Finance Act 1994

200 Assessment on current year basis.

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201 Basis of assessment at commencement.

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202 Change of basis period.

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203 Conditions for such a change.

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204 Basis of assessment on discontinuance.

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205 Overlap profits and overlap losses.

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206 Basis of assessment under Case III.

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207 Basis of assessment under Cases IV and V.

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208 Basis of assessment under Case VI.

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209 Loss relief: general.

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210 Relief for losses on unquoted shares.

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211 Income tax allowances and charges in taxing a trade etc.

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) Subject to section 214(7) below, this section and sections 212 to 214 below, in their application to trades, professions or vocations set up and commenced before 6th April 1994 or employments or offices entered into before that date, have effect as respects the year 1997-98 and subsequent years of assessment.

212 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

213 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

214 Amendments of other enactments.

(1) In the Taxes Act 1988, the following provisions shall cease to have effect, namely— (a) in section 96 (farming and market gardening: relief for fluctuating profits), in subsection (7), paragraph (b); (b) section 383 (extension of right to set-off to capital allowances); (c) in section 384 (restrictions on right of set-off), in subsection (1), the words “(including any amount in respect of capital allowances which, by virtue of section 383, is to be treated as a loss)”, and in subsection (2), the words “or an allowance in respect of expenditure incurred”, paragraph (b) and the word “or” immediately preceding that paragraph; (d) in section 388 (carry-back of terminal losses), in subsection (6), paragraphs (b) and (d) and the word “and” immediately preceding paragraph (d), and in subsection (7), the words from the beginning to “an earlier year: and”; and (e) in section 389 (supplementary provisions relating to carry-back of terminal losses), subsections (5) to (7). (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7) Subsection (1)(a) above— (a) except in its application to a trade set up and commenced on or after 6th April 1994, has effect where the first of the two years of assessment to which the claim relates is the year 1996-97 or any subsequent year, and (b) in its application to a trade so set up and commenced, has effect where the first of those two years of assessment is the year 1995-96 or any subsequent year.

215 Treatment of partnerships.

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216 Effect of change in ownership of trade, profession or vocation.

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) Subsections (3) to (5) of that section and, in subsection (6) of that section, the words from “and where” to the end shall cease to have effect. (3) The following provisions of that Act shall cease to have effect, namely— (a) in section 96 (farming and market gardening: relief for fluctuating profits), in subsection (6) the words from “except that” to the end; (b) in section 380 (set-off against general income), subsection (3); (c) in section 381 (further relief in early years of trade), subsection (6); (d) in section 384 (restrictions on right of set-off), subsection (5); (e) in section 385 (carry-forward against subsequent profits), subsections (2) and (5); (f) in section 386 (carry-forward where business transferred to a company), subsection (4); and (g) in section 389 (supplementary provisions relating to carry-back of terminal losses), subsection (3). (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) Subsection (3)(a) above— (a) except in its application to a trade set up and commenced on or after 6th April 1994, has effect where the first of the two years of assessment to which the claim relates is the year 1996-97 or any subsequent year, and (b) in its application to a trade so set up and commenced, has effect where the first of those two years of assessment is the year 1995-96 or any subsequent year.

217 Double taxation relief in respect of overlap profits.

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218 Commencement, transitional provisions and savings.

(1) Unless the contrary intention appears, this Chapter— (a) except in its application to a trade set up and commenced on or after 6th April 1994 or income from a source arising to a person on or after that date, has effect as respects the year 1996-97 and subsequent years of assessment, and (b) in its application to a trade so set up and commenced or income from a source so arising, has effect as respects the year 1994-95 and subsequent years of assessment. (1A) In a case where— (a) a trade is set up and commenced by a company, and (b) it is not set up and commenced before 6th April 1994, sections 213(4) and (8) and 214(4) and (6) have effect only if it is set up and commenced on or after 6th April 1995. (2) Any reference in subsection (1) above to a trade includes a reference to a profession, vocation, employment or office. (3) Where the first underwriting year of the underwriting business of a member of Lloyd’s is the year 1994, subsection (1) above shall have effect in relation to that business as if it had been set up and commenced on 6th April 1994. (4) Where, as respects income from any source, income tax is to be charged under Case IV or V of Schedule D by reference to the amounts of income received in the United Kingdom, the source shall be treated for the purposes of subsection (1) above as arising on the date on which the first amount of income is so received. (5) This Chapter shall have effect subject to the transitional provisions and savings contained in Schedule 20 to this Act.

219 Taxation of profits.

(1) Corporation tax for any accounting period on the profits arising from a corporate member’s underwriting business shall be computed on the profits of that accounting period. (2) As respects the profits arising to a corporate member for any accounting period directly from its membership of one or more syndicates, or from assets forming part of a premium trust fund— (a) the aggregate of those profits shall be computed for tax purposes under Part 3 of the Corporation Tax Act 2009 ; and (b) accordingly, no part of those profits shall be computed for those purposes otherwise than under Part 3 of the Corporation Tax Act 2009 . (3) ... The profits arising to a corporate member for any accounting period— (a) from assets forming part of an ancillary trust fund; or (b) from assets employed by it in, or in connection with, its underwriting business, shall be computed for tax purposes under Part 3 of the Corporation Tax Act 2009 if, and to the extent that, they do not fall to be computed for those purposes otherwise than under Part 3 of that Act . (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

220 Accounting period in which certain profits or losses arise.

(1) For the purposes of section 219 above and all other purposes of the Corporation Tax Acts, the profits or losses arising to a corporate member in any accounting period directly from its membership of one or more syndicates, or from assets forming part of a premium trust fund, shall be taken to be— (a) if two underwriting years each fall partly within that period, the aggregate of the apportioned parts of those profits or losses in those years; and (b) if a single underwriting year falls wholly or partly within that period, those profits or losses or (as the case may be) the apportioned part of those profits or losses in that year. (2) Subject to the provisions of this Chapter, for the purposes of subsection (1) above and all other purposes of the Corporation Tax Acts— (a) the profits or losses arising to a corporate member in any underwriting year directly from its membership of one or more syndicates shall be taken to be those of any previous year or years which are declared in that year; and (b) the profits or losses arising to a corporate member from assets forming part of a premium trust fund which shall be taken to be profits or losses of any underwriting year are— (i) those allocated under the rules or practice of Lloyd’s to any previous year or years the profits or losses of which are declared in that year, and (ii) those arising in that year and not so allocated to any previous year or years. (3) In this section “apportioned part”, in relation to the profits or losses of an underwriting year, means a part apportioned under section 52 of the Corporation Tax Act 2009 .

221 Assessment and collection of tax.

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222 Premium trust funds.

(1) For the purposes of the Corporation Tax Acts— (a) a corporate member shall be treated as absolutely entitled as against the trustees to the assets forming part of a premium trust fund belonging to it; and (b) where a deposit required by a regulatory authority in a country or territory outside the United Kingdom is paid out of such a fund, the money so paid shall be treated as still forming part of that fund. (2) Where an asset forms part of a corporate member’s premium trust fund at the beginning of any underwriting year, for the purposes of the Corporation Tax Acts— (a) the trustees of the fund shall be treated as acquiring it on that day, and (b) they shall be treated as paying in respect of the acquisition an amount equal to the value of the asset at the time of the acquisition. (3) Where an asset forms part of a corporate member’s premium trust fund at the end of any underwriting year, for the purposes of the Corporation Tax Acts— (a) the trustees of the fund shall be treated as disposing of it on that day, and (b) they shall be treated as obtaining in respect of the disposal an amount equal to the value of the asset at the time of the disposal. (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

223 Ancillary trust funds.

A corporate member shall be treated for the purposes of the Corporation Tax Acts as absolutely entitled as against the trustees to the assets forming part of an ancillary trust fund belonging to it.

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225 Stop-loss and quota share insurance.

(1) In computing for the purposes of corporation tax the profits of a corporate member’s underwriting business, each of the following shall be deductible as an expense, namely— (a) any premium payable by it under a stop-loss insurance, and any repayment of insurance money paid to it under such an insurance; and b) where an amount is payable by it under a quota share contract— (i) so much of that amount as exceeds the amount of transferred losses that are declared on or before the date the contract takes effect (“the declared amount”), or (ii) if the contract does not take effect, the amount so payable under the contract. (2) Subject to subsection (3) below, the following provisions apply where any insurance money is payable to a corporate member under a stop-loss insurance in respect of a loss in its underwriting business— (a) if the underwriting year in which the loss is declared falls within two or more accounting periods, the apportioned part of the insurance money shall be treated as a trading receipt in computing the profits arising from the business for each of those periods; and (b) if the underwriting year in which the loss is declared falls within a single accounting period, the insurance money shall be treated as a trading receipt in computing the profits arising from the business for that period. (3) Where, as respects the payment of any such insurance money as is mentioned in subsection (2) above— (a) the inspector is not notified of the payment at least 30 days before the time after which any assessment or further assessment of profits for any of the accounting periods or (as the case may be) the accounting period is precluded by section 34 of the Management Act (ordinary time limit), and (b) the inspector is not entitled, after that time, to make any such assessment or further assessment by virtue of section 36 ( loss of tax brought about carelessly or deliberately ) of that Act, that subsection shall have effect in relation to the apportioned part of that insurance money or (as the case may be) that insurance money as if, instead of that accounting period, it referred to the accounting period in which the payment is made. (3A) Where the amount payable by a corporate member under a quota share contract is less than the declared amount— (a) if the underwriting year in which the contract takes effect falls within a single accounting period, the difference between the two amounts (“the surplus”) shall be treated as a trading receipt in computing the profits arising from the member’s underwriting business for that period, and (b) if that underwriting year falls within two or more accounting periods, the apportioned part of the surplus shall be treated as a trading receipt in computing the profits arising from the member’s underwriting business for each of those periods. (3B) Where a corporate member has entered a quota share contract, any amount paid by it to cover a cash call in respect of transferred losses that are not declared at the time the contract takes effect shall be treated, for the purposes of subsections (1)(b)(i) and (3A) above, as an amount payable under the contract at that time. (3C) Subsection (3D) applies to any premium which is payable by a corporate member under a stop-loss insurance taken out in respect of its underwriting business and in relation to which section 220(2)(a) does not apply. (3D) The premium is to be treated for the purposes of the Corporation Tax Acts— (a) as an amount that arises to the member directly from its membership of the syndicate or syndicates in relation to the activities of which the stop-loss insurance was taken out, and (b) as if it were payable in the underwriting year in which the profits or losses arising to the member directly from its membership of the syndicate or syndicates concerned are declared. (3E) If a premium is payable under a stop-loss insurance in respect of two or more underwriting years, the amount of the premium treated, as a result of subsection (3D)(b), as payable in each of those years is to be determined on a just and reasonable basis. (3F) If— (a) a corporate member enters into a quota share contract, and (b) the main purpose, or one of the main purposes, of entering into it was to secure that amounts payable by the member under the contract were not dealt with on the basis set out in subsection (3G), the contract is treated for the purposes of subsections (3C) to (3E) as if it were a stop-loss insurance (and, accordingly, the amounts payable under it are treated for those purposes as premiums). (3G) Amounts are dealt with on the basis set out in this subsection if they are treated as payable in the underwriting year in which the profits or losses arising to a corporate member directly from its membership of one or more syndicates are declared. (4) In this section— “apportioned part”, in relation to any insurance money or other amount, means a part apportioned under section 52 of the Corporation Tax Act 2009 ; “cash call” means a request for funds which, in pursuance of a contract made in accordance with the rules and practices of Lloyd’s, is made to a corporate member by the agent of a syndicate of which it is a member; “quota share contract” means any contract between a corporate member and another person which— is made in accordance with the rules or practice of Lloyd’s; and provides for that other person to take over any rights and liabilities of the member under any of the syndicates of which it is a member; and where the taking over of a member’s rights and liabilities is conditional upon the occurrence of any event, the contract does not take effect until that event occurs; and “transferred loss”, in relation to such a contract, means a loss for which that other person takes over liability under the contract (disregarding, in the case of a loss that has been declared at the time it is taken over, any part of it in respect of which the member has paid a cash call before that time).

226 Provisions which are not to apply.

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) No relevant contract (within the meaning of Part 7 of the Corporation Tax Act 2009 ) forming part of a premium trust fund of a corporate member shall be a derivative contract.

227 Cessation: final underwriting year.

(1) This section applies where a corporate member ceases to carry on its underwriting business, whether by reason of being wound up or otherwise. (2) Subject to the provisions of any regulations made by the Board— (a) the member’s final underwriting year shall be that in which its deposit at Lloyd’s is paid over to it or its liquidator, and (b) the member’s underwriting business shall be treated as continuing until the end of that year.

227A Restriction of group relief

(1) Losses of the last active underwriting year of a corporate member are not eligible for surrender by the corporate member as group relief to another company unless the group-relief continuity condition is satisfied. (2) In this section “last active underwriting year”, in relation to a corporate member, means— (a) if the corporate member writes insurance business in only one underwriting year, that underwriting year, and (b) otherwise, the last underwriting year in which the corporate member writes insurance business. (3) Where in an underwriting year— (a) the corporate member writes an amount of insurance business which is insignificant when compared with that written by it in the preceding underwriting year, or (b) the only insurance business written by the corporate member consists of the acceptance of reinsurance to close premiums, the underwriting year is not to be regarded for the purposes of subsection (2)(b) above as an underwriting year in which the corporate member writes insurance business. (4) In subsection (3)(b) above “reinsurance to close premium” means a premium or other consideration under a contract in pursuance of which, in accordance with the rules or practice of Lloyd's, one underwriting member agrees with another to meet liabilities arising from the latter's underwriting business in an underwriting year so that the accounts of the business for that year may be closed. (5) The group-relief continuity condition is satisfied if the corporate member (as the surrendering company) and the other company (as the claimant company) meet the conditions in section 131 (the group condition), section 132 (consortium condition 1) or section 133 (consortium conditions 2 and 3) of the Corporation Tax Act 2010 throughout the period— (a) beginning with the last day of the last active underwriting year of the corporate member, and (b) ending with the first day of the first underwriting year in which losses of the last active underwriting year are declared.

227B Transfer of underwriting business without change of ownership

(1) This section applies where, in accordance with the rules or practice of Lloyd's, a corporate member (“the successor”) has taken up the syndicate capacity of another corporate member (“the predecessor”). (2) Chapter 1 of Part 22 of the Corporation Tax Act 2010 (transfers of trade without a change of ownership) applies as if— (a) the transferred trade referred to in that Chapter were the underwriting business of the predecessor, (b) the predecessor ceases to carry it on, and the successor begins to carry it on, at the end of the first underwriting year in which profits or losses of the predecessor's last active underwriting year are declared, and (c) sections 951 and 952 were omitted. (3) For the purposes of subsection (1) above the successor has taken up the predecessor's syndicate capacity if it has taken up the rights to participate in syndicates which were (or otherwise would be) offered to the predecessor. (4) In subsection (2)(b) above “last active underwriting year” has the same meaning as in section 227A above (see subsections (2) to (4) of that section).

227C Exemption for profits or losses of foreign permanent establishments

(1) This section applies for the purposes of section 18A(6) and (7) of the Corporation Tax Act 2009 (exemption for profits or losses of foreign permanent establishments: “relevant profits amount” and “relevant losses amount”). (2) Any regulations made under section 229(1)(d) below are to be ignored. (3) Profits or losses which are taken to arise to a corporate member in an underwriting year from its membership of one or more syndicates are to be left out of account in relation to any relevant accounting period so far as they are profits or losses of a previous underwriting year which began before the relevant day (as defined in section 18F of the 2009 Act (effect of election under section 18A)). (4) Profits or losses arising to a corporate member from assets forming part of a premium trust fund which are taken to be profits or losses of an underwriting year are to be left out of account in relation to any relevant accounting period so far as they are allocated under the rules or practice of Lloyds to a previous underwriting year which began before the relevant day (as defined in section 18F of the 2009 Act).

228 Lloyd’s underwriters: individuals.

(1) Chapter III of Part II of the 1993 Act (Lloyd’s underwriters: individuals) shall have effect subject to the amendments specified in Schedule 21 to this Act. (2) The following provisions shall cease to have effect, namely— (a) section 627 of the Taxes Act 1988 (elections by Lloyd’s underwriters with respect to retirement annuities); (b) in section 641 of that Act, subsection (2) (elections by Lloyd’s underwriters with respect to carry-back of contributions); and (c) in section 183 of the 1993 Act, subsection (3) (amendments of sections 627(5) and 641(2) of the Taxes Act 1988). (3) Subject to any provision to the contrary, the provisions of Schedule 21 to this Act have effect for the year 1994-95 and subsequent years of assessment. (4) Subsection (2) above has effect for the year 1997-98 and subsequent years of assessment.

229 Regulations.

(1) The Board may by regulations provide— (a) for the assessment and collection of tax charged in accordance with section 219 above ...; (b) for making, in the event of any changes in the rules or practice of Lloyd’s, such amendments of this Chapter as appear to the Board to be expedient having regard to those changes; (c) for modifying the application of this Chapter in cases where a syndicate continues after the end of its closing year or a corporate member becomes insolvent or otherwise ceases to carry on its underwriting business; (ca) for modifying the application of this Chapter in relation to cases where assets forming part of a premium trust fund are the subject of— (i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (ii) arrangements involving repos (within the meaning given by section 554(4) of the Corporation Tax Act 2009); or (iii) arrangements meeting the conditions in section 554(2) of that Act (redemption arrangements); (d) for giving credit for foreign tax. (2) Any power to make regulations conferred by this section includes power to make— (a) different provision for different cases or different purposes, and (b) incidental, supplemental or transitional provision and savings.

230 Interpretation and commencement.

(1) In this Chapter, unless the context otherwise requires— “the 1993 Act” means the Finance Act 1993; “ancillary trust fund”, in relation to a corporate member, does not include a premium trust fund but, subject to that, means any trust fund required or authorised by the rules of Lloyd’s, or required by a members’ agent or regulating trustee of the corporate member; “closing year”— in relation to an underwriting year, means the underwriting year next but one following that year; and in relation to a syndicate, means the closing year of the underwriting year for which it was formed; “corporate member” means a body corporate which is a member of Lloyd’s and is or has been an underwriting member; “inspector” includes any officer of the Board; “the Management Act” means the Taxes Management Act 1970; “managing agent”, in relation to a syndicate and an underwriting year, means— the person registered as a managing agent at Lloyd’s who was acting as such an agent for the syndicate at the end of that year, or such other person as may be determined in accordance with regulations made by the Board; “member” means a member of Lloyd’s who is or has been an underwriting member; “members’ agent”, in relation to a corporate member, means a person registered as a members’ agent at Lloyd’s who has been appointed by the corporate member to act as its members’ agent in respect of all or any part of its underwriting business; “premium trust fund” means a trust fund into which premiums receivable by members are paid in compliance with a trust deed under Rule 8.2.19 of the Prudential Sourcebook for Insurers made by the Prudential Regulation Authority under the Financial Services and Markets Act 2000; “prescribed” means prescribed by regulations made by the Board; “profits” includes gains; “regulating trustee”, in relation to a corporate member, means a person designated as such by the terms of any trust deed by which a premiums trust fund of the corporate member is constituted; “stop-loss insurance” means any insurance taken out by a corporate member against losses in its underwriting business , except insurance taken out by entering a quota share contract (within the meaning of section 225 above); “syndicate” means a syndicate of underwriting members of Lloyd’s formed for an underwriting year; “underwriting business”, in relation to a corporate member, means its underwriting business as a member of Lloyd’s; “underwriting year” means the calendar year. (2) For the purposes of this Chapter, unless the contrary intention appears— (a) the profits or losses of a corporate member’s underwriting business include profits or losses arising to it— (i) from assets forming part of a premium trust fund or an ancillary trust fund; or (ii) from assets employed by it in, or in connection with, its underwriting business; and (b) any charge made on a corporate member by the managing agent of a syndicate of which it is a member, and any expense incurred on its behalf by the managing agent of such a syndicate, shall be treated as expenses arising directly from its membership of that syndicate. (3) Subject to any provision to the contrary, the provisions of this Chapter have effect for accounting periods ending on or after 1st January 1994 or, as the case may require, for the underwriting year 1994 and subsequent underwriting years.

231 Election by reference to pipe-line with excess capacity.

(1) The provisions of this Chapter apply where, on or before 1st January 1996, a participator in a taxable field makes, in accordance with Part I of Schedule 22 to this Act, an election with respect to that field by reference to a pipe-line— (a) which is a qualifying asset; (b) which is used or intended to be used for transporting oil in circumstances which give rise or are expected to give rise to tariff receipts; (c) which, at the date of the election, is at least 25 kilometres in length; and (d) for which the initial usage fraction does not exceed one-half. (2) A participator may not make an election— (a) unless the field to which the election applies is (or, as the case may be, is intended to be) the chargeable field in relation to the tariff receipts referred to in subsection (1)(b) above; or (b) if the first chargeable period of that field ended on or before 30th June 1982; or (c) if the participator’s net profit period with respect to that field ended on or before 30th June 1993; and for the purposes of paragraph (c) above no account shall be taken of the operation of section 113 of the Finance Act 1981 (loss following net profit period). (3) If there is more than one pipe-line by reference to which the electing participator could, apart from this subsection, make an election (with respect to the same field) he may make an election only by reference to that pipe-line which is the longer or longest. (4) In this Chapter, in relation to a pipe-line or an election made by reference to a pipe-line, “the initial usage fraction” means the fraction of which— (a) the numerator is the daily contracted and production throughput of oil in relation to the pipe-line on 16th March 1993; and (b) the denominator is the design capacity of the pipe-line, expressed on a daily basis. (5) Subject to subsection (6) below, where an election is in operation it shall apply to all those assets which, by reference to the field to which the election applies, are at the date of the election or subsequently become— (a) qualifying assets in relation to the electing participator; and (b) assets to which are or are expected to be referable any tariff receipts of the electing participator attributable to that field. (6) If the electing participator specifies in his election that the election is to be limited to oil which is, or is expected to be, transported by the pipe-line by reference to which the election is made, the election shall apply only to such of the assets referred to in subsection (5) above as, in whole or in part, are or subsequently become used in connection with that oil. (7) For the purposes of this Chapter, unless it is just and reasonable to determine some other quantity of oil, the daily contracted and production throughput of oil in relation to a pipe-line on 16th March 1993 is the aggregate of— (a) the maximum daily capacity specified in contracts then in force for the use of the pipe-line (whether at that date or in the future) for transporting oil won from any taxable field (including the field to which the election applies); and (b) the maximum expected daily throughput, otherwise than pursuant to such contracts, of oil transported by the pipe-line and won from the field to which the election applies or any other taxable field, being the throughput ascertained by reference to what was at that date the most recent development plan applicable to the field to which the election applies or, as the case may be, the other taxable field. (8) For the purposes of this Chapter, unless it is just and reasonable to determine some other capacity, the design capacity of a pipe-line is that which is specified for the pipe-line as a whole in what was, on 16th March 1993, the most recent development plan applicable to the field to which the election applies or, as the case may be, the pipe-line itself.

232 Restriction on electing participator’s allowable expenditure on elected assets.

(1) This section has effect in relation to expenditure which is incurred on an asset to which an election applies; and in this section “allowable or allowed”, in relation to any expenditure, means allowable or allowed under any of the expenditure relief provisions. (2) Subject to the following provisions of this section, in the case of expenditure incurred before the date of the election, the amount which, apart from this section, would be allowable or allowed in the case of the electing participator shall be reduced by multiplying it by the initial usage fraction. (3) Subject to subsection (5) below, in the case of expenditure incurred on or after the date of the election, the amount which, apart from this section, would be allowable or allowed in the case of the electing participator shall be reduced to nil. (4) Where, after 30th November 1993 and before the date of the election, expenditure was incurred on an asset to which the election applies and— (a) apart from this section, that expenditure would have qualified for supplement by virtue of paragraph (c) or paragraph (d) of subsection (5) of section 3 of the principal Act, and (b) the effect of the expenditure is to increase the maximum capacity of the pipe-line by reference to which the election was made above its design capacity or to increase the capacity of any asset used or to be used for the initial treatment or initial storage of oil transported by the pipe-line above its development plan capacity, that expenditure shall be treated for the purposes of the application of subsections (2) and (3) above as if it had been incurred after the date of the election. (5) Where, at the date of the election, an asset to which the election applies is for the time being leased or hired under a contract which was entered into before 16th March 1993, any expenditure— (a) which is incurred on or after the date of the election on the leasing or hiring of the asset under the contract, and (b) which is not of a description falling within paragraphs (a) and (b) of subsection (4) above, shall be treated for the purposes of the application of subsections (2) and (3) above as if it had been incurred before the date of the election. (6) For the purposes of subsection (4)(b) above, the development plan capacity of any asset used or to be used for the initial treatment or initial storage of oil transported by a pipe-line is— (a) the maximum capacity of that asset as specified in what, on 16th March 1993, was the most recent development plan applicable to the field to which the election applies or, as the case may be, to the asset itself; or (b) if no such maximum capacity was so specified in relation to an asset, its actual maximum capacity on that date or, if there was no such capacity on that date, nil. (7) Where a claim under Schedule 5 or Schedule 6 to the principal Act relates to the allowance of any expenditure to which subsection (2) above applies, the amount claimed shall take account of the operation of that subsection; and where subsection (3) above applies to any expenditure, no such claim shall be made with respect to it. (8) Where a claim has been made under Schedule 5 or Schedule 6 to the principal Act with respect to any expenditure and, subsequently, an election is made which has the effect of altering the amount of expenditure which is allowable or allowed,— (a) a notice of variation such as is mentioned in paragraph 9 of Schedule 5 to the principal Act may be served after the end of the period referred to in sub-paragraph (1) of that paragraph if it is served before the expiry of the period of three years beginning on the date of the election; and (b) if the effect of such a notice is that the net profit period with respect to the field to which the election applies is changed, the change shall not (by virtue of section 231(2) above) affect the validity of the election. (9) Nothing in this section affects the determination of the question whether an asset is a qualifying asset for the purposes of the 1983 Act and, accordingly, for that purpose, the preceding provisions of this section shall be disregarded in determining whether any expenditure is allowable or allowed.

233 Tax relief for certain receipts of an electing participator.

(1) If any sum— (a) is received or receivable by the electing participator on or after the date of an election, and (b) is so received or receivable from any person in respect of the use, otherwise than in connection with a taxable field, of an asset to which the election applies or the provision of services or other business facilities of whatever kind in connection with that use, and (c) would, apart from this section, constitute a tariff receipt attributable to the field to which the election applies, that sum shall not be regarded as a tariff receipt for the purposes of the Oil Taxation Acts. (2) If any sum— (a) is received or receivable by the electing participator on or after the date of an election, and (b) is so received or receivable in respect of the disposal of an asset to which the election applies or of an interest in such an asset, and (c) constitutes a disposal receipt of the electing participator attributable to the field to which to the election applies, that sum shall, for the purposes of the Oil Taxation Acts, be taken to be reduced in accordance with subsection (4) below. (3) Any reference in subsection (1) or subsection (2) above to a sum received or receivable includes a reference to an amount which (apart from this section) would be treated as a tariff receipt or disposal receipt by virtue of paragraph 5 of Schedule 2 to the 1983 Act (acquisition and disposal of qualifying assets otherwise than at arm’s length). (4) Unless it is just and reasonable to make a different reduction, the reduction referred to in subsection (2) above shall be determined by reference to that applicable under subsection (2) or subsection (3) of section 232 above to the expenditure incurred on the asset concerned so that if, for the purposes of determining under those subsections the amount of that expenditure which was allowed or allowable,— (a) the whole or any part of that expenditure was reduced by multiplying it by the initial usage fraction, or (b) the whole or any part of that expenditure was reduced to nil, a similar reduction shall apply to the whole or, as the case may require, to each correspondingly proportionate part of any sum falling within subsection (2) above. (5) In this section “the Oil Taxation Acts” means Parts I and III of the principal Act, the 1983 Act and any other enactment relating to petroleum revenue tax.

234 Interpretation of Chapter and supplementary provisions.

(1) In this Chapter “the 1983 Act” means the Oil Taxation Act 1983 and expressions used in this Chapter have the same meaning as in that Act. (2) In this Chapter— (a) “election” means an election under section 231 above and “electing participator” means a participator who makes or has made an election; (b) “the expenditure relief provisions” means sections 3 and 4 of the principal Act and section 3 of the 1983 Act; and (c) “the initial usage fraction” shall be construed in accordance with section 231(4) above. (3) In this Chapter— (a) any reference to the assets to which an election applies is a reference to the pipe-line by reference to which the election is made together with the assets determined in accordance with subsections (5) and (6) of section 231 above; (b) any reference to the net profit period is a reference to the chargeable period which is the net profit period for the purposes of section 111 of the Finance Act 1981 (restriction of expenditure supplement); and (c) any reference to a development plan is a reference to a consent for, or programme of, development granted, served or approved by the Secretary of State. (4) Any reference in this Chapter to expenditure incurred on an asset is a reference to expenditure (whether or not of a capital nature) which— (a) is incurred in acquiring, bringing into existence or enhancing the value of the asset, or (b) is incurred (for any of the purposes mentioned in section 3(1) of the principal Act) by reference to the use of the asset in connection with a taxable field, other than expenditure which, in the hands of the recipient, constitutes a tariff receipt. (5) For the purposes of this Chapter— (a) an election is “in operation” if it has been accepted by the Board; and (b) the date of an election which is in operation is the date on which the election was received by the Board. (6) The provisions of Part II of Schedule 22 to this Act shall have effect for supplementing the preceding provisions of this Chapter. (7) The Board may make all such amendments of assessments or determinations or of decisions on claims as may be necessary in consequence of the provisions of this Chapter.

235 Valuation of oil.

(1) With respect to chargeable periods ending after 31st December 1993, subsection (5A) of section 2 of the Oil Taxation Act 1975 (special rules for valuation of oil consisting of gas which is disposed of in a sale at arm’s length on terms including transportation costs etc.) shall be amended as follows— (a) for the words “oil consisting of gas” there shall be substituted “ oil ”; (b) for the word “gas”, in each place where it subsequently occurs, there shall be substituted “ oil ”; (c) for the words “for delivery at a place” there shall be substituted “ or another country for delivery at another place in or ”; and (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) In Schedule 10 to the Finance Act 1987 (nomination scheme for disposals and appropriations of oil), in paragraph 4 (timing of nominations)— (a) in sub-paragraph (1) for the words “sub-paragraph (2)” there shall be substituted “ sub-paragraphs (2) and (2A) ”; and (b) after sub-paragraph (2) there shall be inserted— (2A) Where the proposed transaction has a transaction base date later than 31st December 1993, sub-paragraph (1) above has effect with the substitution for the reference to the second business day of a reference to the first business day. (4) In paragraph 11 of that Schedule (a participator’s aggregate nominated proceeds for a month), in sub-paragraph (2) for the words “sub-paragraph (2A)” there shall be substituted “ sub-paragraphs (2A) and (2B) ” and after sub-paragraph (2A) there shall be inserted the following sub-paragraph— (2B) In the case of a nominated transaction which is a disposal to which subsection (5A) of section 2 of the principal Act applies, for the amount which, apart from this sub-paragraph, would be the nominated price for the purposes of sub-paragraph (2) above there shall be substituted the amount which, under that subsection, is deemed to be the price received or receivable for the oil in question.

236 Valuation of certain light gases.

(1) Subject to subsection (2) below, the principal Act shall have effect subject to the amendments in Schedule 23 to this Act, being— (a) amendments altering the rules for determining the market value of certain light gases for the purposes of petroleum revenue tax; and (b) amendments consequential upon, or incidental to, those amendments. (2) The amendments in Schedule 23 to this Act do not have effect in relation to any light gases if, before 1st January 1994, an election was made under section 134 of the Finance Act 1982 (alternative valuation of certain ethane) or section 109 of the Finance Act 1986 (alternative valuation of certain light gases) and the election applies to those gases. (3) No election may be made after 31st December 1993 under section 134 of the Finance Act 1982 or section 109 of the Finance Act 1986; and, accordingly— (a) in subsection (2) of the said section 134, after the word “section” there shall be inserted “ must be made before 1st January 1994 and ”; and (b) in subsection (1) of the said section 109, after the word “section” there shall be inserted “ before 1st January 1994 ”. (4) In section 12 of the principal Act (interpretation), in subsection (1) after the definition of “licensee” there shall be inserted— “light gases”, except in relation to an election under section 134 of the Finance Act 1982 or section 109 of the Finance Act 1986, means oil consisting of gas of which the largest component by volume over any chargeable period, measured at a temperature of 15 degrees centigrade and a pressure of one atmosphere, is methane or ethane or a combination of those gases .