received under a taxable insurance contract by an insurer on or after the day on
which this Act is passed.
Miscellaneous and supplementary provisions
Provisions consequential on changes to company law
192 Companies acquiring their own shares
(1) This section applies for the purposes of the Taxes Acts and the Inheritance Tax
Act 1984 (c. 51) where a company acquires any of its own shares (whether by
purchase, the issuing of bonus shares or otherwise).
(2) The acquisition of any of those shares by the company is not to be treated as the
acquisition of an asset.
(3) The company is not, by virtue of the acquisition or holding of any of those
shares or its being entered in the company’s register of members in respect of
any of them, to be treated as a member of itself.
(4) Subject to subsection (5)—
(a) the company’s issued share capital is to be treated as if it had been
reduced by the nominal value of the shares acquired,
(b) such of those shares as are not cancelled on acquisition are to be treated
as if they had been so cancelled, and
(c) any subsequent cancellation by the company of any of those shares is
to be disregarded (and, accordingly, is not the disposal of an asset and
does not give rise to an allowable loss within the meaning of the
Taxation of Chargeable Gains Act 1992 (c. 12)).
(5) Where the shares are issued to the company as bonus shares, subsection (4)(a)
and (b) does not apply and the shares are to be treated as if they had not been
(6) Where, disregarding subsections (2) to (5)—
(a) a company holds any of its own shares, and
(b) the company issues bonus shares in respect of those shares or any class
of those shares (“the existing shares”),
nothing in this section prevents the existing shares being the company’s
holding of shares for the purposes of the application of section 126 of the
Taxation of Chargeable Gains Act 1992 (application of sections 127 to 131 of
that Act (company reorganisations etc)).
(7) In subsection (6) the reference to the application of section 126 of the Taxation
of Chargeable Gains Act 1992 does not include a reference to the application of
that section in a modified form by virtue of any enactment relating to
(8) Where a company disposes of any of its own shares to a person in
circumstances where, but for subsections (2) to (5), it would be regarded as
holding the shares immediately before the disposal—
(a) subsections (4)(b) and (c) and (5) cease to apply in relation to the shares
disposed of (“the relevant shares”),
(b) the relevant shares are to be treated as having been issued as new
shares to that person by the company at the time of the disposal (and
not as having been disposed of by the company at that time),
(c) that person is to be treated as having subscribed for the relevant shares,
(d) an amount equal to the amount or value of the consideration (if any)
payable for the disposal of the relevant shares is to be treated as the
amount subscribed for those shares,
(e) if the amount or value of that consideration does not exceed the
nominal value of those shares, the share capital of those shares is to be
treated as if it were an amount equal to the amount or value of that
(f) if the amount or value of that consideration exceeds their nominal
value, the relevant shares are to be treated as if they had been issued at
a premium representing that excess.
(a) a company purchases its own shares, and
(b) the price payable by a company for the shares is taken into account in
computing the profits of the company which are chargeable to tax in
accordance with the provisions of the Taxes Act 1988 applicable to Case
I or II of Schedule D,
subsections (2) to (7) do not apply and subsection (8) does not apply in relation
to any disposal by the company of any of the shares.
(10) Schedule 40 to this Act (which makes amendments relating to the acquisition
and disposal by a company of its own shares) has effect.
(11) For the purposes of this section—
(a) a company issues “bonus shares” if it issues share capital as paid up
otherwise than by the receipt of new consideration (within the meaning
of section 254 of the Taxes Act 1988), and
(b) “the Taxes Acts” has the same meaning as in the Taxes Management
Act 1970 (c. 9),
and in this section references to a “company” are to a company with a share
(12) The preceding provisions of this section and the provisions of Schedule 40 to
this Act have effect in relation to any acquisition of shares by a company on or
after such day as the Treasury may by order made by statutory instrument
193 Companies in administration
Schedule 41 to this Act (provisions relating to the treatment, for tax purposes,
of companies in administration) has effect.
194 Exchange of information between tax authorities of member States
(1) No obligation as to secrecy imposed by statute or otherwise precludes the
Commissioners or an authorised officer of the Commissioners from disclosing
to the competent authorities of another member State any information required
to be so disclosed by virtue of the Mutual Assistance Directive.
(2) Neither the Commissioners nor an authorised officer shall disclose any
information in pursuance of the Mutual Assistance Directive unless satisfied
that the competent authorities of the other State are bound by, or have
undertaken to observe, rules of confidentiality with respect to the information
that are not less strict than those applying to it in the United Kingdom.
(3) Nothing in this section permits the Commissioners or an authorised officer of
the Commissioners to authorise the use of information disclosed by virtue of
the Mutual Assistance Directive otherwise than for the purposes of taxation or
to facilitate legal proceedings for failure to observe the tax laws of the receiving
(4) In this section—
“the Commissioners” means the Commissioners of Inland Revenue or the
Commissioners of Customs and Excise;
the “Mutual Assistance Directive” means Council Directive 77/799/EEC,
as amended by Council Directives 79/1070/EEC and 92/12/EEC.
(5) The Treasury may by order make such provision amending any of subsections
(1) to (4) above as appears to them appropriate for the purpose of giving effect
to any Council Directive adopted after 16th April 2003 amending or replacing
the Mutual Assistance Directive.
(6) In section 48 of the Value Added Tax Act 1994 (c. 23) (VAT representatives)—
(a) in subsection (1B) (meaning of “the mutual assistance provisions”) for
paragraphs (a) and (b) substitute—
“(a) section 134 of the Finance Act 2002 and Schedule 39 to
that Act (recovery of taxes etc due in other member
(b) section 194 of the Finance Act 2003 (exchange of
information between tax authorities of member
(b) after subsection (8) insert—
“(9) The Treasury may by order amend the definition of “the mutual
assistance provisions” in subsection (1B) above.”.
195 Arrangements for mutual exchange of tax information
(1) In the following provisions (which confer power to make arrangements for the
exchange of information necessary for carrying out the tax laws of the UK and
the territory to which the arrangements relate) for “necessary for carrying out”
substitute “foreseeably relevant to the administration or enforcement of”.
(2) The provisions are—
sections 788(2) and 815C(1) of the Taxes Act 1988 (income tax, capital
gains tax and corporation tax), and
sections 158(1A) and 220A(1) of the Inheritance Tax Act 1984 (c. 51)
(3) Any reference in arrangements made before the passing of this Act, or in any
Order in Council under which such arrangements have effect, to information
necessary for the carrying out of the tax laws of the United Kingdom or the
territory to which the arrangements relate shall be read as including any
information foreseeably relevant to the administration or enforcement of the
tax laws of the United Kingdom or, as the case may be, of that territory.
196 Savings income: Community obligations and international arrangements
(1) The Treasury may make regulations for implementing and for dealing with
matters arising out of or related to—
(a) any Community obligation created with a view to ensuring the
effective taxation of savings income under the law of the United
Kingdom and the laws of the other member States, or
(b) any arrangements made with a territory other than a member State
with a view to ensuring the effective taxation of savings income under
the law of the United Kingdom and the law of the other territory.
(2) Regulations under this section may, in particular, require paying agents—
(a) to obtain and verify prescribed descriptions of information about the
identity and residence of relevant payees to whom they make savings
income payments, and
(b) to provide to the Inland Revenue (or an officer of the Inland Revenue)
prescribed descriptions of information about relevant payees to whom
they make savings income payments and about the savings income
payments which they make to them.
(3) Regulations under this section may include provision for the inspection on
behalf of the Inland Revenue of books, documents and other records of persons
who are, or appear to an officer of the Inland Revenue to be, paying agents.
(4) Regulations under this section may include provision for notices under such
regulations to be combined with notices under sections 17 and 18 of the Taxes
Management Act 1970 (c. 9) (interest paid or credited by banks and others).
(5) Regulations under this section may include provision about the time at or
within which, and the manner in which, any requirement imposed by such
regulations is to be complied with.
(6) Regulations under this section may include provision for penalties for failure
to comply with requirements imposed by such regulations (including
provision applying any provision of the Taxes Management Act 1970 about the
determination of penalties or any other matter relating to penalties); and in the
first column of the Table in section 98 of that Act (penalties for failure to furnish
information etc), insert at the appropriate place “Regulations under section 196
of the Finance Act 2003.”.
(7) In this section “paying agents” means persons of a prescribed description who
make savings income payments to other persons; and the descriptions of
persons who may be prescribed as paying agents include, in particular, public
officers and government departments.
(8) For the purposes of this section a person makes savings income payments to
another person if the person—
(a) makes payments of savings income to the other person, or
(b) secures the payment of savings income for the other person.
(9) In this section “savings income” means interest (apart from interest of a
prescribed description) or other sums of a prescribed description.
(10) In this section “relevant payees” means persons of a prescribed description
who are resident (within the meaning of the regulations) in a prescribed
territory and persons of any such other description as may be prescribed; and
the only territories which may be prescribed are the other member States and
territories with which arrangements such as are mentioned in subsection (1)(b)
have been made.
(11) Regulations under this section—
(a) may make different provision for different cases or descriptions of case,
(b) may include supplementary, incidental, consequential or transitional
(12) The power to make regulations under this section is exercisable by statutory
(13) A statutory instrument containing regulations under this section is subject to
annulment in pursuance of a resolution of the House of Commons.
(14) In this section—
“the Inland Revenue” means the Commissioners of Inland Revenue, and
“prescribed” means prescribed by regulations under this section.
197 Controlled foreign companies: exempt activities
(1) Schedule 42 to this Act (which amends Part 2 of Schedule 25 to the Taxes Act
1988 (exempt activities)) shall have effect.
(2) The amendments made by that Schedule have effect in relation to accounting
periods of a controlled foreign company beginning on or after 27th November
(3) In this section “accounting period” and “controlled foreign company” have the
same meaning as in Chapter 4 of Part 17 of the Taxes Act 1988.
(4) This section shall be taken to have come into force on 27th November 2002.
198 Application of CFC provisions to Hong Kong and Macao companies
(1) In Part 2 (exempt activities) of Schedule 25 to the Taxes Act 1988 (cases where
section 747(3) does not apply), in paragraph 5 insert after sub-paragraph (2)—
“(3) In the case of a controlled foreign company—
(a) which is, by virtue of section 749(5), presumed to be resident
in a territory in which it is subject to a lower level of taxation,
(b) the business affairs of which are, throughout the accounting
period in question, effectively managed in a special
administrative region, and
(c) which is liable to tax for that period in that region,
references in the following provisions of this Part of this Schedule to
the territory in which that company is resident shall be construed as
references to that region.
(4) In sub-paragraph (3) above “special administrative region” means
the Hong Kong or the Macao Special Administrative Region of the
People’s Republic of China.
(5) Where sub-paragraph (3) above applies, it applies in place of sub-
(2) This section shall be deemed to have had effect—
(a) as from 1st July 1997, so far as relating to the Hong Kong Special
(b) as from 20th December 1999, so far as relating to the Macao Special
199 Deduction of tax from interest: recognised clearing houses etc
(1) Section 349 of the Taxes Act 1988 (payment of annual interest etc) is amended
(2) In subsection (3) (cases where obligation to make interest payments net of tax
does not apply), at the end insert “or—
(j) to interest paid by a recognised clearing house or recognised
investment exchange carrying on business as provider of a
central counterparty clearing service, in the ordinary course of
that business, on margin or other collateral deposited with it by
users of the service; or
(k) to interest treated by virtue of section 730A(2)(a) or (b) (repos)
as paid by a recognised clearing house or recognised
investment exchange in respect of contracts made by it as
provider of a central counterparty clearing service.”.
(3) In subsection (6) (definitions), at the appropriate places insert—
““central counterparty clearing service” means the service
provided by a clearing house or investment exchange to the
parties to a transaction where there are contracts between each
of the parties and the clearing house or investment exchange (in
place of, or as an alternative to, a contract directly between the
““recognised clearing house” and “recognised investment
exchange” have the same meaning as in the Financial Services
and Markets Act 2000 (see section 285 of that Act);”.
(4) This section applies in relation to payments of interest on or after 14th April
200 Authorised unit trusts: interest distributions paid gross
(1) Chapter 3 of Part 12 of the Taxes Act 1988 (unit trust schemes) is amended as
(2) In section 468L(4) (obligation to deduct tax from interest distributions to be
subject to provision made by sections 468M and 468N), for “sections 468M and
468N” substitute “section 468M”.
(3) For sections 468M and 468N substitute—
“468M Cases where no obligation to deduct tax
(1) Where an interest distribution is made for a distribution period to a unit
holder, any obligation to deduct under section 349(2) does not apply to
the interest distribution if—
(a) the unit holder is a company or the trustees of a unit trust
(b) either the residence condition or the reputable intermediary
condition is on the distribution date fulfilled with respect to the
(2) Section 468O makes provision about the circumstances in which the
residence condition or the reputable intermediary condition is fulfilled
with respect to a unit holder.”.
(4) Section 468O (residence condition) is amended as follows.
(5) In subsection (1), for “sections 468M and 468N” substitute “section 468M”.
(6) After that subsection insert—
“(1A) For the purposes of section 468M, the reputable intermediary condition
is fulfilled with respect to a unit holder if—
(a) the interest distribution is paid on behalf of the unit holder to a
(b) the company either is subject to the EC Money Laundering
Directive, or to equivalent non-EC provisions, or is an
associated company resident in a regulating country or territory
of a company which is so subject, and
(c) the trustees of the authorised unit trust have reasonable
grounds for believing that the unit holder is not ordinarily
resident in the United Kingdom.
(1B) For the purposes of subsection (1A)(b) above—
(a) a company is subject to the EC Money Laundering Directive if
it is a credit institution or financial institution as defined by
Article 1 of Directive 91/308/EEC, as amended by Directive
(b) a company is subject to equivalent non-EC provisions if it is
required by the law of any country or territory which is not a
member State to comply with requirements similar to those
which, under Article 3 of that Directive (as so amended),
member States must ensure are complied with by credit
institutions and financial institutions,
(c) a company is to be treated as another’s associated company if it
would be so treated for the purposes of Part 11 (see section 416),
(d) a country or territory is a regulating country or territory if it
either is a member State or imposes requirements similar to
those which, under Article 3 of that Directive (as so amended),
member States must ensure are complied with by credit
institutions and financial institutions.
(1C) If Directive 91/308/EEC ceases to have effect, or is further amended,
the Treasury may by order make consequential amendments in
subsections (1A) and (1B) above.”.
(7) In the sidenote, insert at the end “and reputable intermediary condition”.
(8) In section 468P(1) (residence declarations)—
(a) for “468O” substitute “468O(1)”, and
(b) for “subsections (2) to (4)” substitute “subsection (2) or (3)”.