Finance Bill

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Session 2003 - 04
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Finance Bill

Finance Bill
Schedule 26 — Offshore funds
414

14    (1)
In Schedule 27 to the Taxes Act 1988 (distributing funds), Part 2
(modifications of conditions for certification in certain cases) is amended as
follows.
      (2)
In paragraph 6—
(a)
in sub-paragraph (1)(b) for the words from the beginning to “section
5
760” substitute “those interests are such that, by virtue of section
760(3)(a)”;
(b)
in the words following paragraph (c) of sub-paragraph (1), for
“section 760(3)(a) to (c)” substitute “section 760(3)(a)”;
(c)
in sub-paragraph (3)(a) for “section 760(3)(a) to (c)” substitute
10
“section 760(3)(a)”.
      (3)
In paragraph 7 for “section 760(3)(a) to (c)” (in both places) substitute
“section 760(3)(a)”.
      (4)
Omit paragraph 10.
      (5)
In paragraph 11—
15
(a)
in sub-paragraphs (1) and (4), omit “section 760(3) and”, and
(b)
in sub-paragraph (1) for “sub-paragraph (3)” substitute “sub-
paragraph (4)”.
      (6)
Omit paragraphs 12 and 13.
      (7)
In paragraph 14, for “any of the conditions in paragraphs (a) to (c) of section
20
760(3)” substitute “the condition in section 760(3)(a)”.
      (8)
In paragraph 16(1), omit “by a trustee or officer thereof”.
Exchange of interests of different classes
15    (1)
After section 762 of the Taxes Act 1988 insert—
“762A   Exchange of interests of different classes
25
(1)
This section applies where—
(a)
classes of interest in an offshore fund (the “main fund”) are
treated as separate offshore funds under section 756C; and
(b)
as the result of—
(i)
a reorganisation within the meaning of section 126 of
30
the 1992 Act, or
(ii)
a conversion of securities within the meaning of
section 132 of that Act,

a person exchanges an interest of one class (A) in the main
fund for an interest of another class (B) in that fund.
35
(2)
Where—
(a)
the interest of class A—
(i)
is at the time of the exchange an interest in a non-
qualifying offshore fund, or
(ii)
has been an interest in such a fund at any material
40
time, and
(b)
the interest of class B is at the time of the exchange an interest
in a fund which is certified by the Board as a distributing
offshore fund,

Finance Bill
Schedule 26 — Offshore funds
415


section 127 of the 1992 Act (equation of original shares and new
holding) shall not prevent the exchange constituting a disposal for
the purposes of this Chapter.
(3)
Any such disposal shall be treated as a disposal for a consideration
equal to the market value of the rights at the time of the exchange.
5
(4)
In this section—

“class of interest” has the same meaning as in section 756C(1);

“material time” has the same meaning as in section 757.”.
      (2)
In section 763 of the Taxes Act 1988 (deduction of offshore income gain in
determining capital gain), after subsection (6) insert—
10
“(6A)
Where the disposal to which this Chapter applies constitutes such a
disposal by virtue of section 762A (exchange of interests of different
classes), the 1992 Act shall have effect as if an amount equal to the
offshore income gain to which that disposal gives rise were given (by
the person making the exchange) as consideration for the new
15
holding (within the meaning of section 128 of that Act (consideration
given or received for new holding on a reorganisation)).”
Correction of cross-reference
16    (1)
In section 763(6) of the Taxes Act 1988 (offshore income gain treated as
consideration given on certain disposals), for “section 757(6)” substitute
20
“section 757(5) or (6)”.
      (2)
Sub-paragraph (1) has effect, and shall be deemed always to have had effect,
in relation to disposals on or after 17th April 2002.
Transitional provision
17    (1)
This paragraph applies for the purposes of determining whether an offshore
25
fund that is—
(a)
a part of an umbrella fund (which is treated as an offshore fund
under section 756B of that Act), or
(b)
a class of interest in a part of an umbrella fund (which is treated as an
offshore fund under section 756C of that Act),
30

may be certified as a distributing fund under Chapter 5 of Part 17 of the
Taxes Act 1988 in respect of an account period ending on or after the day on
which this Act is passed and on or before 31st December 2005.
      (2)
Where this paragraph applies—
(a)
subsection (3) of section 760 of the Taxes Act 1988 shall not have
35
effect, and
(b)
the fund shall not be certified as a distributing fund in respect of a
period if at any time in that period—
(i)
more than 5 per cent by value of the assets of that offshore
fund consists of interests in other offshore funds, and
40
(ii)
more than 5 per cent by value of the assets of the umbrella
fund consists of interests in other offshore funds.
      (3)
Where this paragraph applies, references to subsection (3) of section 760 of
the Taxes Act 1988 shall have effect as references to sub-paragraph (2)(b)
above.
45

Finance Bill
Schedule 27 — Meaning of “offshore installation”
Part 1 — The new definition
416

      (4)
Words used in Chapter 5 of Part 17 of the Taxes Act 1988 have the same
meaning in this paragraph as they have in that Chapter.
Schedule 27
Section 136

Meaning of “offshore installation”
Part 1
5
The new definition
1
In Part 19 of the Taxes Act 1988 (supplemental provisions), after section 837B
insert—
“837C Meaning of “offshore installation”
(1)
For the purposes of the Tax Acts, unless the context otherwise
10
requires, “offshore installation” means a structure which is, is to be,
or has been, put to a use specified in subsection (2) while—
(a)
standing in any waters,
(b)
stationed (by whatever means) in any waters, or
(c)
standing on the foreshore or other land intermittently
15
covered with water.
(2)
The uses are—
(a)
use for the purposes of exploiting mineral resources by
means of a well;
(b)
use for the purposes of exploration with a view to exploiting
20
mineral resources by means of a well;
(c)
use for the storage of gas in or under the shore or the bed of
any waters;
(d)
use for the recovery of gas so stored;
(e)
use for the conveyance of things by means of a pipe;
25
(f)
use mainly for the provision of accommodation for persons
who work on or from a structure which is, is to be, or has
been, put to a use specified in any of paragraphs (a) to (e)
while—
(i)
standing in any waters,
30
(ii)
stationed (by whatever means) in any waters, or
(iii)
standing on the foreshore or other land intermittently
covered with water.
(3)
But a structure is not an offshore installation if—
(a)
it has ceased permanently to be put to a use specified in
35
subsection (2),
(b)
it is not, and is not to be, put to any other use specified in
subsection (2), and
(c)
since ceasing permanently to be put to a use specified in
subsection (2) it has been put to a use which is not so
40
specified.
(4)
In this section “structure” includes a ship or other vessel.

Finance Bill
Schedule 27 — Meaning of “offshore installation”
Part 2 — Minor and consequential amendments
417

(5)
The Treasury may make provision by regulations as to the meaning
of “offshore installation” for the purposes of the Tax Acts.
(6)
The regulations may—
(a)
add to, amend or repeal subsections (1) to (4) or any
provision of those subsections;
5
(b)
make different provision for different purposes;
(c)
include incidental, consequential, supplemental, saving or
transitional provisions.”
2
In section 832(1) of the Taxes Act 1988 (interpretation of the Tax Acts) at the
appropriate place insert—
10

““offshore installation” has the meaning given by section 837C;”.
3
Subject to the following provisions of this Schedule, paragraphs 1 and 2 have
effect—
(a)
for the purposes of income tax and capital gains tax, for the year
2004-05 and subsequent years of assessment;
15
(b)
for the purposes of corporation tax, for accounting periods ending on
or after 1st April 2004.
Part 2
Minor and consequential amendments
The Taxes Act 1988
20
4     (1)
Chapter 3 of Part 7 of the Taxes Act 1988 (enterprise investment scheme) is
amended as set out in sub-paragraphs (2) to (4).
      (2)
In section 293 (qualifying companies), in subsection (3C)(b) for “oil rigs”
substitute “offshore installations”.
      (3)
In section 297 (qualifying trades), in subsection (6) for “oil rigs” substitute
25
“offshore installations”.
      (4)
In section 298 (provisions supplementary to sections 293 and 297), in
subsection (5) omit the definition of “oil rig”.
      (5)
This paragraph has effect in relation to shares issued on or after 6th April
2004.
30
      (6)
Nothing in this paragraph affects the operation of any of the following
provisions in relation to shares issued before that date—
(a)
Chapter 3 of Part 7 of the Taxes Act 1988 (enterprise investment
scheme);
(b)
sections 573 and 574 of that Act (relief for losses on unlisted shares in
35
trading companies);
(c)
Schedule 5B to the Taxation of Chargeable Gains Act 1992 (c. 12)
(enterprise investment scheme: re-investment).
5     (1)
Schedule 28B to the Taxes Act 1988 (venture capital trusts) is amended as set
out in sub-paragraphs (2) to (4).
40
      (2)
In paragraph 3 (requirements as to company’s business), in sub-paragraph
(8)(b) for “oil rigs” substitute “offshore installations”.
      (3)
In paragraph 4 (qualifying trades), in sub-paragraph (7) for “oil rigs”
substitute “offshore installations”.

Finance Bill
Schedule 27 — Meaning of “offshore installation”
Part 2 — Minor and consequential amendments
418

      (4)
In paragraph 5 (provisions supplemental to paragraph 4), in sub-paragraph
(1) omit the definition of “oil rig”.
      (5)
This paragraph has effect for the purpose of determining whether shares or
securities issued on or after 6th April 2004 are, for the purposes of section
842AA of the Taxes Act 1988, to be regarded as comprised in a company’s
5
qualifying holdings.
      (6)
Nothing in this paragraph affects the operation of Schedule 28B to the Taxes
Act 1988 as it has effect for the purpose of determining whether shares or
securities issued before that date are, for the purposes of section 842AA of
the Taxes Act 1988, to be regarded as comprised in a company’s qualifying
10
holdings.
Finance Act 2000 (c. 17)
6     (1)
Schedule 15 to the Finance Act 2000 (the corporate venturing scheme) is
amended as set out in sub-paragraphs (2) to (4).
      (2)
In paragraph 23 (the trading activities requirement), in sub-paragraph
15
(8)(a)(i) for “oil rigs” substitute “offshore installations”.
      (3)
In paragraph 28 (excluded activities: leasing of ships), in sub-paragraph (1)
for “oil rigs” substitute “offshore installations”.
      (4)
In paragraph 28(6) omit the definition of “oil rig”.
      (5)
This paragraph has effect in relation to shares issued on or after 6th April
20
2004.
      (6)
Nothing in this paragraph affects the operation of Schedule 15 to the Finance
Act 2000 in relation to shares issued before that date.
7     (1)
In Schedule 22 to the Finance Act 2000 (tonnage tax), in paragraph 20
(vessels excluded from being qualifying ships) omit sub-paragraph (5).
25
      (2)
This paragraph has effect for accounting periods ending on or after 1st April
2004.
Capital Allowances Act 2001 (c. 2)
8
In section 94 of the Capital Allowances Act 2001 (expenditure on ships that
is not long-life asset expenditure) omit subsections (2)(b) and (3).
30
9     (1)
Section 153 of the Capital Allowances Act 2001 (ships that are not qualifying
ships) is amended as follows.
      (2)
For subsection (2) substitute—
“(2)
A ship is not a qualifying ship at any time when it is an offshore
installation.”
35
      (3)
Omit subsection (3).
10
In Part 2 of Schedule 1 to the Capital Allowances Act 2001 (index of defined
expressions) at the appropriate place insert—

“offshore installation
section 837C of ICTA”

(except in Chapter 13 of

40

Part 2)

Finance Bill
Schedule 27 — Meaning of “offshore installation”
Part 2 — Minor and consequential amendments
419

11    (1)
Paragraphs 8 to 10 have effect—
(a)
for income tax purposes, as respects allowances and charges falling
to be made for chargeable periods ending on or after 6th April 2004;
(b)
for corporation tax purposes, as respects allowances and charges
falling to be made for chargeable periods ending on or after 1st April
5
2004.
      (2)
In this paragraph “chargeable period” has the meaning given by section 6 of
the Capital Allowances Act 2001.
Income Tax (Earnings and Pensions) Act 2003 (c. 1)
12
In section 40 of the Income Tax (Earnings and Pensions) Act 2003 (duties on
10
board vessel or aircraft), in subsection (5) for paragraph (b) (meaning of
ship) substitute—
“(b)
“ship” does not include an offshore installation;”.
13
In section 305 of the Income Tax (Earnings and Pensions) Act 2003 (offshore
oil and gas workers: mainland transfers), in subsection (6) omit the
15
definition of “offshore installation”.
14
For section 385 of the Income Tax (Earnings and Pensions) Act 2003
substitute—
“385 Meaning of “ship”
In this Chapter “ship” does not include an offshore installation.”
20
15
In Part 2 of Schedule 1 to the Income Tax (Earnings and Pensions) Act 2003
(index of defined expressions) at the appropriate place insert—

“offshore installation
section 837C of ICTA”

16
Paragraphs 12 to 15 have effect for the year 2004-05 and subsequent years of
assessment.
25
17    (1)
Schedule 5 to the Income Tax (Earnings and Pensions) Act 2003 (enterprise
management incentives) is amended as follows.
      (2)
In paragraph 18 (excluded activities: leasing of certain ships), in sub-
paragraph (1) for “oil rigs” substitute “offshore installations”.
      (3)
In paragraph 18(2) for “oil rig” substitute “offshore installation”.
30
      (4)
In paragraph 18(8) omit the definition of “oil rig”.
      (5)
In paragraph 59 (index of defined expressions) at the appropriate place
insert—

“offshore installation
section 837C of ICTA”

      (6)
This paragraph has effect in relation to a right to acquire shares in a company
35
granted on or after 6th April 2004.
      (7)
Nothing in this paragraph affects the operation of Schedule 5 to the Income
Tax (Earnings and Pensions) Act 2003 in relation to a right to acquire shares
in a company granted before that date.