Law

Finance Act 2002

United Kingdom · statute

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In force since 2026-03-18, as the publisher states.

Copy read on 2026-11-08. The page it was read from

Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.

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Contents: 158 provisions
  1. Title and introductory text
  2. 1 Rates of tobacco products duty
  3. 2 Rates of duty on cider
  4. 3 Duty on beverages made with spirits to be at spirits rate
  5. 4 Reduced rates of duty on beer from small breweries
  6. 5 Biodiesel
  7. 6 Regulating trade in rebated heavy oil etc
  8. 7 Fuel substitutes
  9. 8 Amusement machine licences: excepted machines
  10. 9 Amusement machine licence duty: rates
  11. 10 Rates of gaming duty
  12. 11 Gaming duty to be chargeable in respect of sic bo and three card poker
  13. 12 Pool betting duty etc
  14. 13 General betting duty: spread bets
  15. 14 General betting duty: overseas bet-brokers
  16. 15 Cars registered on or after 1st March 2001: rates of duty
  17. 16 Vans registered on or after 1st March 2001: rates of duty
  18. 17 Disclosure of information for vehicle excise duty exemptions
  19. 18 Motorcycles (and motorcycle trade licences): rates of duty
  20. 19 Registered vehicles etc
  21. 20 Calculating cylinder capacity of vehicles
  22. 21 Drawback of excise duty
  23. 22 Disallowance of input tax where consideration not paid
  24. 23 Flat-rate scheme
  25. 24 Invoices
  26. 25 Relief from VAT on acquisition if importation would attract relief
  27. 30 Charge and main rate for financial year 2003
  28. 31 Small companies’ rate and fraction for financial year 2002
  29. 32 Corporation tax starting rate and fraction for financial year 2002
  30. 38 Provision of services through an intermediary: minor amendments
  31. 39 Employee share ownership plans: minor amendments
  32. 40 Treatment of deductions from payments to sub-contractors
  33. 41 Parliamentary visits to EU candidate countries: tax treatment of members’ expenses
  34. 42 Reallocation within group of gain or loss accruing under section 179
  35. 43 Roll-over of degrouping charge on business assets
  36. 44 Exemptions for disposals by companies with substantial shareholding
  37. 45 Share exchanges and company reconstructions
  38. 46 Taper relief: holding period for business assets
  39. 47 Taper relief: minor amendments
  40. 48 Use of trading losses against chargeable gains
  41. 49 Election to forgo roll-over relief on transfer of business
  42. 50 Shares acquired on same day: election for alternative treatment
  43. 51 Deduction of personal losses from gains treated as accruing to settlors
  44. 52 Capital gains tax: variation of dispositions taking effect on death
  45. 53 Tax relief for expenditure on research and development
  46. 54 Tax relief for expenditure on vaccine research etc
  47. 55 Gifts of medical supplies and equipment
  48. 56 R&D tax relief for small and medium-sized enterprises: minor and consequential amendments
  49. 57 Community investment tax relief
  50. 58 Relief for community amateur sports clubs
  51. 59 Cars with low carbon dioxide emissions
  52. 60 Expense of hiring cars with low carbon dioxide emissions
  53. 61 Plant or machinery for gas refuelling station: first-year allowances
  54. 62 Expenditure on green technologies: leasing
  55. 63 First-year allowances for expenditure wholly for a ring fence trade
  56. 64 Adjustment on change of basis
  57. 65 Postponement of change to mark to market in certain cases
  58. 66 Election to continue postponement of mark to market
  59. 67 Mark to market: miscellaneous amendments
  60. 68 Expenditure involving crime
  61. 69 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  62. 70 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  63. 71 Accounting method where rate of interest etc is reset
  64. 72 Convertible securities etc: loan relationships
  65. 73 Convertible securities etc: issuing company not to be connected company
  66. 74 Convertible securities etc: debtor relationships
  67. 78 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  68. 79 Forex and exchange gains and losses from loan relationships etc
  69. 80 Corporation tax: currency
  70. 81 Transitional provision
  71. 82 Loan relationships: general amendments
  72. 83 Derivative contracts
  73. 84 Gains and losses from intangible fixed assets of company
  74. 85 Gains of insurance company from venture capital investment partnership
  75. 86 Lloyd’s underwriters
  76. 87 Life policies etc: chargeable events
  77. 88 Extension of power to give effect to double taxation arrangements
  78. 89 Controlled foreign companies: territorial exclusions from s.748 exemptions
  79. 90 Controlled foreign companies and treaty non-resident companies
  80. 91 Supplementary charge in respect of ring fence trades
  81. 92 Assessment, recovery and postponement of supplementary charge
  82. 93 Supplementary charge: transitional provisions
  83. 94 Deduction of tax: payments to exempt bodies etc
  84. 95 Deduction of tax by persons dealing in financial instruments
  85. 96 Cross-border royalties
  86. 97 Gifts of real property to charity
  87. 98 Gift aid: election to be treated as if gift made in previous tax year
  88. ... Restriction of relief to films genuinely intended for theatrical release
  89. ... Exclusion of deferments from production expenditure
  90. 101 Restriction of relief for successive acquisitions of the same film
  91. 102 Distributions: reasonable commercial return for use of principal secured
  92. 103 References to accounting practice and periods of account
  93. 104 Discounted securities etc
  94. 105 Financial trading stock
  95. 106 Valuation of trading stock on transfer of trade
  96. 107 Banks etc in compulsory liquidation
  97. 108 Manufactured dividends and interest
  98. 109 Venture capital trusts
  99. 110 Land in disadvantaged areas
  100. 111 Withdrawal of group relief
  101. 112 Restriction of relief for company acquisitions
  102. 113 Withdrawal of relief for company acquisitions
  103. 114 Penalties for late stamping
  104. 115 Contracts for the sale of an estate or interest in land chargeable as conveyances
  105. 116 Abolition of duty on instruments relating to goodwill
  106. 117 Power to extend exceptions relating to recognised exchanges
  107. 118 IHT: rate bands
  108. 119 IHT: powers over, or exercisable in relation to, settled property or a settlement
  109. 120 IHT: variation of dispositions taking effect on death
  110. 121 Air passenger duty: extension of area to which EEA rates apply
  111. 122 Landfill tax: rate
  112. 123 Climate change levy: electricity produced in combined heat and power station
  113. 124 Climate change levy: certification requirement
  114. 125 Climate change levy: exemption for renewable sources
  115. 126 Climate change levy: electricity produced from coal mine methane
  116. 127 Climate change levy: incorrect certificates
  117. 128 Climate change levy: invoices incorrectly showing levy due
  118. 129 Aggregates levy: transitional relief for Northern Ireland
  119. 130 Aggregates levy: amendments to provisions exempting spoil etc
  120. 131 Aggregates levy: crushing and cutting rock
  121. 132 Aggregates levy: miscellaneous amendments
  122. 133 Aggregates levy: amendments to provisions about civil penalties
  123. 134 Recovery of taxes etc due in other member States
  124. 135 Mandatory e-filing
  125. 136 Use of electronic communications under other provisions
  126. 137 Lorry road-user charge
  127. 138 Authority of Bank of England to discharge functions in place of Bank of Ireland
  128. 139 Closure of UK gilts registers kept in Ireland
  129. 140 Administration of UK gilts
  130. 141 Repeals
  131. 142 Interpretation
  132. 143 Short title
  133. SCHEDULE 1 Beer from small breweries: reduced rate of duty
  134. SCHEDULE 2 Hydrocarbon oil duties: minor and consequential amendments relating to biodiesel
  135. SCHEDULE 3 Hydrocarbon oil duties: rebated heavy oil etc
  136. SCHEDULE 4 Pool betting duty etc
  137. SCHEDULE 5 Vehicle excise duty: registered vehicles etc
  138. SCHEDULE 7 Chargeable gains: roll-over of degrouping charge: modification of enactments
  139. SCHEDULE 8 Chargeable gains: exemptions in case of substantial shareholding
  140. SCHEDULE 9 Chargeable gains: share exchanges and company reconstructions
  141. SCHEDULE 11 Chargeable gains: deduction of personal losses from gains treated as accruing to settlors
  142. SCHEDULE 17 Community investment tax relief: consequential amendments
  143. SCHEDULE 19 Capital allowances: cars with low carbon dioxide emissions
  144. SCHEDULE 20 Capital allowances: plant or machinery for gas refuelling station
  145. SCHEDULE 21 First-year allowances for expenditure wholly for a ring fence trade
  146. SCHEDULE 23 Exchange gains and losses from loan relationships etc
  147. SCHEDULE 24 Corporation tax: currency
  148. SCHEDULE 25 Loan relationships
  149. SCHEDULE 27 Derivative contracts: minor and consequential amendments
  150. SCHEDULE 28 Derivative contracts: transitional provisions etc
  151. SCHEDULE 30 Gains and losses of a company from intangible fixed assets: consequential amendments
  152. SCHEDULE 31 Gains of insurance company from venture capital investment partnership
  153. SCHEDULE 32 Lloyd’s underwriters
  154. SCHEDULE 34 Stamp duty: withdrawal of group relief: supplementary provisions
  155. SCHEDULE 36 Stamp duty: contracts chargeable as conveyances: supplementary provisions
  156. SCHEDULE 37 Stamp duty: abolition of duty on instruments relating to goodwill: supplementary provisions
  157. SCHEDULE 38 Aggregates levy amendments
  158. SCHEDULE 40 Repeals

Proposed changes to this act

No one has proposed a change to this act yet.

158 provisions

92 Assessment, recovery and postponement of supplementary charge

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) In section 59E of the Taxes Management Act 1970 (c. 9) (further provision as to when corporation tax is due and payable) in subsection (11) (extension of references in the section to corporation tax) after paragraph (b) add— (c) to any sum chargeable on a company under section 501A(1) of the principal Act (supplementary charge in respect of ring fence trades) as if it were an amount of corporation tax chargeable on the company . (3) In Schedule 18 to the Finance Act 1998 (c. 36) (company tax returns: assessments and related matters) in paragraph 1 (meaning of “tax”) in the second sentence (amounts assessable or chargeable as if they were corporation tax) for the word “and” immediately preceding the paragraph beginning “section 747(4)(a)” substitute the following paragraph— section 501A(1) of that Act (supplementary charge in respect of ring fence trades), and . (4) In paragraph 8 of that Schedule (calculation of tax payable) after paragraph number 1 of the third step insert— 1A Any sum chargeable under section 501A(1) of that Act (supplementary charge in respect of ring fence trades). . (5) Regulation 3 of the Instalment Payment Regulations (large companies) is amended as follows. (6) In paragraph (1) (which, subject to paragraphs (2) and (3), defines a large company) for “paragraphs (2) and (3),” substitute “ paragraphs (2) to (3A), ”. (7) After paragraph (3) insert— (3A) Any question whether a company is, or is not, a large company as respects an accounting period beginning on or after 17th April 2002 shall, so far as not falling to be determined by reference to the company’s total liability, be determined as it would have been determined apart from section 501A of the Taxes Act (supplementary charge in respect of ring fence trades). . (8) The amendment by this section of any provision contained in regulations shall not be taken to have prejudiced any power to make further regulations revoking or amending that provision, whether in relation to the same or any other chargeable periods. (9) In this section “the Instalment Payment Regulations” means the Corporation Tax (Instalment Payments) Regulations 1998 (S.I. 1998/3175).

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93 Supplementary charge: transitional provisions

(1) In the case of a straddling period, that is to say, an accounting period which begins before 17th April 2002 and ends on or after that date— (a) sections 501A and 501B of the Taxes Act 1988 (which are inserted by sections 91 and 92) shall apply as if so much of the straddling period as falls before 17th April 2002, and so much of that period as falls on or after that date, were separate accounting periods; and (b) all necessary apportionments between the two separate accounting periods shall be made in proportion to the number of days in those periods. (2) In the case of a straddling period, the Instalment Payment Regulations shall apply separately— (a) in relation to any tax chargeable on the company under section 501A(1) of the Taxes Act 1988; and (b) in relation to any other tax chargeable on the company. (3) In their application by virtue of paragraph (a) of subsection (2), the Instalment Payment Regulations shall have effect in relation to the tax mentioned in that paragraph as if— (a) the deemed accounting period treated under subsection (1)(a) as beginning on 17th April 2002 were an accounting period for the purposes of those Regulations; and (b) that tax were chargeable for that period. (4) Any reference in the Instalment Payment Regulations to the total liability of a company shall accordingly be construed— (a) in their application by virtue of paragraph (a) of subsection (2), as a reference to the tax mentioned in that paragraph; and (b) in their application by virtue of paragraph (b) of that subsection, as a reference to the amount that would be the company’s total liability for the straddling period if the tax mentioned in paragraph (a) of that subsection were left out of account. (5) For the purposes of the Instalment Payment Regulations— (a) a company shall be regarded as a large company as respects the deemed accounting period under subsection (3)(a) if, and only if, it is a large company for those purposes as respects the straddling period; and (b) any question whether a company is a large company as respects the straddling period shall be determined as it would have been determined apart from section 501A of the Taxes Act 1988. (6) In this section “the Instalment Payment Regulations” has the same meaning as in section 92.

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94 Deduction of tax: payments to exempt bodies etc

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) In section 98 of the Taxes Management Act 1970 (c. 9) (special returns, etc), in subsection (4B)— (a) in paragraph (a), after “a company” insert “ or local authority ”, (b) in paragraph (b)— (i) after “the company” insert “ or authority ”, and (ii) for “either”, in each place, substitute “ one ”, (c) in paragraph (c), after “the company” insert “ or authority ”, and (d) in paragraph (d), for “neither” substitute “ none ”. (6) In that section, for subsection (4C) substitute— (4C) In subsection (4B) above— “company” includes a partnership of which any member is a company; and “local authority” includes a partnership of which any member is a local authority. . (7) The amendments made by this section apply for the purposes of payments made on or after 1st October 2002.

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95 Deduction of tax by persons dealing in financial instruments

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96 Cross-border royalties

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) In section 98 of the Taxes Management Act 1970 (c. 9) (special returns etc)— (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (b) after subsection (4C) insert— (4D) A payment is within this subsection if— (a) it is a payment to which section 349(1) of the principal Act (requirement to deduct tax) applies, (b) it is made by a company which, purporting to rely on section 349E(1) of that Act (power for companies to take account of double taxation treaty relief when paying royalties), deducts less tax from the payment than required by section 349(1) of that Act , and (c) at the time the payment is made the payee (within the meaning of section 349E of that Act) is not entitled to relief in respect of the payment under any arrangements under section 788 of that Act (double taxation relief) and the company— (i) does not believe that it is entitled to such relief, or (ii) if it does so believe, cannot reasonably do so. . (4) This section applies in relation to payments made on or after 1st October 2002.

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97 Gifts of real property to charity

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98 Gift aid: election to be treated as if gift made in previous tax year

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... Restriction of relief to films genuinely intended for theatrical release

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... Exclusion of deferments from production expenditure

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101 Restriction of relief for successive acquisitions of the same film

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102 Distributions: reasonable commercial return for use of principal secured

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103 References to accounting practice and periods of account

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) In section 288(1) of the Taxation of Chargeable Gains Act 1992 (interpretation), at the appropriate place insert— “period of account” has the meaning given by section 832(1) of the Taxes Act; . (4) In the following provisions for “normal accounting practice” or “normal accountancy practice”, wherever occurring, substitute “ generally accepted accounting practice ” (a) in the Taxes Act 1988, sections ......, ..., 798B(1) ..., ...; (b) in the Finance Act 1993 (c. 34), sections ... 150(6)(c) and (11)(c), 154(11)(c), (12)(d), (13)(b), (13A)(d) and (13B)(d), 155(7), (11)(d) and (12)(b), 156(2)(e) and (4)(b) and 159(1)(b); (c) in the Finance Act 1994 (c. 9), section 156(3)(a) and (4)(a); (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (f) in the Finance Act 2000 (c. 17), ... in Schedule 15, paragraph 29(4), ...; (g) in the Capital Allowances Act 2001 (c. 2), sections 179(1)(f), 219(1) ...; (h) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6) The amendments made by subsections (1) to (3) above have effect for the purposes of provisions of this Act using the expressions mentioned (including provisions inserted by amendment in other enactments) whenever those provisions are expressed to have effect or to come, or to have come, into force. This is without prejudice to the general effect of those amendments.

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104 Discounted securities etc

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105 Financial trading stock

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) In Schedule 12 to the Finance Act 1988 (c. 39) (building societies: change of status)— (a) in paragraph 1 (which provides that paragraphs 2 to 7 apply where there is a transfer of the whole of a building society’s business to a successor company in accordance with section 97 etc of the Building Societies Act 1986 (c. 53)) for “2” substitute “ 3 ”; and (b) omit paragraph 2 (which relates to gilt-edged securities and other financial trading stock and is superseded by Chapter 2 of Part 4 of the Finance Act 1996).

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106 Valuation of trading stock on transfer of trade

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107 Banks etc in compulsory liquidation

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108 Manufactured dividends and interest

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109 Venture capital trusts

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110 Land in disadvantaged areas

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111 Withdrawal of group relief

(1) This section applies where— (a) an instrument (“the relevant instrument”) transferring land in the United Kingdom from one company (“the transferor company”) to another (“the transferee company”) has been stamped on the basis that group relief applies, (b) before the end of the period of three years beginning with the date on which the instrument was executed the transferee company ceases to be a member of the same group as the transferor company, and (c) at the time when the transferee company ceases to be a member of the same group as the transferor company it or a relevant associated company holds an estate or interest in land— (i) that was transferred to the transferee company by the relevant instrument, or (ii) that is derived from an estate or interest that was so transferred, and that has not subsequently been transferred at market value by a duly stamped instrument on which ad valorem duty was paid and in respect of which group relief was not claimed. (2) In those circumstances— (a) group relief in relation to the relevant instrument, or an appropriate proportion of it, is withdrawn, and (b) the stamp duty that would have been payable on stamping the relevant instrument but for group relief if the estate or interest in land transferred by that instrument had been transferred at market value, or an appropriate proportion of the duty that would have been so paid, is payable by the transferee company within 30 days after that company ceases to be a member of the same group as the transferor company. (3) In subsection (2)(a) and (b) “an appropriate proportion” means an appropriate proportion having regard to what was transferred to the transferee company by the relevant instrument and what is held by that company or, as the case may be, that company and any relevant associated companies, at the time it or they cease to be members of the same group as the transferor company. (4) In this section “group relief” means relief under any of the following provisions— (a) section 42 of the Finance Act 1930 (c. 28) or section 11 of the Finance Act (Northern Ireland) 1954 (c. 23 (N.I.)) (transfer of property between associated bodies corporate); (b) section 151 of the Finance Act 1995 (c. 4) (leases etc between associated bodies corporate). (4A) In this section “relevant associated company”, in relation to the transferee company, means a company that— (a) is a member of the same group as the transferee company immediately before that company ceases to be a member of the same group as the transferor company, and (b) ceases to be a member of the same group as the transferor company in consequence of the transferee company so ceasing. (5) In this section— (a) references to the transfer of land include the grant or surrender of an estate or interest in or over land; (b) “company” includes any body corporate; and (c) references to a company being in the same group as another company are to the companies being associated bodies corporate within the meaning of the relevant group relief provision. (6) Schedule 34 to this Act contains provisions supplementing this section. (7) Where the relevant instrument transfers land in the United Kingdom together with other property, the provisions of this section and of Schedule 34 apply as if there were two separate instruments, one relating to land in the United Kingdom and the other relating to other property. (8) This section applies where the relevant instrument is executed after 23rd April 2002. (9) But this section does not apply to an instrument giving effect to a contract made on or before 17th April 2002, unless— (a) the instrument is made in consequence of the exercise after that date of any option, right of pre-emption or similar right, or (b) the instrument transfers the property in question to, or vests it in, a person other than the purchaser under the contract because of an assignment (or, in Scotland, assignation) or further contract made after that date. (10) This section shall be deemed to have come into force on 24th April 2002.

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112 Restriction of relief for company acquisitions

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113 Withdrawal of relief for company acquisitions

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114 Penalties for late stamping

(1) Section 15B of the Stamp Act 1891 (c. 39) (late stamping: penaties) is amended as follows. (2) In subsection (1)— (a) in paragraph (a) (penalty where instrument not stamped within 30 days of execution), after “is executed in the United Kingdom” insert “ or relates to land in the United Kingdom ”; (b) in paragraph (b) (penalty where instrument not stamped within 30 days of instrument being first received in the United Kingdom), after “is executed outside the United Kingdom” insert “ and does not relate to land in the United Kingdom ”. (3) After that subsection insert— (1A) For the purposes of subsection (1) every instrument that (whether or not it also relates to any other transaction) relates to a transaction which to any extent involves land in the United Kingdom is an instrument relating to land in the United Kingdom. . (4) This section applies in relation to instruments executed on or after the day on which this Act is passed.

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115 Contracts for the sale of an estate or interest in land chargeable as conveyances

(1) This section applies to a contract or agreement for the sale of an estate or interest in land in the United Kingdom where— (a) the amount or value of the consideration exceeds £10 million, or (b) the instrument forms part of a larger transaction or series of transactions in respect of which the amount or value, or aggregate amount or value, of the consideration exceeds £10 million. (2) If, in the case of such a contract or agreement that is not otherwise chargeable to stamp duty, a conveyance or transfer made in conformity with the contract or agreement is not presented to the Commissioners for stamping with the ad valorem duty chargeable on it— (a) within the period of 90 days after the execution of the contract or agreement, or (b) within such longer period as the Commissioners may think reasonable in the circumstances of the case, the contract or agreement shall be chargeable with the same ad valorem duty, to be paid by the purchaser, as if it were an actual conveyance on sale of the estate or interest contracted or agreed to be sold. (3) The Commissioners— (a) may refuse to allow a longer period unless they are provided with a copy of the contract or agreement and such other evidence as they may reasonably require as to the facts and circumstances relevant to their decision, (b) may allow a longer period subject to compliance with such conditions as they think fit, and (c) shall not allow any longer period if it appears to them that the whole, or substantially the whole, of the intended consideration has been paid or transferred. (4) Where an instrument to which this section applies is presented for stamping before the end of the period mentioned in subsection (2)— (a) any adjudication to the effect that stamp duty is not chargeable does not affect the operation of this section, and (b) the fact that duty may be chargeable under this section may be denoted on the instrument in such manner as the Commissioners think fit. (5) Where an instrument is chargeable with duty under this section— (a) section 14(4) of the Stamp Act 1891 (c. 39) (inadmissibility of unstamped instruments) does not apply in relation to it until after the end of the period mentioned in subsection (2) above, and (b) sections 15A and 15B of that Act (late stamping: interest and penalties), apply in relation to it as if it had been executed at the end of that period. (6) The ad valorem duty paid upon a contract or agreement under this section shall be repaid by the Commissioners if the contract or agreement is afterwards rescinded or annulled or is for any other reason not substantially performed or carried into effect. (7) Schedule 36 contains provisions supplementing this section. (8) This section and that Schedule apply to contracts or agreements executed after the day on which this Act is passed.

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116 Abolition of duty on instruments relating to goodwill

(1) No stamp duty is chargeable on an instrument for the sale, transfer or other disposition of goodwill. (2) Schedule 37 to this Act contains provisions supplementing this section. (3) This section and that Schedule shall be construed as one with the Stamp Act 1891 (c. 39). (4) This section applies to instruments executed on or after 23rd April 2002. (5) This section shall be deemed to have come into force on that date.

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117 Power to extend exceptions relating to recognised exchanges

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118 IHT: rate bands

(1) For the Table in Schedule 1 to the Inheritance Tax Act 1984 (c. 51) substitute— Table of Rates of Tax Portion of value | Rate of tax Lower limit (£) | Upper limit (£) | Per cent. 0 | 250,000 | Nil 250,000 | 40 (2) Subsection (1) shall apply to any chargeable transfer made on or after 6th April 2002; and section 8(1) of that Act (indexation of rate bands) shall not have effect as respects any difference between the retail prices index for the month of September 2000 and that for the month of September 2001.

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119 IHT: powers over, or exercisable in relation to, settled property or a settlement

(1) The Inheritance Tax Act 1984 is amended in accordance with the following provisions of this section. (2) After section 47 (meaning of “reversionary interest”) insert— Settlement power 47A In this Act “settlement power” means any power over, or exercisable (whether directly or indirectly) in relation to, settled property or a settlement. . (3) After section 55 (reversionary interest acquired by beneficiary) insert— Purchased settlement powers 55A (1) Where a person makes a disposition by which he acquires a settlement power for consideration in money or money’s worth— (a) section 10(1) above shall not apply to the disposition; (b) the person shall be taken for the purposes of this Act to make a transfer of value; (c) the value transferred shall be determined without bringing into account the value of anything which the person acquires by the disposition; and (d) sections 18 and 23 to 27 above shall not apply in relation to that transfer of value. (2) For the purposes of this section, a person acquires a settlement power if he becomes entitled— (a) to a settlement power, (b) to exercise, or to secure or prevent the exercise of, a settlement power (whether directly or indirectly), or (c) to restrict, or secure a restriction on, the exercise of a settlement power (whether directly or indirectly), as a result of transactions which include a disposition (whether to him or another) of a settlement power or of any power of a kind described in paragraph (b) or (c) above which is exercisable in relation to a settlement power. . (4) In section 272 (general interpretation)— (a) insert the following definition at the appropriate place— “settlement power” has the meaning given by section 47A above; ; and (b) in the definition of “property”, at the end insert “ but does not include a settlement power ”. (5) In consequence of the amendments made by this section, the title of Chapter 2 of Part 3 of the Inheritance Tax Act 1984 (c. 51) becomes “Interests in possession, reversionary interests and settlement powers”. (6) The amendments made by this section have effect in relation to transfers of value on or after 17th April 2002. (7) The amendments made by subsections (2) and (4) shall also be deemed always to have had effect (subject to and in accordance with the other provisions of the Inheritance Tax Act 1984) for the purpose of determining the value, immediately before his death, of the estate of any person who died before 17th April 2002, for the purposes of the transfer of value which that person is treated by section 4(1) of that Act as having made immediately before his death.

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120 IHT: variation of dispositions taking effect on death

(1) In section 142 of the Inheritance Tax Act 1984 (alteration of dispositions taking effect on death), for subsection (2) (election to treat subsequent variation of dispositions taking effect on death as if effected by deceased) substitute— (2) Subsection (1) above shall not apply to a variation unless the instrument contains a statement, made by all the relevant persons, to the effect that they intend the subsection to apply to the variation. (2A) For the purposes of subsection (2) above the relevant persons are— (a) the person or persons making the instrument, and (b) where the variation results in additional tax being payable, the personal representatives. Personal representatives may decline to make a statement under subsection (2) above only if no, or no sufficient, assets are held by them in that capacity for discharging the additional tax. . (2) After section 218 of that Act insert— Instruments varying dispositions taking effect on death 218A (1) Where— (a) an instrument is made varying any of the dispositions of the property comprised in the estate of a deceased person immediately before his death, (b) the instrument contains a statement under subsection (2) of section 142 above, and (c) the variation results in additional tax being payable, the relevant persons (within the meaning of that subsection) shall, within six months after the day on which the instrument is made, deliver a copy of it to the Board and notify them of the amount of the additional tax. (2) To the extent that any of the relevant persons comply with the requirements of this section, the others are discharged from the duty to comply with them. . (3) In section 245A of that Act (failure to provide information etc)— (a) after subsection (1) insert— (1A) A person who fails to comply with the requirements of section 218A above shall be liable— (a) to a penalty not exceeding £100; and (b) to a further penalty not exceeding £60 for every day after the day on which the failure has been declared by a court or the Special Commissioners and before the day on which the requirements are complied with. . (b) in subsection (4), insert “ (1A)(b), ” after “subsection (1)(b),” and after paragraph (a) insert— (aa) he complies with the requirements of section 218A above, . (4) This section applies in relation to instruments made on or after 1st August 2002.

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121 Air passenger duty: extension of area to which EEA rates apply

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122 Landfill tax: rate

(1) In section 42 of the Finance Act 1996 (c. 8) (amount of landfill tax), in subsections (1)(a) and (2) for “£12” substitute “ £13 ”. (2) This section has effect in relation to taxable disposals made, or treated as made, on or after 1st April 2002.

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123 Climate change levy: electricity produced in combined heat and power station

(1) In Schedule 6 to the Finance Act 2000 (c. 17) (climate change levy), after paragraph 20 insert— Exemption: electricity produced in combined heat and power stations 20A (1) A supply of electricity is exempt from the levy chargeable under paragraph 5(1) if— (a) the supply is not one that is deemed to be made under paragraph 23(3), (b) the supply is made under a contract that contains a CHP declaration given by the supplier, (c) prescribed conditions are fulfilled, and (d) the supplier, and each other person (if any) who is a generator of any CHP electricity allocated by the supplier to supplies under the contract, has in a written notice given to the Commissioners agreed that he will fulfil those conditions so far as they may apply to him. (2) Sub-paragraph (1) does not apply in relation to a supply to a person of electricity produced in a wholly or partly exempt combined heat and power station where the supply is made to that person from the station. (3) In this paragraph “CHP declaration” means a declaration that, in each averaging period, the amount of electricity supplied by exempt CHP supplies made by the supplier in the period will not exceed the difference between— (a) the total amount of CHP electricity that during that period is either acquired or generated by the supplier, and (b) so much of that total amount as is allocated by the supplier otherwise than to exempt CHP supplies made by him in the period. In this sub-paragraph “averaging period” has the same meaning as in paragraph 20B; and “exempt CHP supplies” means supplies made on the basis that they are exempt under this paragraph. (4) For the purposes of this paragraph and paragraph 20B, electricity is “CHP electricity” if— (a) the electricity was— (i) produced in a fully exempt combined heat and power station, or (ii) produced in a partly exempt combined heat and power station and originally supplied from the station without causing the limit referred to in paragraph 16(2) to be exceeded, (b) the electricity is not renewable source electricity (within the meaning of paragraph 19), and (c) prescribed conditions are fulfilled. (5) The conditions that may be prescribed under sub-paragraph (1)(c) include, in particular, conditions in connection with— (a) the giving of effect to CHP declarations; (b) the supply of information; (c) the inspection of records and, for that purpose, the production of records in legible form and entry into premises; (d) monitoring by the Gas and Electricity Markets Authority, or the Director General of Electricity Supply for Northern Ireland, of the application of provisions of, or made under, this paragraph; (e) the doing of things to or by a person authorised by the Authority or the Director General (as well as the doing of things to or by the Authority or the Director General); (f) things being done at times or in ways specified by the Authority, the Director General or such an authorised person. (6) A condition prescribed under sub-paragraph (1)(c) may be one that is required to be fulfilled throughout a period, including a period ending after the time when a supply whose exemption turns on the fulfilment of the condition is treated as being made. (7) The conditions that may be prescribed under sub-paragraph (4)(c) include in particular conditions in connection with any of the matters mentioned in paragraphs (b) to (f) of sub-paragraph (5). (8) Each of— (a) the Gas and Electricity Markets Authority, and (b) the Director General of Electricity Supply for Northern Ireland, shall supply the Commissioners with such information (whether or not obtained under this paragraph), and otherwise give the Commissioners such co-operation, as the Commissioners may require in connection with the application of this paragraph (whether generally or in relation to any particular case). (9) Paragraph 19(10) (disclosure of information) applies in relation to sub-paragraph (8) above as it applies in relation to paragraph 19(8). Exemption under paragraph 20A: averaging periods 20B (1) This paragraph applies where a person (“the supplier”) makes supplies of electricity on the basis that they are exempt under paragraph 20A (“exempt CHP supplies”). (2) The rules about balancing and averaging periods are— (a) a balancing period is a period of three months; (b) when a balancing period ends, a new one begins; (c) the first balancing period and the first averaging period begin at the same time; (d) unless the supplier specifies an earlier time, that time is the time when he is treated as making the first of the exempt CHP supplies; (e) when an averaging period ends, a new one begins; (f) an averaging period ends once it has run for two years (but may end sooner under paragraph (g) or sub-paragraph (4)(a) or (5)(a)); (g) if the supplier stops making exempt CHP supplies, the end of the balancing period in which he makes the last exempt CHP supply is also the end of the averaging period in which the balancing period falls. (3) At the end of each balancing period calculate— (a) the total of— (i) the quantity of CHP electricity that the supplier acquired or generated in that period, and (ii) any balancing credit carried forward to that balancing period; and (b) the total of— (i) the quantity of electricity supplied by exempt CHP supplies made by him in that period, and (ii) any balancing debit carried forward to that balancing period. (4) If the total mentioned in sub-paragraph (3)(a) exceeds that mentioned in sub-paragraph (3)(b)— (a) the averaging period within which the balancing period fell ends at the end of the balancing period, and (b) a balancing credit equal to the difference between the two totals is carried forward to the next balancing period. (5) If the totals mentioned in paragraphs (a) and (b) of sub-paragraph (3) are the same— (a) the averaging period within which the balancing period fell ends at the end of the balancing period, and (b) no balancing credit or debit is carried forward to the next balancing period. (6) Sub-paragraphs (7) and (8) apply if the total mentioned in sub-paragraph (3)(b) exceeds that mentioned in sub-paragraph (3)(a). (7) Where the end of the balancing period is by virtue of sub-paragraph (2)(g) the end of an averaging period, the supplier is liable to account to the Commissioners for an amount equal to the amount that would be payable by way of levy on a taxable supply that— (a) is made at the end of the balancing period, and (b) is a supply of a quantity of electricity equal to the difference between the two totals. For the purposes of this Schedule, the amount for which the supplier is liable to account shall be treated as an amount of levy for which he is liable to account for an accounting period ending at the end of the balancing period. (8) Where sub-paragraph (7) does not apply, a balancing debit equal to the difference between the two totals is carried forward to the next balancing period. . (2) Subsection (1) has effect in relation to supplies of electricity made on or after such day as the Treasury may by order made by statutory instrument appoint.

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124 Climate change levy: certification requirement

In Schedule 6 to the Finance Act 2000 (c. 17) (climate change levy), after paragraph 149 insert— Certification of electricity from fully or partly exempt combined heat and power station 149A (1) The Commissioners may by regulations make provision for the Gas and Electricity Markets Authority, or the Director General of Electricity Supply for Northern Ireland, to certify as respects any quantity of electricity that— (a) the electricity has been produced in a fully exempt combined heat and power station; (b) the electricity has been produced in a partly exempt combined heat and power station and supplied from the station without causing the limit referred to in paragraph 16(2) to be exceeded. (2) Regulations under this paragraph may provide that for any purposes of this Schedule (or any regulations made under it)— (a) electricity is not to be regarded as having been produced as specified in sub-paragraph (1)(a) unless it has been certified under that provision; (b) electricity is not to be regarded as having been produced and supplied as specified in sub-paragraph (1)(b) unless it has been certified under that provision. (3) Regulations under this paragraph may in particular provide that the supply of any electricity does not qualify for the exemption under paragraph 16(2) unless the electricity is certified as specified in sub-paragraph (1)(b). (4) Regulations under this paragraph may also make provision for determining whether electricity is produced and supplied as specified in sub-paragraph (1)(b). .

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125 Climate change levy: exemption for renewable sources

(1) In Schedule 6 to the Finance Act 2000 (c. 17) (climate change levy), in paragraph 20(7), (exemption under paragraph 19: liability to account)— (a) for the words from “(2)(c)” to “2 years)” substitute “ (2)(g) ”, (b) after paragraph (a) insert “and”, and (c) omit paragraph (c) and the preceding “and”. (2) This section has effect in relation to averaging periods under paragraph 20 of that Schedule which end on or after the day on which this Act is passed.

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126 Climate change levy: electricity produced from coal mine methane

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127 Climate change levy: incorrect certificates

(1) In Schedule 6 to the Finance Act 2000 (climate change levy), in sub-paragraph (2)(a) of paragraph 101 (civil penalties: incorrect notifications etc)— (a) in sub-paragraph (ii) for “18 and 21, or” substitute “ 15, 18 and 21, ”; (b) before the word “and” at the end of sub-paragraph (iii) insert— , or (iv) a reduced-rate supply (or reduced-rate supplies), . (2) This section applies in relation to certificates given in respect of any supplies made on or after 24th April 2002.

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128 Climate change levy: invoices incorrectly showing levy due

(1) In Schedule 6 to the Finance Act 2000 (climate change levy), immediately before paragraph 142 insert— Invoices incorrectly showing levy due 141A (1) This paragraph applies where— (a) a person issues an invoice showing an amount as levy chargeable on a supply, and (b) no levy is chargeable on the supply, or the amount chargeable is less than the amount shown. (2) The person shall be liable to a penalty unless he satisfies the Commissioners or, on appeal, a tribunal that there is a reasonable excuse for the inclusion in the invoice of the false information. (3) The amount of the penalty is £50 or, if more, the following amount— (a) where no levy is chargeable, the amount shown as chargeable; (b) where an amount of levy is chargeable, the difference between that amount and the amount shown as chargeable. (4) It is irrelevant for the purposes of sub-paragraph (1) whether or not the supply shown on the invoice actually takes place or has taken place. (5) A reference in this paragraph to an invoice is a reference to any kind of invoice (and not just a climate change levy accounting document). . (2) This section applies only in relation to invoices issued on or after the day on which this Act is passed.

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129 Aggregates levy: transitional relief for Northern Ireland

(1) After section 30 of the Finance Act 2001 (c. 9) (credit for aggregates levy) insert— Transitional tax credit in Northern Ireland 30A (1) The Commissioners may by regulations make provision of the kind described in section 30(2) above (entitlement to tax credit) in relation to cases where aggregate is used in Northern Ireland for a prescribed purpose— (a) on or after the commencement date, and (b) before 1st April 2007. (2) In relation to the use of aggregate in the year ending with a date shown in the first column of the following table, the amount of any tax credit to which a person would otherwise by entitled by virtue of the regulations shall be reduced by the percentage of that amount shown opposite that date in the second column. Year ending | Reduction in tax credit 31st March 2004 | 20% 31st March 2005 | 40% 31st March 2006 | 60% 31st March 2007 | 80% (3) Subsections (3) to (5) of section 30 above apply to regulations under this section as they apply to regulations under that section. . (2) In section 17(6) of that Act (certain tax credits to be disregarded in determining whether aggregate has already been charged to levy), in paragraph (a) after “section 30(1)(c)” insert “ or 30A ”.

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130 Aggregates levy: amendments to provisions exempting spoil etc

(1) In section 17(3) of the Finance Act 2001 (c. 9) (aggregate that is exempt)— (a) in paragraph (e) (by-products of extracting china clay or ball clay), after “or other by-products” insert “ , not including the overburden, ”; (b) after that paragraph insert— (f) it consists wholly of the spoil from any process by which— (i) coal, lignite, slate or shale, or (ii) a substance listed in section 18(3) below, has been separated from other rock after being extracted or won with that other rock; . (2) Omit section 17(4)(b) of that Act (aggregate exempt if it consists, or is part of anything consisting, wholly or mainly of spoil from the separation of coal from other rock after extraction). (3) This section shall be deemed to have come into force on 1st April 2002.

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131 Aggregates levy: crushing and cutting rock

(1) In section 17(3) of the Finance Act 2001 (exempt aggregate), omit paragraph (a) (exemption for rock that has not been subjected to an industrial crushing process). (2) In section 18(2)(a) of that Act (exemption for production of dimension stone), for “dimension stone” substitute “ stone with one or more flat surfaces ”. (3) The following amendments to that Act are consequential on that made by subsection (1)— (a) in section 20(1) (originating sites), omit— (i) the words “and is not rock” in paragraphs (a) and (b), and (ii) paragraph (c); (b) in section 21 (operators of sites), omit subsection (2)(b); (c) in section 24 (the register), omit subsections (6)(b) and (8)(a). (4) This section shall be deemed to have come into force on 1st April 2002.

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