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| Deduction of tax: payments between companies etc. |
83. - (1) After section 349 of the Taxes Act 1988 (certain payments to be made under deduction of tax) insert-
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| "Exceptions to section 349 for payments between companies etc. |
349A. - (1) The provisions specified in subsection (3) below (which require tax to be deducted on making certain payments) do not apply to a payment made by a company if, at the time the payment is made, the company reasonably believes that one of the conditions specified in section 349B is satisfied.
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(2) Subsection (1) above has effect subject to any directions under section 349C.
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(3) The provisions are-
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section 349(1) (certain annuities and other annual payments, and royalties and other sums paid for use of UK patents), |
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section 349(2)(a) and (b) (UK interest), |
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section 349(3A) (dividend or interest on securities issued by building societies), and |
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section 524(3)(b) (which provides for section 349(1) to apply to proceeds of sale of UK patent rights). |
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(4) References in subsection (3) above to any provision of section 349 do not include that provision as applied-
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(a) under section 777(9) (directions applying section 349(1) to certain payments to non-residents), or |
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(b) by paragraph 4(2) of Schedule 23A (manufactured overseas dividends to be treated as annual payments within section 349). |
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(5) References in this section to the company by which a payment is made do not include a company acting as trustee or agent for another person.
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(6) For the purposes of this section, a payment by a partnership is treated as made by a company if any member of the partnership is a company.
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| The conditions mentioned in section 349A(1). |
349B. - (1) The first of the conditions mentioned in section 349A(1) is that the person beneficially entitled to the income in respect of which the payment is made is-
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(a) a company resident in the United Kingdom, or |
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(b) a partnership each member of which is a company resident in the United Kingdom. |
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(2) The second of those conditions is that-
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(a) the person beneficially entitled to the income in respect of which the payment is made is a company not resident in the United Kingdom ("the non-resident company"), |
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(b) the non-resident company carries on a trade in the United Kingdom through a branch or agency, and |
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(c) the payment falls to be brought into account in computing the chargeable profits (within the meaning given by section 11(2)) of the non-resident company. |
| Directions disapplying section 349A(1). |
349C. - (1) The Board may give a direction to a company directing that section 349A(1) is not to apply in relation to any payment that-
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(a) is made by the company after the giving of the direction, and |
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(b) is specified in the direction or is of a description so specified. |
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(2) A direction under this section may be varied or revoked by a subsequent such direction.
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(3) In this section "company" includes a partnership of which any member is a company.
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| Section 349A(1): consequences of reasonable but incorrect belief. |
349D. - (1) Where-
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(a) a payment is made by a company without an amount representing the income tax on the payment being deducted from the payment, |
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(b) at the time the payment is made, the company reasonably believes that one of the conditions specified in section 349B is satisfied, |
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(c) if the company did not so believe, tax would be deductible from the payment under section 349, and |
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(d) neither of the conditions specified in section 349B is satisfied at the time the payment is made, |
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section 350 applies as if the payment were within section 349 (and Schedule 16 applies as if tax were deductible from the payment under section 349).
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(2) In this section "company" includes a partnership of which any member is a company.".
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(2) In section 98 of the Taxes Management Act 1970 (penalties for failing to make, or making incorrectly, certain returns etc.), after subsection (4) insert-
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"(4A) If-
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(a) a failure to comply with section 350(1) of, or Schedule 16 to, the principal Act arises from a person's failure to deliver an account, or show the amount, of a payment, and |
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(b) the payment is within subsection (4B) below, |
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subsection (1) above shall have effect as if for "£300" there were substituted "£3,000" and as if for "£60" there were substituted "£600".
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(4B) A payment is within this subsection if-
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(a) the payment is made by a company without an amount representing the income tax on the payment being deducted from the payment, |
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(b) at the time the payment is made, the company- |
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(i) does not believe that either of the conditions specified in section 349B of the principal Act is satisfied, or
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(ii) where it believes that either of those conditions is satisfied, could not reasonably so believe,
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(c) the payment is one from which tax is deductible under section 349 of the principal Act unless the company reasonably believes that one of those conditions is satisfied, and |
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(d) neither of those conditions is satisfied at the time the payment is made. |
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(4C) In subsection (4B) above "company" includes a partnership of which any member is a company.".
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(3) In section 338(4) of the Taxes Act 1988 (when payment by company to non-resident to be treated as charge on income), after paragraph (a) insert-
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"(aa) the person beneficially entitled to the income in respect of which the payment is made is a company not resident in the United Kingdom ("the non-resident company"), the non-resident company carries on a trade in the United Kingdom through a branch or agency and the payment falls to be brought into account in computing the chargeable profits (within the meaning given by section 11(2)) of the non-resident company, or". |
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(4) Subsections (1) to (3) apply to payments made on or after 1st April 2001.
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(5) Sections 247 and 248 of the Taxes Act 1988 (companies within a group may elect for section 349 not to apply to payments between them) shall cease to have effect.
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(6) Subsection (5) applies in relation to payments made after the day on which this Act is passed.
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| Profits for purposes of small companies' relief. |
84. - (1) Section 13 of the Taxes Act 1988 (small companies' relief) is amended in accordance with subsections (2) to (4).
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(2) In subsection (7) (profits of company for accounting period)-
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(a) in paragraph (a), omit "resident in the United Kingdom", and |
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(b) in paragraph (b), for "section 247(1A)" substitute "subsection (7A) below". |
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(3) After subsection (7) insert-
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"(7A) A company falls within this subsection if-
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(a) it is a 75 per cent subsidiary of any other company, or |
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(b) arrangements of any kind (whether in writing or not) are in existence by virtue of which it could become such a subsidiary.". |
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(4) For subsection (8AA) (interpretation of subsection (7)) substitute-
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"(8AA) Section 13ZA applies for the interpretation of subsection (7) above.".
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(5) After section 13 of the Taxes Act 1988 insert-
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| "Interpretation of section 13(7). |
13ZA. - (1) In determining for the purposes of section 13(7) whether one body corporate is a 51 per cent subsidiary of another, that other shall be treated as not being the owner of any share capital-
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(a) which it owns indirectly, and |
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(b) which is owned directly by a body corporate for which a profit on the sale of the shares would be a trading receipt. |
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(2) Notwithstanding that at any time a company ("the subsidiary company") is a 51 per cent subsidiary of another company ("the parent company") it shall not be treated at that time as such a subsidiary for the purposes of section 13(7) unless, additionally, at that time-
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(a) the parent company would be beneficially entitled to more than 50 per cent of any profits available for distribution to equity holders of the subsidiary company, and |
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(b) the parent company would be beneficially entitled to more than 50 per cent of any assets of the subsidiary company available for distribution to its equity holders on a winding-up. |
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(3) For the purposes of section 13(7) and this section-
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(a) "trading or holding company" means a trading company or a company the business of which consists wholly or mainly in the holding of shares or securities of trading companies that are its 90 per cent subsidiaries; |
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(b) "trading company" means a company whose business consists wholly or mainly of the carrying on of a trade or trades; |
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(c) a company is owned by a consortium if 75 per cent or more of the ordinary share capital of the company is beneficially owned between them by companies of which none- |
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(i) beneficially owns less than 5 per cent of that capital,
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(ii) would be beneficially entitled to less than 5 per cent of any profits available for distribution to equity holders of the company, or
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(iii) would be beneficially entitled to less than 5 per cent of any assets of the company available for distribution to its equity holders on a winding up,
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and those companies are called the members of the consortium. |
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(4) Schedule 18 (equity holders and assets etc. available for distribution) applies for the purposes of subsections (2) and (3)(c) above as it applies for the purposes of section 413(7).".
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(6) The amendments made by this section apply for the purposes of accounting periods ending on or after 1st April 2001.
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| Tax deductions and credits: end of provisional repayment regime. |
85. - (1) The provisions of section 438A of, and Schedule 19AB to, the Taxes Act 1988 (provisional repayments in respect of tax borne by deduction and tax credits) shall cease to have effect as follows.
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(2) Those provisions shall not apply in relation to income tax borne by deduction from payments received after 30th September 2001.
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(3) For the purposes of the following provisions (as they apply in relation to tax credits)-
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(a) section 121 of the Finance Act 1993 (application of Schedule 19AB to tax exempt business of friendly societies) and any regulations under that section, and |
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(b) any regulations under section 333B of the Taxes Act 1988 (individual savings account business etc. of insurance companies and friendly societies), |
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that Schedule shall be deemed to continue to apply in relation to pension business of insurance companies as it would do so apart from subsection (2).
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(4) The power to make regulations under each of the sections referred to in subsection (3) includes power to set out the text of that Schedule as applied by regulations under that section.
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(5) The provisions of section 438A of, and Schedule 19AB to, the Taxes Act 1988 shall not apply in relation to tax credits in respect of distributions made on or after 6th April 2004.
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General |
| Amendments to the machinery of self-assessment. |
86. - (1) Schedule 28 to this Act (amendments to the machinery of self-assessment) has effect.
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(2) In that Schedule-
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Part I makes provision about the amendment or correction of returns, |
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Part II makes provision about enquiries into returns, |
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Part III makes provision for the referral of questions to the Special Commissioners during an enquiry, |
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Part IV makes provision about the procedure on completion of an enquiry, and |
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Part V contains minor and consequential amendments. |
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(3) Except as otherwise provided, the amendments in that Schedule have effect as from the passing of this Act in relation to returns-
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(a) whether made before or after the passing of this Act, and |
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(b) whether relating to periods before or after the passing of this Act. |
| Recovery proceedings: minor amendments. |
87. - (1) In sections 66(1) and 67(1) of the Taxes Management Act 1970 (proceedings in county court or sheriff court to recover tax due and payable under an assessment), omit the words "under any assessment".
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This amendment applies in relation to proceedings begun after the passing of this Act.
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(2) For section 69 of the Taxes Management Act 1970 substitute-
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| "Recovery of penalty, surcharge or interest. |
69. - (1) This section applies to-
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(a) penalties imposed under Part II, VA or X of this Act or Schedule 18 to the Finance Act 1998; |
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(b) surcharges imposed under Part VA of this Act; and |
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(c) interest charged under any provision of this Act (or recoverable as if it were interest so charged). |
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(2) An amount by way of penalty, surcharge or interest to which this section applies shall be treated for the purposes of the following provisions as if it were an amount of tax.
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(3) Those provisions are-
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(a) sections 61, 63 and 65 to 68 of this Act; |
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(b) section 35(2)(g)(i) of the Crown Proceedings Act 1947 (rules of court: restriction of set-off or counterclaim where proceedings, or set-off or counterclaim, relate to tax) and any rules of court imposing any such restriction; |
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(c) section 35(2)(b) of that Act as set out in section 50 of that Act (which imposes corresponding restrictions in Scotland).". |
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This amendment applies-
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(a) to proceedings begun (or a counterclaim made) after the passing of this Act, and |
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(b) to a set-off first claimed after the passing of this Act. |
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(3) In section 70 of the Taxes Management Act 1970 (evidence), in subsection (2)(a) (certificate of collector as to penalty, surcharge or interest payable), for "payable under Part IX of this Act" substitute "payable under any provision of this Act or the principal Act".
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This amendment applies to certificates tendered in evidence after the passing of this Act.
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| Repayment supplements: claim for relief involving two or more years. |
88. - (1) Section 824 of the Taxes Act 1988 (repayment supplements) is amended as follows.
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(2) After subsection (2B) insert-
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"(2C) Subsection (1) above shall apply to a repayment made by the Board as a result of a claim for relief under-
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(a) paragraph 2 of Schedule 1B to the Management Act (carry back of loss relief), |
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(b) paragraph 3 of that Schedule (relief for fluctuating profits of farming etc.), or |
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(c) Schedule 4A to this Act (relief for fluctuating profits of creative artists etc.), |
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as if it were a repayment falling within that subsection.".
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(3) In subsection (3), after paragraph (aa) insert-
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"(ab) if the repayment is a repayment as a result of a claim for relief under any of the provisions mentioned in subsection (2C) above, the relevant time is the 31st January next following the year that is the later year in relation to the claim;". |
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(4) This section applies in relation to repayments made after the passing of this Act.
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| Power to revise excessive penalties. |
89. - (1) In section 100 of the Taxes Management Act 1970 (determination of penalties by officer of the Board), in subsection (6) (revision of penalty if amount of tax taken into account discovered to be excessive), after "a penalty under" insert "section 93(2), (4) or (5) of this Act or".
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(2) This section applies in relation to penalties determined at any time whether before or after the passing of this Act.
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