted, in each case "section 730A"; and after subsection (11) of that section there shall be inserted the following subsection--
"(11A) The deemed increase of the repurchase price which is made for the purposes of section 730A by subsection (3)(b), (9) or (11)(c) above shall also have effect--
(a) for all the purposes of the Tax Acts, other than section 737A,
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(b) in cases where section 263A of the 1992 Act does not apply, for the purposes of the 1992 Act,wherever in consequence of that increase there is for the purposes of section 730A no difference between the sale price and the repurchase price."
(4) After section 263 of the Taxation of Chargeable Gains Act 1992 there shall be inserted the following section--
"Agreements for sale and repurchase of securities
263A.--(1) Subject to subsections (2) to (4) below, in any case falling within subsection (1) of section 730A of the Taxes Act (treatment of price differential on sale and repurchase of securities) and in any case which would fall within that subsection if the sale price and the repurchase price were different-- (a) the acquisition of the securities in question by the interim holder and the disposal of those securities by him to the repurchaser; and
(b) except where the repurchaser is or may be different from the original owner, the disposal of those securities by the original owner and any acquisition of those securities by the original owner as the repurchaser,
shall be disregarded for the purposes of capital gains tax. (2) Subsection (1) above does not apply in any case where the repurchase price of the securities in question falls to be calculated for the purposes of section 730A of the Taxes Act by reference to provisions of section 737C of that Act that are not in force in relation to those securities when the repurchase price becomes due. (3) Subsection (1) above does not apply if--
(a) the agreement or agreements under which provision is made for the sale and repurchase 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 repurchase takes place, in the market value of the securities sold accrues to, or falls on, the interim holder.
(4) Subsection (1) above does not apply in relation to any disposal or acquisition of qualifying corporate bonds in a case where the securities disposed of by the original owner or those acquired by him, or by any other person, as the repurchaser are not such bonds. (5) Expressions used in this section and in section 730A of the Taxes Act have the same meanings in this section as in that section."
(5) This section shall have effect where the agreement to sell the securities is entered into on or after the date on which this Act is passed.'.-- [Mr. Nelson.]
Brought up, read the First and Second time, and added to the Bill.
New clause 9
Manufactured interest on gilt-edged securities
`.--(1) In section 737 of the Taxes Act 1988 (manufactured dividends and interest)--
(a) after subsection (1A) there shall be inserted the following subsection- -
"(1B) Subject to subsection (5AA) below, subsection (1) above shall not apply where the interest in question is interest on gilt-edged securities.";
(b) at the beginning of subsections (2) and (5), there shall be inserted, in each case, "Subject to subsection (5AA) below,"; (c) after subsection (5) there shall be inserted the following subsection--
"(5AA) Regulations made by the Treasury may make provision in relation to any such case where the securities in question are gilt-edged securities as may be specified in the regulations--
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(a) for subsections (1B), (2) and (5) above to be disregarded in determining whether the case is one where subsection (1) above applies; or(b) for this section to have effect as if subsections (1B) and (2) above were omitted and the words in subsection (5) from `unless' to the end of paragraph (b) were modified in such manner as may be set out in the regulations.";
and
(d) in subsection (6), after the definition of "foreign income dividend" there shall be inserted the following definition-- "`gilt-edged securities' has the same meaning as in section 51A;".
(2) In Schedule 23A to that Act, at the beginning of sub-paragraphs (2) and (3) of paragraph 3, there shall be inserted, in each case, "Subject to paragraph 3A below,"; and after that paragraph there shall be inserted the following paragraph-- "3A.--(1) This paragraph applies, except in so far as dividend manufacturing regulations otherwise provide, in any case where paragraph 3 above applies and the United Kingdom securities in question are gilt-edged securities.
(2) In a case where this paragraph applies, sub-paragraphs (2) and (3) of paragraph 3 above shall not have effect, but the gross amount of the manufactured interest shall be treated--
(a) in relation to the interest manufacturer, for all the purposes of the Tax Acts except the determination of whether a deduction of tax is liable to be made on the making of the manufactured payment, and
(b) in relation to the recipient and all persons claiming title through or under him, for all the purposes of those Acts,
as if it were the gross amount of a periodical payment of interest on those gilt-edged securities, but made by the interest manufacturer.
(3) Sub-paragraph (4) of paragraph 3 above shall apply for the purposes of this paragraph as it applies for the purposes of that paragraph.
(4) In this paragraph `gilt-edged securities' has the same meaning as in section 51A."
(3) In paragraph 5(6) of that Schedule (construction of references to securities in provisions relating to interest passing through the market), after "United Kingdom securities" there shall be inserted ", other than gilt-edged securities (within the meaning of section 51A), ".
(4) This section shall have effect in relation to any payments made on or after such day as the Treasury may by order appoint, and different days may be appointed under this subsection for different purposes.'.-- [Mr. Nelson.]
Brought up, read the First and Second time, and added to the Bill.
New clause 7
Power to make special provision for special cases
`.--(1) Immediately before section 738 of the Taxes Act 1988 there shall be inserted the following sections--
"Power to provide for manufactured payments to be eligible for relief
737D.--(1) The Treasury may by regulations provide for any manufactured payment made to any person to be treated, in such circumstances and to such extent as may be described in the regulations, as comprised in income of that person that is eligible for relief from tax by virtue of section 438, 592(2), 608(2)(a), 613(4), 614(2), (3) or (4), 620(6) or 643(2).
(2) In this section `manufactured payment' means any manufactured dividend, manufactured interest or manufactured overseas dividend, within the meaning of Schedule 23A.
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Power to modify sections 727A, 730A and 737A to 737C737E--(1) The Treasury may by regulations make provision for all or any of sections 727A, 730A and 737A to 737C to have effect with modifications in relation to cases involving any arrangement for the sale and repurchase of securities where--
(a) the obligation to make the repurchase is not performed or the option to repurchase is not exercised;
(b) provision is made by or under any agreement for different or additional securities to be treated as, or as included with, securities which, for the purposes of the repurchase, are to represent securities transferred in pursuance of the original sale; (c) provision is made by or under any agreement for any securities to be treated as not included with securities which, for the purposes of the repurchase, are to represent securities transferred in pursuance of the original sale;
(d) provision is made by or under any agreement for the sale price or repurchase price to be determined or varied wholly or partly by reference to fluctuations, occurring in the period after the making of the agreement for the original sale, in the value of securities transferred in pursuance of that sale, or in the value of securities treated as representing those securities; or
(e) provision is made by or under any agreement for any person to be required, in a case where there are any such fluctuations, to make any payment in the course of that period and before the repurchase price becomes due.
(2) The Treasury may by regulations make provision for all or any of sections 727A, 730A and 737A to 737C to have effect with modifications in relation to cases where--
(a) arrangements, corresponding to those made in cases involving an arrangement for the sale and repurchase of securities, are made by any agreement, or by one or more related agreements, in relation to securities that are to be redeemed in the period after their sale; and
(b) those arrangements are such that the person making the sale or a person connected with him (instead of being required to repurchase the securities or acquiring an option to do so) is granted rights in respect of the benefits that will accrue from their redemption. (3) The Treasury may by regulations provide that section 730A is to have effect with modifications in relation to cases involving any arrangement for the sale and repurchase of securities where there is an agreement relating to the sale or repurchase which is not such as would be entered into by persons dealing with each other at arm's length.
(4) The powers conferred by subsections (1) and (2) above shall be exercisable in relation to section 263A of the 1992 Act as they are exercisable in relation to section 730A of this Act.
(5) Regulations made for the purposes of this section may-- (a) make different provision for different cases; and
(b) contain such supplementary, incidental, consequential and transitional provision as appears to the Treasury to be appropriate.
(6) The supplementary, incidental and consequential provision that may be made by regulations under this section shall include-- (a) in the case of regulations relating to section 730A, provision modifying subsections (3)(b), (9), (11)(c) and (11A) of section 737C; and
(b) in the case of regulations relating to section 263A of the 1992 Act, provision modifying the operation of that Act in relation to cases where by virtue of the regulations any acquisition or disposal is excluded from those which are to be disregarded for the purposes of capital gains tax.
(7) In this section `modifications' includes exceptions and omissions; and any power under this section to provide for an
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enactment to have effect with modifications in any case shall include power to provide for it not to apply (if it otherwise would do) in that case.(8) References in this section to a case involving an arrangement for the sale and repurchase of securities are references to any case where--
(a) a person makes a sale of any securities under any agreement (`the original sale'); and
(b) that person or a person connected with him either--
(i) is required under that agreement or any related agreement to buy them back; or
(ii) acquires, under that agreement or any related agreement, an option to buy them back.
(9) Section 730B shall apply for the purposes of this section as it applies for the purposes of section 730A."
(2) In section 182(1) of the Finance Act 1993 and section 229 of the Finance Act 1994 (powers to modify provisions relating to Lloyd's), the following paragraph shall be inserted, in each case, after paragraph (c)--
"(ca) for modifying the application of this Chapter in relation to cases where assets forming part of a premiums trust fund are the subject of--
(i) any such arrangement as is mentioned in section 129(1), (2) or (2A) of the Taxes Act 1988 (stock lending etc.); or
(ii) any such arrangements or agreements as are mentioned in section 737E(2) and (8) of the Taxes Act 1988 (sale and repurchase of securities etc.);".'.-- [Mr. Nelson.]
Brought up, read the First and Second time, and added to the Bill.
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