Finance (No. 2) Act 1987
1987 c. 51
An Act to grant certain duties, to alter other duties, and to amend the law relating to the National Debt and the Public Revenue, and to make further provision in connection with Finance.
[23rd July 1987]
M ost Gracious Sovereign,We, Your Majesty ’ s most dutiful and loyal subjects, the Commons of the United Kingdom in Parliament assembled, towards raising the necessary supplies to defray Your Majesty ’ s public expenses, and making an addition to the public revenue, have freely and voluntarily resolved to give and grant unto your Majesty the several duties hereinafter mentioned; and do therefore most humbly beseech Your Majesty that it may be enacted, and be it enacted by the Queen ’ s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows: —
Part I
Income Tax, Corporation Tax and Capital Gains Tax
Chapter I
Profit-Related Pay
Preliminary
1 — 17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chapter II
Personal Pension Schemes
18 — 57. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chapter III
General
58 — 63. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
64. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65 — 68. Controlled foreign companies: acceptable distribution policy.
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Miscellaneous
69. Disclosure of employment information obtained from Inland Revenue.
— (1) Section 58 of the
Finance Act 1969 (disclosure of information for statistical purposes by Board of Inland Revenue) shall be amended in accordance with this section.
(2) At the end of subsection (4)(cases in which information obtained under the section may be disclosed by officers of the Department of Employment or Manpower Services Commission to other persons) there shall be added " or ( c )
to an authorised officer of any body specified in the first column of the following Table for the purposes of functions of that body under any enactment specified in relation to it in the second column of the Table. Table
| Body | Enactment |
| A local education authority in England and Wales. | Section 8 of the Employment and Training Act 1973. |
| An education authority in Scotland. | Section 126 of the Education ( Scotland ) Act 1980. |
| The Northern Ireland Training Authority. | The Industrial Training ( Northern Ireland ) Order 1984. |
| A local planning authority within the meaning of the Town and Country Planning Act 1971 and any board which exercises for any area the functions of such an authority. | Part II of the Town and Country Planning Act 1971. |
| A planning authority as defined in section 172 ( 3 ) of the Local Government ( Scotland ) Act 1973. | Part II of the Town and Country Planning ( Scotland ) Act 1972. |
| The Welsh Development Agency. | The Welsh Development Agency Act 1975. |
| The Scottish Development Agency. | The Scottish Development Agency Act 1975. |
| The Development Board for Rural Wales. | The Development of Rural Wales Act 1976. |
| The Highlands and Islands Development Board. | The Highlands and Islands Development ( Scotland ) Acts 1965 and 1968. |
| A development corporation within the meaning of the New Towns Act 1981. | Section 4 of the New Towns Act 1981. |
| A development corporation within the meaning of the New Towns ( Scotland ) Act 1968. | Section 3 of the New Towns ( Scotland ) Act 1968. |
| A new town commission within the meaning of the New Towns Act ( Northern Ireland ) 1965. | Section 7 of the New Towns Act ( Northern Ireland ) 1965. | " |
(3) In subsection (6) for the words “ or paragraph (b) of subsection (4) ” there shall be substituted " paragraph ( b ) or paragraph ( c ) of subsection ( 4 ) above " . 70, 71. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
72. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
73. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chapter IV
Capital Gains
Companies ’ chargeable gains
74 — 77. General rules.
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Miscellaneous
78. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
79. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
80. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
81. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chapter V
Taxes Management Provisions
Company returns
82. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
83. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
84. — (1) — (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) At the end of section 70 of the Management Act (evidential certificates) there shall be inserted the following subsection —
" ( 5 ) Where an amount has been assessed by way of penalty under section 94 of this Act and either no appeal has been brought against that assessment or the amount assessed has been confirmed or varied on appeal, — ( a )
a certificate of an inspector or other officer of the Board that an amount is due by way of penalty under that section, and
( b )
a certificate of a collector that payment of that amount has not been made to him or, to the best of his knowledge and belief, to any other collector, or to a person acting on his behalf or on behalf of another collector,
shall be sufficient evidence that the amount mentioned in the certificates is unpaid and is due to the Crown; and any document purporting to be such a certificate as is mentioned in this subsection shall be deemed to be such a certificate unless the contrary is proved. "
(5) — (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(9) This section has effect with respect to penalties incurred after the appointed day. 85. Interest on overdue corporation tax etc.
With respect to accounting periods ending after the appointed day, after section 87 of the Management Act there shall be inserted the following section
—
" Interest on overdue corporation tax etc.
87A. — ( 1 ) Corporation tax shall carry interest at the [ rate applicable under section 178 of the Finance Act 1989 ] from the date when the tax becomes due and payable ( in accordance with section [ 10 ] of the principal Act ) until payment.
( 2 ) Subsection ( 1 ) above applies even if the date when the tax becomes due and payable ( as mentioned in that subsection ) is a non-business day within the meaning of section 92 of the Bills of Exchange Act 1882.
( 3 ) In relation to corporation tax assessed by virtue of section [ 346 ( 2 ) or 347 ( 1 ) of the principal Act, section 267 ( 3C ) or 278 ( 5 ) of the Income and Corporation Taxes Act 1970 ] [ , section 96 ( 8 ) of the Finance Act 1990 ] or section 87 ( 4 ) of the Capital Gains Tax Act 1979 ( which enable unpaid corporation tax assessed on a company to be assessed on other persons in certain circumstances ) , the reference in subsection ( 1 ) above to the date when the tax becomes due and payable is a reference to the date when it became due and payable by the company.
( 4 ) [ Subject to subsection ( 7 ) below ] in any case where — ( a )
there is in any accounting period of a company ( in this subsection referred to as “ the later period ” ) an amount of surplus advance corporation tax, as defined in subsection ( 3 ) of section [ 239 of the principal Act ] , and ( b )
pursuant to a claim under the said subsection ( 3 ) , the whole or any part of that amount is treated for the purposes of the said section [ 239 ] as discharging liability for an amount of corporation tax for an earlier accounting period ( in this subsection referred to as “ the earlier period ” ) , and ( c )
disregarding the effect of the said subsection ( 3 ) , an amount of corporation tax for the earlier period would carry interest in accordance with this section,
then, in determining the amount of interest payable under this section on corporation tax unpaid for the earlier period, no account shall be taken of any reduction in the amount of that tax which results from the said subsection ( 3 ) except so far as concerns interest for any time after the date on which any corporation tax for the later period became due and payable ( as mentioned in subsection ( 1 ) above ) .
( 5 ) A sum assessed on a company by such an assessment as is referred to in [ section 252 ( 5 ) of the principal Act ] ( recovery of payment of tax credit or interest on such a payment ) shall carry interest at the [ rate applicable under section 178 of the Finance Act 1989 ] from the date when the payment of tax credit or interest was made until the sum assessed is paid. " [ ( 6 ) In any case where — ( a )
on a claim under section 393A ( 1 ) of the principal Act, the whole or any part of a loss incurred in an accounting period ( “ the later period ” ) has been set off for the purposes of corporation tax against profits of a preceding accounting period ( “ the earlier period ” ) ;
( b )
the earlier period does not fall wholly within the period of twelve months immediately preceding the later period; and
( c )
if the claim had not been made, there would be an amount or, as the case may be, an additional amount of corporation tax for the earlier period which would carry interest in accordance with this section,
then, for the purposes of the determination at any time of whether any interest is payable under this section or of the amount of interest so payable, the amount mentioned in paragraph ( c ) above shall be taken to be an amount of unpaid corporation tax for the earlier period except so far as concerns interest for any time after the date on which any corporation tax for the later period became ( or, as the case may be, would have become ) due and payable as mentioned in subsection ( 1 ) above.
( 7 ) Where, in a case falling within subsection ( 6 ) ( a ) and ( b ) above — ( a )
there is in the earlier period, as a result of the claim under section 393A ( 1 ) of the principal Act, an amount of surplus advance corporation tax, as defined in subsection ( 3 ) of section 239 of that Act; and
( b )
pursuant to a claim under the said subsection ( 3 ) , the whole or any part of that amount is to be treated for the purposes of the said section 239 as discharging liability for an amount of corporation tax for an accounting period before the earlier period,
the claim under the said subsection ( 3 ) shall be disregarded for the purposes of subsection ( 6 ) above but subsection ( 4 ) above shall have effect in relation to that claim as if the reference in the words after paragraph ( c ) to the later period within the meaning of subsection ( 4 ) above were a reference to the period which, in relation to the claim under the said section 393A ( 1 ) , would be the later period for the purposes of subsection ( 6 ) above. ]
86. Supplementary provisions as to interest on overdue tax.
— (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) In section 86 of the Management Act (interest on overdue tax), subsection (2)(d) and paragraph 5 of the Table (which relate to assessed corporation tax) shall be omitted.
(3) References to section 86 of the Management Act in — (a)
sections 70(2) and 92 of that Act (evidence, and remission of interest in certain cases), and
(b)
paragraph 4 of Schedule 15 to the
Finance Act 1973 (territorial extension of tax),
shall include a reference to section 87A of the Management Act.
(4) In section 88 of the Management Act (interest on tax recovered to make good loss due to taxpayer ’ s fault) — (a)
in subsection (2)(exclusion of certain non-assessed tax) after the words “ in relation to ” there shall be inserted " corporation tax or " ; and
(b)
in subsection (5), paragraph (e)(which relates to corporation tax) shall be omitted.
(5) In section 91 of the Management Act (effect on interest of reliefs) after subsection (1) there shall be inserted the following subsections —
" ( 1A ) Where interest is payable under section 87A of this Act in respect of an amount of corporation tax for an accounting period, and relief from tax is given by a discharge of any of that corporation tax — ( a )
such adjustment shall be made of the amount of interest payable under that section in respect of corporation tax for that accounting period, and
( b )
such repayment shall be made of any amounts of interest previously paid under that section in respect of that corporation tax,
as are necessary to secure that the total sum ( if any ) paid or payable under that section in respect of corporation tax for that accounting period is the same as it would have been if the tax discharged had never been charged.
( 1B ) Subsection ( 1A ) above has effect subject to section 87A ( 4 ) of this Act. "
(6) At the beginning of subsection (2) of that section there shall be inserted the words " Subject to subsection ( 2A ) below " and at the end of that subsection there shall be added the following subsection —
" ( 2A ) In any case where — ( a )
relief from corporation tax is given to any person by repayment, and
( b )
that tax was paid for an accounting period ending after the day which is the appointed day for the purposes of section [ 10 of the principal Act ] ,
that person shall be entitled to require that the amount repaid shall be treated for the purposes of this section, so far as it will go, as if it were a discharge of the corporation tax charged on him for that period. "
(7) This section has effect with respect to accounting periods ending after the appointed day. 87. Interest on tax overpaid.
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88. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
89. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Miscellaneous
90. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
91. Close companies: loans to participators.
— (1) In section 109 of the Management Act (close companies: loans to participators) subsection (2) shall be omitted.
(2) In subsection (3) of that section for “ 88 ” there shall be substituted " 87A " and for the words from “ charged ” onwards there shall be substituted " under the said section [ 419 ] became due and payable shall be that determined in accordance with subsection [ ( 3 ) ] of that section " .
(3) After subsection (3) of that section there shall be inserted the following subsection —
" ( 3A ) If there is such a repayment of the whole or any part of a loan or advance as is referred to in subsection [ ( 4 ) ] of section [ 419 ] of the principal Act, interest under section 87A of this Act on so much of the tax under the said section [ 419 ] as is referable to the amount repaid shall not be payable in respect of any period after the date on which the repayment was made. "
(4) This section has effect with respect to loans or advances made (or treated as made) in any accounting period ending after the appointed day. 92, 93. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
94. Failure to do things within a limited time.
In section 118(2) of the Management Act (cases where persons are deemed not to have failed to do things which are required to be done within a limited time), after the word
“ deemed ” , in the second place where it occurs, there shall be inserted
" not to have failed to do it unless the excuse ceased and, after the excuse ceased, he shall be deemed " .
95. Interpretation of Chapter V and consequential and supplementary provisions.
— (1) In this Chapter
“ the Management Act ” means the
Taxes Management Act 1970.
(2) Subject to subsection (3) below, any reference in this Chapter to the appointed day is a reference to such day as the Treasury may by order made by statutory instrument appoint, and different days may be so appointed for different provisions of this Chapter.
(3) No day may be appointed by virtue of subsection (2) above which falls earlier than 31st March 1992.
(4) The provisions of Schedule 6 to this Act shall have effect, being provisions consequential on and supplementary to the provisions of this Chapter.
Part II
Inheritance Tax etc.
96. Interests in possession.
— (1) With respect to transfers of value made, and other events occurring, on or after 17th March 1987, the
Inheritance Tax Act 1984 shall be amended in accordance with this section.
(2) In section 3A (potentially exempt transfers) — (a)
in subsection (2)(a) the words “ otherwise than as settled property ” shall be omitted;
(b)
in subsection (2)(b) the words from “ otherwise ” onwards shall be omitted; and
(c)
in subsection (6) after the words “ this Act ” there shall be inserted " other than section 52 " .
(3) At the end of section 3A there shall be added the following subsection —
" ( 7 ) In the application of this section to an event on the happening of which tax is chargeable under section 52 below, the reference in subsection ( 1 ) ( a ) above to the individual by whom the transfer of value is made is a reference to the person who, by virtue of section 3 ( 4 ) above, is treated as the transferor. "
(4) In section 49 (treatment of interests in possession) subsection (3)(which was added by paragraph 14 of Schedule 19 to the Finance Act 1986) shall be omitted.
(5) In section 55 (reversionary interest acquired by beneficiary) in subsection (2) the words “ and such a disposition is not a potentially exempt transfer ” (being words added by paragraph 15 of the said Schedule 19) shall be omitted.
(6) Schedule 7 to this Act shall have effect for the purpose of making further amendments of the Inheritance Tax Act 1984 relating to interests in possession in settled property. 97. Acceptance in lieu: capital transfer tax and estate duty.
— (1) If, under paragraph 17 of Schedule 4 to the
Finance Act 1975, the Commissioners of Inland Revenue agree to accept property in satisfaction of an amount of capital transfer tax on terms that the value to be attributed to the property for the purposes of that acceptance is determined as at a date earlier than that on which the property is actually accepted, the terms may provide that the amount of capital transfer tax which is satisfied by the acceptance of that property shall not carry interest under paragraph 19 of that Schedule from that date.
(2) If, under any of the enactments set out in paragraphs (a) to (c) of subsection (3) of section 8 of the National Heritage Act 1980, the Commissioners of Inland Revenue agree to accept property in satisfaction of an amount of estate duty on terms that the value to be attributed to the property for the purposes of that acceptance is determined as at a date earlier than that on which the property is actually accepted, the terms may provide that the amount of estate duty which is satisfied by the acceptance of that property shall not carry interest under section 18 of the Finance Act 1896 from that date.
(3) Subsections (1) and (2) above apply in any case where the acceptance of the property in question occurs on or after 17th March 1987 and paragraph 19 of Schedule 4 to the Finance Act 1975 or, as the case may be, section 18 of the Finance Act 1896 shall have effect subject to any such terms as are referred to in subsection (1) or subsection (2) above.
(4) In this section “ estate duty ” and “ property ” have the meaning assigned by section 272 of the Inheritance Tax Act 1984. 98. Personal pension schemes.
— (1) The Inheritance Tax Act 1984 shall be amended as follows.
(2) At the end of section 12(2)(dispositions by employers that are not transfers of value) there shall be added — (c)
it is a contribution under approved personal pension arrangements within the meaning of Chapter II of Part I of the Finance (No. 2) Act 1987 entered into by an employee of the person making the disposition ” .
(3) In section 12(3), for the words “ both paragraph (a) and (b) ” there shall be substituted the words " more than one paragraph " , and for the word “ either ” there shall be substituted the words " any one " .
(4) In section 151 (treatment of pension rights etc.) after subsection (1) there shall be inserted —
" ( 1A ) This section also applies to approved personal pension arrangements within the meaning of Chapter II of Part I of the Finance ( No. 2 ) Act 1987; and references in the following provisions of this section to a scheme shall be construed accordingly. "
(5) In section 152 (cash options) for the words from “ under a contract ” to “ annuities) ” there shall be substituted the words — " ( a )
under approved personal pension arrangements within the meaning of Chapter II of Part I of the Finance ( No. 2 ) Act 1987, or
( b )
under a contract or trust scheme approved by the Board under section 226 or 226A of the Taxes Act or ( before the commencement of that Act ) under section 22 of the Finance Act 1956, " .
Part III
Miscellaneous and Supplementary
99. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
101. Oil taxation.
— (1) Schedule 10 to the
Finance Act 1987 (nomination scheme for disposals and appropriations of oil) shall have effect subject to the amendments in Schedule 8 to this Act.
(2) In section 62 of the Finance Act 1987 (market value of oil to be determined on a monthly basis) subsection (6)(meaning of relevant sale of oil in relation to the additional return required by subsection (4) of that section) shall have effect subject to the following modifications — (a)
after the words “ sale of oil ” , in the second place where they occur, there shall be inserted the words " at arm ’ s length " ;. . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) Section 63 of the Finance Act 1987 (blends of oil from two or more fields) shall have effect with the omission from subsection (1) of the words from “ and in ” onwards and with the addition, at the end of that subsection, of the following subsection —
" ( 1A ) In this section — ( a )
“ oil field ” includes an area which is a foreign field for the purposes of section 12 of the Oil Taxation Act 1983; ( b )
“ oil ” includes any substance which would be oil if the enactments mentioned in section 1 ( 1 ) of the principal Act extended to such an area as is referred to in paragraph ( a ) above;
( c )
“ blended oil ” means oil which has been mixed as mentioned in subsection ( 1 ) above; and
( d )
“ the originating fields ” , in relation to any blended oil, means the oil fields from which the blended oil is derived. "
(4) In paragraph 5 of Schedule 2 to the Oil Taxation Act 1975 (returns by the responsible person for an oil field) after sub-paragraph (2A) there shall be inserted the following sub-paragraph —
" ( 2B ) If in any chargeable period oil won from the oil field is mixed as mentioned in section 63 of the Finance Act 1987 so as to give rise to blended oil, within the meaning of that section, then, as respects that chargeable period, for paragraph ( a ) of sub-paragraph ( 2 ) above there shall be substituted the following paragraph — ’ ( a )
state the total of the shares of the participators in the oil field of the oil won from the field during the period less so much of the oil won from the field as is not saved ’ . "
(5) Subsections (2) to (4) above have effect with respect to chargeable periods ending after 1st January 1987 and, subject to subsection (6) below, Schedule 8 to this Act has effect with respect to calendar months in chargeable periods beginning with March 1987.
(6) Paragraph 5 of Schedule 8 to this Act has effect with respect to chargeable periods ending after such date as the Treasury may by order made by statutory instrument appoint; but no order shall be made under this subsection unless a draft of it has been laid before and approved by a resolution of the House of Commons. 102. Government fees and charges.
— (1) This section applies where a Minister of the Crown of any other person has power under any enactment (whenever passed) to require the payment of, or to determine by subordinate legislation the amount of, any fee or charge (however described) which is payable to the Minister or to any other person who is required to pay the fee or charge into the Consolidated Fund (whether the obligation is so expressed or is expressed as a requirement to make the payment into the Exchequer).
(2) In the following provisions of this section, a power falling within subsection (1) above is referred to as a “ power to fix a fee ” and, in relation to such a power, — (a)
“ fee ” includes charge;
(b)
“ the appropriate authority ” means, if the power is exercisable by a Minister of the Crown or any Commissioners, that Minister or those Commissioners and, in any other case, such Minister of the Crown as the Treasury may determine ; and
(c)
“ the recipient ” means the Minister or other person to whom the fee is payable.
(3) In relation to any power to fix a fee, the appropriate authority or any Minister of the Crown with the consent of the appropriate authority may, by order made by statutory instrument, specify functions, whether of the recipient or any other person and whether arising under any enactment, by virtue of the Community obligation or otherwise, the costs of which, in addition to any other matters already required to be taken into account, are to be taken into account in determing the amount of the fee.
(4) In relation to any functions of the costs of which fall to be taken into account on the exercise of any power to fix a fee (whether by virtue of subsection (3) above or otherwise), the appropriate authority or any Minister of the Crown with the consent of the appropriate authority may, by order made by statutory instrument, specify matters which, in addition to any matters already required to be taken into account, are to be taken into account in determining the those costs, and, without prejudice to the generality of the power conferred by this subsection, those matters may include deficits incurred before as well as after the exercise of that power, a requirement to secure a return on an amount of capital and depreciation of assets.
(5) No order shall be made under subsection (3) or subsection (4) above unless a draft of the order has been laid before, and approved by a resolution of, the House of Commons.
(6) An order under subsection (3) or subsection (4) above has effect in relation to any exercise of the power to fix the fee concerned after the making of the order ; but no earlier exercise of that power shall be regarded as having been invalid if, had the order been made before that exercsie of power, the exercise would have been validated by the order.
(7) In this section — (a)
“ Minister of the Crown ” has the same meaning as in the
Ministers of the Crown Act 1975;
(b)
“ Commissioners ” means the Commissioners of Customs and Excise or the Commissioners of Inland Revenue;
(c)
“ enactment ” does not include Northern Ireland legislation, as defined in section 24(5) of the
Interpretation Act 1978; and
(d)
subject to paragraph (c) above, “ subordinate legislation ” has the same meaning as in the Interpretation Act 1978.
(8) An Order in Council under paragraph 1(1)(b) of Schedule 1 to the Northern Ireland Act 1974 (legislation for Northern Ireland in the interim period) which states that it only made for purposes corresponding to those of this section — (a)
shall not be subject to sub-paragraphs (4) and (5) of paragraph 1 of that Schedule (affirmative resolution of both House of Parliament); but
(b)
shall be subject to annulment in pursuance of a resolution of either House.
103. Consumption in port of goods transhipped for use as stores etc.
Subject to subsection (2) below and to any directions given by the Commissioners under section 61 of the
Customs and Excise Management Act 1979, goods transhipped for use as stores on a ship which is not less than 40 tons register and which is to make a voyage to a country outside the United Kingdom may be used while the ship is in port without payment of duty.
(2) Subsection (1) above does not apply to — (a)
dutiable alcoholic liquor other than beer and cider ; or
and the reference in subsection (1) above to a country outside the United Kingdom does not include a reference to the Isle of Man.
(3) In section 1(1) of the Customs and Excise Management Act 1979, at the end of the definition of “ transit of transhipment ” there shall be added " or transhipment of those goods for use as stores " .
(4) In subsection (1) of section 61 of that Act, after paragraph (a) there shall be added — " ( aa )
as to the descriptions of vessel on which goods carried as stores may be used in port without payment of duty in accordance with section 103 ( 1 ) of the Finance ( No. 2 ) Act 1987;
( ab )
as to the quantity of any goods which may be carried as stores for use in port as mentioned in paragraph ( aa ) above and as to the time within which such goods or any specified quantities of them may be so used ; and " ;
and in paragraph (b) of that subsection after the words “ paragraph (a) ” there shall b inserted " or paragraph ( aa ) " .
(5) In subsection (5) of the said section 61 after the words “ United Kingdom ” , in the first place where they occur, there shall be inserted " or for use in port without payment of duty " .
(6) Subsections (1) and (2) above shall be construed as one with the Customs and Excise Management Act 1979.
(7) Notwitstanding the generality of section 24 of the Value Added Tax Act 1983 (application of customs and excise enactments in relation to value added tax), subsections (1) and (2) above are excluded from the enactments to which that section applies. 104. Short title, interpretation, construction and repeals.
— (1) This Act may be cited as the Finance (No. 2) Act 1987.
(2) In this Act “ the Taxes Act ” means the Income and Corporation Taxes Act 1970.
(3) Part I of this Act, so far as it relates to income tax, shall be construed as one with the Income Tax Acts, so far as it relates to corporation tax, shall be construed as one with the Corporation Tax Acts and, so far as it relates to capital gains tax, shall be construed as one with the Capital Gains Tax Act 1979.
(4) The enactments specified in Schedule 9 to this Act (which include enactments which are spent or otherwise unnecessary) are hereby repealed to the extent specified in the third column of that Schedule, but subject to any provision at the end of any Part of that Schedule.
SCHEDULES
SCHEDULES 1 — 5
SCHEDULE 6
Section 95.
Management Provisions: Supplementary and Consequential Provisions
Companies ’ capital gains
1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Relief for unremittable income
6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lloyd ’ s underwriting agents
8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SCHEDULE 7
Section 96.
Inheritance Tax: Interests in Possession
1. After section 54 of the
Inheritance Tax Act 1984 (in this Schedule referred to as
“ the 1984 Act ” ) there shall be inserted the following sections
—
" Special rate of charge where settled property affected by potentially exempt transfer.
54A. — ( 1 ) If the circumstances fall within subsection ( 2 ) below, this section applies to any chargeable transfer made — ( a )
under section 52 above, on the coming to an end of an interest in possession in settled property during the life of the person beneficially entitled to it, or
( b )
on the death of a person beneficially entitled to an interest in possession in settled property;
and in the following provisions of this section the interest in possession mentioned in paragraph ( a ) or paragraph ( b ) above is referred to as “ the relevant interest ” .
( 2 ) The circumstances referred to in subsection ( 1 ) above are — ( a )
that the whole or part of the value transferred by the transfer is attributable to property in which the relevant interest subsisted and which became settled property in which there subsisted an interest in possession ( whether the relevant interest or any previous interest ) on the making by the settlor of a potentially exempt transfer at any time on or after 17th March 1987 and within the period of seven years ending with the date of the chargeable transfer; and
( b )
that the settlor is alive at the time when the relevant interest comes to an end; and
( c )
that, on the coming to an end of the relevant interest, any of the property in which that interest subsisted becomes settled property in which no qualifying interest in possession ( as defined in section 59 below ) subsists, other than property to which section 71 below applies; and
( d )
that, within six months of the coming to an end of the relevant interest, any of the property in which that interest subsisted has neither —
( i ) become settled property in which a qualifying interest in possession subsists or to which section 71 below applies, nor
( ii ) become property to which an individual is beneficially entitled.
( 3 ) In the following provisions of this section “ the special rate property ” , in relation to a chargeable transfer to which this section applies, means the property in which the relevant interest subsisted or, in a case where — ( a )
any part of that property does not fall within subsection ( 2 ) ( a ) above, or
( b )
any part of that property does not become settled property of the kind mentioned in subsection ( 2 ) ( c ) above,
so much of that property as appears to the Board or, on appeal, to the Special Commissioners to be just and reasonable.
( 4 ) Where this section applies to a chargeable transfer ( in this section referred to as “ the relevant transfer ” ) , the tax chargeable on the value transferred by the transfer shall be whichever is the greater of the tax that would have been chargeable apart from this section and the tax determined in accordance with subsection ( 5 ) below.
( 5 ) The tax determined in accordance with this subsection is the aggregate of — ( a )
the tax that would be chargeable on a chargeable transfer of the description specified in subsection ( 6 ) below, and
( b )
so much ( if any ) of the tax that would, apart from this section, have been chargeable on the value transferred by the relevant transfer as is attributable to the value of property other than the special rate property.
( 6 ) The chargeable transfer postulated in subsection ( 5 ) ( a ) above is one — ( a )
the value transferred by which is equal to the value transferred by the relevant transfer or, where only part of that value is attributable to the special rate property, that part of that value;
( b )
which is made at the time of the relevant transfer by a transferor who has in the preceding seven years made chargeable transfers having an aggregate value equal to the aggregate of the values transferred by any chargeable transfers made by the settlor in the period of seven years ending with the date of the potentially exempt transfer; and
( c )
for which the applicable rate or rates are one-half of the rate or rates referred to in section 7 ( 1 ) above.
( 7 ) This section has effect subject to section 54B below.
Provisions supplementary to section 54A.
54B. — ( 1 ) The death of the settlor, at any time after a chargeable transfer to which section 54A above applies, shall not increase the tax chargeable on the value transferred by the transfer unless, at the time of the transfer, the tax determined in accordance with subsection ( 5 ) of that section is greater than the tax that would be chargeable apart from that section.
( 2 ) The death of the person who was beneficially entitled to the relevant interest, at any time after a chargeable transfer to which section 54A above applies, shall not increase the tax chargeable on the value transferred by the transfer unless, at the time of the transfer, the tax that would be chargeable apart from that section is greater than the tax determined in accordance with subsection ( 5 ) of that section.
( 3 ) Where the tax chargeable on the value transferred by a chargeable transfer to which section 54A above applies falls to be determined in accordance with subsection ( 5 ) of that section, the amount referred to in paragraph ( a ) of that subsection shall be treated for the purposes of this Act as tax attributable to the value of the property in which the relevant interest subsisted.
( 4 ) Subsection ( 5 ) below shall apply if — ( a )
during the period of seven years preceding the date on which a chargeable transfer to which section 54A above applies ( “ the current transfer ” ) is made, there has been another chargeable transfer to which that section applied, and
( b )
the person who is for the purposes of the current transfer the settlor mentioned in subsection ( 2 ) ( a ) of that section is the settlor for the purposes of the other transfer ( whether or not the settlements are the same ) ;
and in subsections ( 5 ) and ( 6 ) below the other transfer is referred to as the “ previous transfer ” .
( 5 ) Where this subsection applies, the appropriate amount in relation to the previous transfer ( or, if there has been more than one previous transfer, the aggregate of the appropriate amounts in relation to each ) shall, for the purposes of calculating the tax chargeable on the current transfer, be taken to be the value transferred by a chargeable transfer made by the settlor immediately before the potentially exempt transfer was made.
( 6 ) In subsection ( 5 ) above “ the appropriate amount ” , in relation to a previous transfer, means so much of the value transferred by the previous transfer as was attributable to the value of property which was the special rate property in relation to that transfer.
( 7 ) In this section — “ the relevant interest ” has the meaning given by subsection ( 1 ) of section 54A above; and
“ the special rate property ” has the meaning given by subsection ( 3 ) of that section. " .
2. In section 56 of the 1984 Act (exclusion of certain exemptions) in subsection (5) after the word “ disposition ” there shall be inserted “ for such consideration ” .
3. — (1) Section 201 of the 1984 Act (liability for tax relating to settled property) shall be amended as follows.
(2) In subsection (2) after the word “ death ” there shall be inserted “ but is not a potentially exempt transfer ” .
(3) After subsection (3) there shall be inserted the following subsection —
" ( 3A ) Subsection ( 1 ) ( d ) above shall not apply in relation to the tax chargeable on the value transferred by a potentially exempt transfer which proves to be a chargeable transfer in a case where the settlement was made before 17th March 1987 if the trustees were resident in the United Kingdom when the settlement was made, but have not been resident there at any time between 16th March 1987 and the death of the transferor. " 4. — (1) Section 216 of the 1984 Act (delivery of accounts) shall be amended as follows.
(2) In subsection (1) after paragraph (bc) there shall be inserted the following paragraph — " ( bd )
is liable under section 201 ( 1 ) ( b ) , ( c ) or ( d ) above for tax on the value transferred by a potentially exempt transfer which is made under section 52 above and which proves to be a chargeable transfer, or would be so liable if tax were chargeable on that value, or "
(3) In subsection (6)(aa) of that section after the words “ subsection (1)(bb) ” there shall be inserted “ or (bd) ” . 5. In section 265 of the 1984 Act (chargeable transfers affecting more than one property) after the words “ subject to ” there shall be inserted “ section 54B(3) above and to ” .
SCHEDULE 8
Section 101.
Amendments of Schedule 10 to
Finance Act 1987
1. At the end of paragraph 1 (interpretation) there shall be added the following sub-paragraph
—
" ( 3 ) Where an amount of oil is required to be delivered to the Secretary of State pursuant to a notice served by him, any oil which is inadvertently delivered to him in excess of the amount required shall be treated for the purposes of sub-paragraph ( 2 ) above as delivered pursuant to the notice. " . 2. — (1) In paragraph 5 (content of nomination) in sub-paragraph (1)(b)
— (a)
for the words “ except in the case of a proposed appropriation ” there shall be substituted “ in the case of a proposed sale ” ; and
(b)
for the word “ delivered ” there shall be substituted “ sold ” .
(2) At the end of sub-paragraph (3) of paragraph 5 (penalty for fraudulent or negligent furnishing of information etc. in connection with a nomination) there shall be added the words “ and the nomination shall not be effective ” . 3. — (1) In paragraph 8 (revision of nominations) after sub-paragraph (2) there shall be inserted the following sub-paragraphs
—
" ( 2A ) If a participator who has made a nomination of a proposed supply, proposed appropriation or a proposed transaction falling within paragraph 2 ( 1 ) ( d ) above fails, in whole or in part, to supply, to appropriate or otherwise to complete the proposed transaction by the delivery or appropriation of oil forming part of his equity production for the proposed delivery month, then, in accordance with regulations made by the Board, he may amend or withdraw the nomination as mentioned in sub-paragraph ( 2B ) below.
( 2B ) The circumstances in which, in a case falling within sub-paragraph ( 2A ) above, a participator may amend or withdraw a nomination are, — ( a )
in the case of a nomination of a proposed supply or proposed appropriation, if the participator is of the opinion that the failure referred to in that sub-paragraph was caused by circumstances over which neither he nor any person connected or associated with him had control; or
( b )
in the case of a nomination of a proposed transaction falling within paragraph 2 ( 1 ) ( d ) above, in such circumstances as may be prescribed by regulations made by the Board; or
( c )
in any case where the nomination is of a proposed supply or proposed appropriation and the participator is either the field operator or the operator of a relevant system, if the participator is of the opinion that the failure referred to in sub-paragraph ( 2A ) above was caused by action necessarily taken by him in the interests of safety or the prevention of pollution or in accordance with good oil field practice.
( 2C ) In relation to such a nomination as is referred to in sub-paragraph ( 2B ) ( c ) above, — ( a )
a participator is the field operator if, in relation to the field specified in the nomination, he is the person having the function of organising or supervising operations for searching or boring for or getting oil in pursuance of a licence; and
( b )
the expression “ relevant system ” is applicable only where the oil to which the nomination relates is blended oil and is a reference to any system by which blended oil ( in relation to which the field specified in the nomination is one of the originating fields ) is transported, treated or stored prior to its disposal or relevant appropriation; and
( c )
a participator in an oil field is an operator of a relevant system, as defined above, if he is the person charged, or principally charged, with the operation of the system;
and expressions used in paragraph ( b ) above have the same meaning as in section 63 of this Act. "
(2) In sub-paragraph (3) of paragraph 8 — (a)
for the words “ sub-paragraph (2) ” , in the first place where they occur, there shall be substituted “ the preceding provisions of this paragraph ” ;
(b)
in paragraph (a) after the word “ above ” there shall be inserted “ or, where sub-paragraph (2B) above applies, that the failure was caused as mentioned in paragraph (a) or paragraph (c) of that sub-paragraph or that the circumstances prescribed for the purposes of paragraph (b) of that sub-paragraph exist ” ; and
(c)
in paragraph (b), for the words “ if sub-paragraph (2)(a) ” there shall be substituted “ except where sub-paragraph (2)(b) or sub-paragraph (2B)(a) ” .
(3) In sub-paragraph (4) of paragraph 8 after the words “ sub-paragraph (2)(b) ” there shall be inserted “ and sub-paragraph (2B) ” .
(4) In sub-paragraph (5) of paragraph 8 for the words “ preceding provisions of this Schedule ” there shall be substituted “ provisions of this Schedule (other than this paragraph) ” . 4. In paragraph 9 (effective volume for nominated transactions) for sub-paragraph (4) there shall be substituted the following sub-paragraphs
—
" ( 4 ) In relation to a proposed supply or proposed appropriation where the nominal volume is expressed as mentioned in paragraph 7 ( 5 ) above and oil is in fact supplied or, as the case may be, relevantly appropriated as proposed in the nomination, the effective volume is whichever is the greater of — ( a )
the minimum nominal volume; and
( b )
so much of the total volume of oil supplied or relevantly appropriated as does not exceed the maximum nominal volume.
( 5 ) In relation to a proposed supply or proposed appropriation which does not fall within sub-paragraph ( 4 ) above, the effective volume is the nominal volume. " 5. — (1) In paragraph 11 (which defines the aggregate nominated proceeds for a month) at the beginning of paragraph (b) of sub-paragraph (1)(market value of excess of equity production over proceeds of nominated transactions) there shall be inserted the words
“ subject to sub-paragraph (1A) below ” and at the end of that sub-paragraph there shall be inserted the following sub-paragraph
—
" ( 1A ) If for any month — ( a )
a participator has made a nomination of a proposed sale, and
( b )
he has an excess falling within sub-paragraph ( 3 ) below,
then for that month the reference in sub-paragraph ( 1 ) ( b ) above to the market value of the excess shall be construed as a reference to the market value multiplied by the designated fraction for that month. "
(2) At the beginning of sub-paragraph (2) of paragraph 11 there shall be inserted “ Subject to sub-paragraph (2A) below ” and at the end of that sub-paragraph there shall be inserted the following sub-paragraph —
" ( 2A ) In the case of a nominated transaction consisting of a proposed supply or proposed appropriation, the proceeds of the transaction shall not have the meaning assigned by sub-paragraph ( 2 ) above unless the participator satisfies the Board — ( a )
that the whole of the effective volume of oil has been or is to be used for refining as mentioned in paragraph 2 ( 1 ) ( b ) above or, as the case may be, has been or is to be relevantly appropriated; or
( b )
that, in so far as any of the effective volume of oil has not been or is not to be so used or appropriated, that is occasioned by circumstances over which neither the participator nor any company associated with him, as mentioned in paragraph 2 ( 1 ) above, has ( or had at any material time ) control;
and if the Board are not so satisfied with respect to any such nominated transaction, the proceeds of that transaction means the market value ( determined in accordance with Schedule 3 to the principal Act ) of the effective volume of oil, multiplied by the designated fraction for the month in question. "
(3) At the end of paragraph 11 there shall be inserted the following sub-paragraphs —
" ( 5 ) For any month the designated fraction is such fraction as may be specified for the purposes of that month by order made by the Treasury.
( 6 ) An order under sub-paragraph ( 5 ) above — ( a )
shall not specify a fraction smaller than unity or greater than 3/2;
( b )
may be made to have effect for any month in the chargeable period in which falls the date on which the order is made ( whether that month begins before, on or after that date ) ;
( c )
if it has effect for a month earlier than the date on which it is made, may contain such transitional provisions as the Treasury consider appropriate; and
( d )
shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of the House of Commons. "
6. In paragraph 12 (nominations of blended oil by a participator in two or more fields)
— (a)
for the words from the beginning to “ this Act ” there shall be substituted “ (1) If a person is a participator in two or more oil fields which, in relation to any blended oil, are or are included among the originating fields, then, in accordance with regulations made by the Board, he may make a nomination, having effect with respect to all the originating fields in which he is a participator, of a proposed sale, supply or appropriation of the blended oil ” ; and
(b)
at the end there shall be added
—
" ( 2 ) In sub-paragraph ( 1 ) above “ blended oil ” and “ the originating fields ” have the same meaning as in section 63 of this Act. "
SCHEDULE 9
Section 104.
Repeals
Part I
Income Tax and Corporation Tax: General
| Chapter | Short title | Extent of repeal |
| 1970 c. 10. | The Income and Corporation Taxes Act 1970. | In section 337(2), paragraph (b). |
| 1970 c. 24. | The Finance Act 1970. | In section 21(4), the words “ ordinary annual ” . |
| | | In section 22(2), the words “ ordinary annual ” . |
| 1982 c. 39. | The Finance Act 1982. | In section 65(1)(a), the words “ in a territory ” . |
| 1987 c. 16. | The Finance Act 1987. | In Schedule 4, paragraphs 1(2) and 2(2). |
1. The repeals in sections 21 and 22 of the Finance Act 1970 have effect in relation to contributions made on or after 6th April 1987.
2. The repeal in section 65 of the Finance Act 1982 has effect in accordance with section 67(6) of this Act.
Part II
Capital Gains
| Chapter | Short title | Extent of repeal |
| 1972 c. 41. | The Finance Act 1972. | In section 85(6) the words from “ exclusive ” onwards. |
| | | Section 93. |
| 1974 c. 30. | The Finance Act 1974. | In section 26(3), in paragraph (a), the words “ so much of ” and the words from “ as remains ” to “ 1972 ” and, in paragraph (b), the words “ as so reduced ” . |
| 1975 c. 22. | The Oil Taxation Act 1975. | In section 16(1), the words “ on its income ” . |
| 1980 c. 48. | The Finance Act 1980. | Section 84(2) to (4). |
| 1984 c. 43. | The Finance Act 1984. | Section 18(6). |
| | | Section 65. |
| | | In section 79(5), the words from “ (reduced ” to “ Finance Act 1972) ” . |
| 1985 c. 54. | The Finance Act 1985. | Section 72(5). |
1. The repeals of section 84(2) to (4) of the Finance Act 1980, section 65 of the Finance Act 1984 and section 72(5) of the Finance Act 1985 come into force on the day appointed under section 81(8) of this Act.
2. The remaining repeals have effect with respect to accounting periods beginning on or after 17th March 1987.
Part III
Inheritance Tax
| Chapter | Short title | Extent of repeal |
| 1984 c. 51. | The Inheritance Tax Act 1984. | In section 3A, in subsection (2), in paragraph (a) the words “ otherwise than as settled property ” and in paragraph (b) the words from “ otherwise ” onwards. |
| | | Section 49(3). |
| | | In section 55(2), the words “ and such a disposition is not a potentially exempt transfer ” . |
| 1986 c. 41. | The Finance Act 1986. | In Schedule 19, paragraphs 14 and 15. |
These repeals have effect in relation to transfers of value made, and other events occuring, on or after 17th March 1987.
Part IV
Stamp Duty Reserve Tax
| Chapter | Short title | Extent of repeal |
| 1986 c.41. | The Finance Act 1986. | Section 91(2). |
This repeal has effect in accordance with section 100(2) of this Act.
Part V
Oil Taxation
| Chapter | Short title | Extent of repeal |
| 1987 c.16. | The Finance Act 1987. | In section 63(1), the words from “ and in ” onwards. |
This repeal has effect for chargeable periods ending after 1st January 1987.
