Law

Finance Act 1998

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: 175 provisions
  1. Title and introductory text
  2. 1 Rate of duty on beer.
  3. 2 Adjustment of rates of duty on sparkling liquors.
  4. 3 Rates of duty on wine and made-wine.
  5. 4 Rates of duty on cider.
  6. 5 Drawback of excise duty on beer.
  7. 6 Charge on production without delivery.
  8. 7 Rates of duties and rebates.
  9. 8 Ultra low sulphur diesel.
  10. 9 Mixtures of heavy oils.
  11. 10 Rates of tobacco products duty.
  12. 11 Rates of gaming duty.
  13. 12 Rates of amusement machine licence duty.
  14. 13 Further exception for thirty-five-penny machines.
  15. 14 Video machines.
  16. 15 Fiscal representatives.
  17. 16 Rates of duty where pollution reduced.
  18. 17 Restriction of exemption for old vehicles.
  19. 18 Regulations relating to nil licences.
  20. 19 Failure to pay amount required in respect of void licence.
  21. 20 Assessments for excise duty purposes.
  22. 21 Deemed supplies.
  23. 22 Changes of place of supply: transitional.
  24. 23 Bad debt relief.
  25. 24 Long leases in Scotland.
  26. 25 Charge and rates for 1998-99.
  27. 26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  28. 27 Married couple’s allowance etc. in and after 1999-00.
  29. 28 Charge and rates for financial year 1998.
  30. 29 Charge and rates for financial year 1999.
  31. 30 Corporation tax: due and payable date.
  32. 31 Abolition of advance corporation tax.
  33. 32 Unrelieved surplus advance corporation tax.
  34. 33 Relief for interest payable under the Tax Acts.
  35. 34 Charge to tax on interest payable under the Tax Acts.
  36. 35 Further provision about interest payable under the Tax Acts.
  37. 36 Arrangements with respect to payment of corporation tax.
  38. 37 Abolition of periodic accounting.
  39. 38 Taxation of rents and other receipts from land.
  40. 39 Land managed as one estate and maintenance funds for historic buildings.
  41. 40 Treatment of premiums as rent.
  42. 41 Tied premises: receipts and expenses treated as those of trade.
  43. 42 Computation of profits of trade, profession or vocation.
  44. 43 Barristers and advocates in early years of practice.
  45. 44 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  46. 45 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  47. 46 Minor and consequential provisions about computations.
  48. 47 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  49. 48 Gifts of money for relief in poor countries.
  50. 54 Amendments consequential on sections 50 to 53.
  51. 55 Construction workers supplied by agencies.
  52. 56 Transitional provisions in connection with section 55.
  53. 57 Sub-contractors in the construction industry.
  54. 58 Payments and other benefits in connection with termination of employment, etc.
  55. 59 Car fuel.
  56. 60 Reductions for road fuel gas cars.
  57. 61 Travelling expenses.
  58. 62 Provision preventing manipulation of profit periods.
  59. 70 Qualifying trades for EIS and VCTs.
  60. 71 Pre-arranged exits from EIS.
  61. 72 Qualifying holdings for VCTs after 2nd July 1997.
  62. 73 Other changes to requirements for VCTs.
  63. 74 Other changes to EIS etc.
  64. 75 Use of PEPs powers to provide for accounts.
  65. 76 Tax credits for accounts and for PEPs.
  66. 77 The insurance element etc.
  67. 78 Phasing out of TESSAs.
  68. 79 Relief for loan to acquire interest in a close company.
  69. 80 Relief for losses on unlisted shares in trading companies.
  70. 81 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  71. 82 Carry forward of non-trading deficit on loan relationships.
  72. 83 First-year allowances for investment in Northern Ireland.
  73. 84 First-year allowances for small businesses etc.
  74. 85 First-year allowances: consequential amendments etc.
  75. 86 Life policies etc.
  76. 87 Non-resident insurance companies: tax representatives.
  77. 88 Overseas life assurance business.
  78. 89 Personal portfolio bonds.
  79. 90 Distributions to friendly societies.
  80. 91 Provisional repayments in connection with pension business.
  81. 92 Approved retirement benefit schemes etc.
  82. 93 Benefits received under non-approved retirement benefits scheme.
  83. 94 Approval of personal pension schemes.
  84. 95 Personal pensions: charge on withdrawal of approval.
  85. 96 Information relating to personal pension schemes etc.
  86. 97 Notices to be given to scheme administrator.
  87. 98 Assessments on scheme administrators.
  88. 99 Extension of provisions relating to guaranteed returns.
  89. 100 Accrued income scheme.
  90. 101 Dealers in securities etc.
  91. 102 Manufactured dividends.
  92. 103 Restriction of relief on certain interest and dividends.
  93. 104 Adjustments of interest and dividends for spared tax etc.
  94. 105 Meaning of “financial expenditure".
  95. 106 Underlying tax reflecting interest or dividends.
  96. 107 Notification of foreign tax adjustment.
  97. 108 New regime for transfer pricing etc.
  98. 109
  99. 110 Determinations requiring the sanction of the Board.
  100. 111 Notice to potential claimants.
  101. 112 Exempt activities.
  102. 113 Miscellaneous amendments.
  103. 114 Postponed corporation tax.
  104. 115 Information powers where ownership changes.
  105. 116 Provisions supplemental to sections 114 and 115.
  106. 117 Company tax returns, assessments and related matters.
  107. 118 Claims for income tax purposes.
  108. 119 Evidential provisions in PAYE regulations.
  109. 120 Rate of CGT for trustees etc.
  110. 121 Taper relief for CGT.
  111. 122 Freezing of indexation allowance for CGT.
  112. 123 Abolition of pooling for CGT.
  113. 124 New identification rules for CGT.
  114. 125 Indexation and share pooling etc.
  115. 126 Capital gains on stock dividends.
  116. 127 Charge to CGT on temporary non-residents.
  117. 128 Disposal of interests in a settlement.
  118. 129 Attribution of gains to settlor in section 10A cases.
  119. 130 Charge on beneficiaries of settlements with non-resident settlors.
  120. 131 Charge on settlors of settlements for grandchildren.
  121. 132 Charge on settlors of pre-19th March 1991 settlements.
  122. 133 Transfer within group to investment trust.
  123. 134 Transfer of company’s assets to venture capital trust.
  124. 135 Transfer within group to venture capital trust.
  125. 136 Incorporated friendly societies.
  126. 137 Pre-entry gains.
  127. 138 Pre-entry losses.
  128. 139 De-grouping charges.
  129. 140 Phasing out of retirement relief.
  130. 141 Abolition of certain other CGT reliefs.
  131. 142 Property of historic interest etc.
  132. 143 Removal of exemption for gifts for public benefit.
  133. 144 Maintenance funds for historic buildings, etc.
  134. 145 Accounting for property accepted in satisfaction of tax.
  135. 146 Travel insurance: higher rate tax.
  136. 147 Taxable intermediaries.
  137. 148 Provisional collection of landfill tax.
  138. 149 Stamp duty on conveyance or transfer on sale.
  139. 150 Relief from double stamp duties etc.
  140. 151 Depositary receipts and clearance services: exchanges of shares.
  141. 152 Gas valuation.
  142. 153 Reduction and abolition of gas levy.
  143. 154 Repeal of Customs Duties (Dumping and Subsidies) Act 1969.
  144. 155 Code for fiscal stability.
  145. 156 Annual Budget documents.
  146. 157 Supplementary powers of the Comptroller and Auditor General.
  147. 158 Treasury’s position regarding their own securities.
  148. 159 Treasury bills.
  149. 160 National loans.
  150. 161 Non-FOTRA securities.
  151. 162 Accounting statements relating to National Savings.
  152. 163 Adoption of single currency by other member States.
  153. 164 Interpretation.
  154. 165 Repeals.
  155. 166 Short title.
  156. SCHEDULE 1 Rates of duty where pollution reduced
  157. SCHEDULE 2 Assessments for excise duty purposes
  158. SCHEDULE 3 Advance corporation tax
  159. SCHEDULE 4 Interest payable under the Tax Acts by or to companies
  160. SCHEDULE 5 Rent and other receipts from land
  161. SCHEDULE 6 Adjustment on change of accounting basis
  162. SCHEDULE 7 Removal of unnecessary references to gains
  163. SCHEDULE 12 EIS and VCTs: meaning of qualifying trade
  164. SCHEDULE 13 Changes to EIS etc
  165. SCHEDULE 14 Life policies, life annuities and capital redemption policies
  166. SCHEDULE 16 Transfer pricing etc: new regime
  167. SCHEDULE 17 Controlled foreign companies
  168. SCHEDULE 18 Company tax returns, assessments and related matters
  169. SCHEDULE 19 Company tax returns, etc.: minor and consequential amendments
  170. SCHEDULE 21 Amendments in connection with taper relief
  171. SCHEDULE 22 Transitional provision and consequential amendments for section 131
  172. SCHEDULE 23 Transitional provision in connection with section 132
  173. SCHEDULE 25 Property of historic interest etc
  174. SCHEDULE 26 National loans
  175. SCHEDULE 27 Repeals

Proposed changes to this act

No one has proposed a change to this act yet.

175 provisions

92 Approved retirement benefit schemes etc.

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93 Benefits received under non-approved retirement benefits scheme.

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94 Approval of personal pension schemes.

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95 Personal pensions: charge on withdrawal of approval.

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96 Information relating to personal pension schemes etc.

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97 Notices to be given to scheme administrator.

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98 Assessments on scheme administrators.

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) In section 9 of the Taxes Management Act 1970 (self-assessment), in subsection (1), for “subsection (2)" there shall be substituted “ subsections (1A) and (2) ”; and after that subsection there shall be inserted the following subsection— (1A) The tax to be assessed on a person by a self-assessment shall not include any tax which, under Chapter I or IV of Part XIV of the principal Act, is charged on the administrator of a scheme (within the meaning of section 658A of that Act) and is assessable by the Board in accordance with that section. (3) Subsection (2) above shall have effect for the year 1998-99 and subsequent years of assessment and shall be deemed to have had effect for the years 1996-97 and 1997-98.

Propose a change

99 Extension of provisions relating to guaranteed returns.

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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100 Accrued income scheme.

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101 Dealers in securities etc.

(1) Section 471 of the Taxes Act 1988 (exchange of securities in connection with conversion operations, nationalisation etc.) shall cease to have effect. (2) Section 472 of that Act (distribution of securities issued in connection with nationalisation etc.) shall cease to have effect. (3) Subsection (1) above applies in relation to exchanges made after the day on which this Act is passed. (4) Subsection (2) above applies in relation to issues of securities occurring after that day.

Propose a change

102 Manufactured dividends.

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) In section 737D of the Taxes Act 1988 (power by regulations to provide for manufactured payments to be eligible for relief) in subsection (2) (which defines manufactured payment as any manufactured dividend etc) the words “manufactured dividend" shall cease to have effect. (4) Schedule 23A to the Taxes Act 1988 (manufactured dividends and interest) shall be amended in accordance with subsections (5) to (8) below. (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6) In paragraph 2(3) (manufactured dividends to which paragraph 2(2) does not apply) paragraph (a) (duty to account for notional ACT) shall cease to have effect. (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8) In consequence of subsection (6) above, the following provisions shall also cease to have effect— (a) in paragraph 2, sub-paragraphs (4) and (5) and, in sub-paragraph (6), paragraph (b) and the word “and" immediately preceding it; and (b) in paragraph 2A (deductibility of manufactured payment in the case of the manufacturer) in sub-paragraph (1), the words “together with an amount equal to the notional ACT" and sub-paragraph (3). (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10) Subsections (2) to (8) above have effect in relation to manufactured dividends paid (or treated for the purposes of Schedule 23A to the Taxes Act 1988 as paid) on or after 6th April 1999.

Propose a change

103 Restriction of relief on certain interest and dividends.

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104 Adjustments of interest and dividends for spared tax etc.

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105 Meaning of “financial expenditure".

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106 Underlying tax reflecting interest or dividends.

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107 Notification of foreign tax adjustment.

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108 New regime for transfer pricing etc.

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) In the Finance Act 1996— (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (b) in paragraph 16 of Schedule 9 (imputed interest)— (i) in sub-paragraph (1), for the words from “sections 770" to “that Act" there shall be substituted “ Schedule 28AA to the Taxes Act 1988 (provision not at arm’s length) ”; and (ii) in sub-paragraph (2), for “Those sections" there shall be substituted “ That Schedule ”. (5) Subject to subsection (6) below, this section and Schedule 16 to this Act have effect (in relation to provision made or imposed at any time)— (a) for the purposes of corporation tax, as respects accounting periods ending on or after the day appointed under section 199 of the Finance Act 1994 for the purposes of Chapter III of Part IV of that Act (self-assessment management provisions); and (b) for the purposes of income tax, as respects any year of assessment ending on or after that day. (6) The Schedule 28AA to the Taxes Act 1988 that is inserted by subsection (2) above shall not, in the case of any potentially advantaged person, apply as respects the consequences at any time of the difference between the actual provision and the arm’s length provision if— (a) that time falls before 17th March 2001; (b) the actual provision is a provision made or imposed by means of contractual arrangements entered into by that person before 17th March 1998; (c) the requirements of paragraph 1(1)(b) of Schedule 28AA to that Act (control requirements) are satisfied in the case of the actual provision and that person by reference only to paragraph 4(2)(b) of that Schedule (joint ventures etc.); (d) the rights and obligations of that person by virtue of the actual provision are not ones that have been varied or continued in pursuance of any transaction entered into by that person in the period between 17th March 1998 and that time; and (e) that person is not a party, and has not been a party, to any transaction by virtue of which he could during that period have secured the variation or termination of those rights and obligations. (7) Expressions used in subsection (6) above and in Schedule 28AA to the Taxes Act 1988 have the same meanings in that subsection as in that Schedule.

Propose a change

109

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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110 Determinations requiring the sanction of the Board.

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111 Notice to potential claimants.

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112 Exempt activities.

(1) Part II of Schedule 25 to the Taxes Act 1988 (exempt activities) shall be amended as follows. (2) In paragraph 9 (activities which constitute investment business) for sub-paragraph (1A) (definition of “intellectual property") there shall be substituted— (1A) In sub-paragraph (1)(a) above “intellectual property” includes (in particular)— (a) any industrial, commercial or scientific information, knowledge or expertise; (b) any patent, trade mark, registered design, copyright or design right; (c) any licence or other right in respect of intellectual property; (d) any rights under the law of a country outside the United Kingdom which correspond or are similar to those falling within paragraph (b) or (c) above. (3) In paragraph 11(1) (activities which constitute wholesale, distributive or financial business) for paragraph (c) (banking or any similar business involving the receipt of deposits, loans or both and the making of loans or investments) there shall be substituted— (c) banking, deposit-taking, money-lending or debt-factoring, or any business similar to banking, deposit-taking, money-lending or debt-factoring; . (4) In consequence of subsection (3) above— (a) in paragraph 9(3), for “banking or any similar business" there shall be substituted “ business ”; (b) in paragraph 11(3), for “banking or other business" there shall be substituted “ business ”. (5) This section has effect in relation to accounting periods of a controlled foreign company, within the meaning of Chapter IV of Part XVII of the Taxes Act 1988, beginning on or after 17th March 1998.

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113 Miscellaneous amendments.

Schedule 17 to this Act (which makes provision in relation to controlled foreign companies) shall have effect.

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114 Postponed corporation tax.

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115 Information powers where ownership changes.

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116 Provisions supplemental to sections 114 and 115.

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117 Company tax returns, assessments and related matters.

(1) The provisions of Schedule 18 to this Act have effect in place of— (a) the provisions of Parts II and IV of the Taxes Management Act 1970 (returns, assessment and claims), so far as they relate to corporation tax, (b) certain related provisions of Part X of that Act (penalties) and (c) Schedule 17A to the Taxes Act 1988 (group relief: claims), and also make provision in relation to claims for allowances under the Capital Allowances Act (2) Schedule 18 to this Act, the Taxes Management Act 1970 and the Tax Acts shall be construed and have effect as if that Schedule were contained in that Act. (3) The enactments mentioned in Schedule 19 to this Act have effect with the amendments specified there, which are minor amendments and amendments consequential on Schedule 18. (4) Except as otherwise provided, the provisions of Schedules 18 and 19 to this Act have effect in relation to accounting periods ending on or after the self-assessment appointed day. (5) In this section “the self-assessment appointed day” means the day appointed by the Treasury under section 199 of the Finance Act 1994 for the purposes of Chapter III of Part IV of that Act (corporation tax self-assessment).

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118 Claims for income tax purposes.

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119 Evidential provisions in PAYE regulations.

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120 Rate of CGT for trustees etc.

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121 Taper relief for CGT.

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) Schedule 21 to this Act (which makes incidental and consequential provision in connection with the introduction of taper relief) shall have effect. (4) This section and those two Schedules have effect for the year 1998-99 and subsequent years of assessment.

Propose a change

122 Freezing of indexation allowance for CGT.

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) In section 13 of that Act (attribution of gains to non-resident companies), the following subsection shall be inserted after subsection (11)— (11A) For the purposes of this section the amount of the gain or loss accruing at any time to a company that is not resident in the United Kingdom shall be computed (where it is not the case) as if that company were within the charge to corporation tax on capital gains. (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6) Subject to subsection (7) below, the preceding provisions of this section have effect in relation to disposals on or after 6th April 1998. (7) This section does not affect the computation of the amount of so much of any gain as— (a) is treated for the purposes of the taxation of chargeable gains as having accrued on a disposal on or after 6th April 1998; but (b) is taken for those purposes to be equal to the whole or any part of a gain that— (i) would (but for any enactment relating to the taxation of chargeable gains) have accrued on an actual disposal made before that date, or (ii) would have accrued on a disposal assumed under any such enactment to have been made before that date.

Propose a change

123 Abolition of pooling for CGT.

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) In subsection (3) of that section (interpretation), for “ “a new holding” is" there shall be substituted “ “a section 104 holding” is ”. (4) For subsection (4) of that section there shall be substituted the following subsection— (4) For the purposes of this Chapter securities of a company which are held— (a) by a person who acquired them as an employee of the company or of any other person, and (b) on terms which for the time being restrict his right to dispose of them, shall (notwithstanding that they would otherwise fall to be treated as of the same class) be treated as of a different class from any securities acquired by him otherwise than as an employee of the company or of any other person and also from any shares that are not held subject to restrictions, or the same restrictions, on disposal or in the case of which the restrictions are no longer in force. (5) In the following enactments for the words “new holding", wherever they occur, there shall be substituted “ section 104 holding ”, namely— (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (b) in sections 104(6), 107 and 110 of the Taxation of Chargeable Gains Act 1992. (6) The preceding provisions of this section have effect in relation to any disposal on or after 6th April 1998 of any securities (whenever acquired). (7) The powers of the Treasury to make provision by regulations under one or more of— (a) section 333 of the Taxes Act 1988 (investment plan regulations), (a) section 151 of the Taxation of Chargeable Gains Act 1992 (capital gains tax and investment plans), and (c) Chapter 3 of Part 6 of the Income Tax (Trading and Other Income) Act 2005 (income from individual investment plans), shall include power to provide, to such extent as appears to them to be appropriate for purposes connected with the enactment of this section and section 124 below, for any provision contained in any such regulations to have effect retrospectively in relation to such times falling on or after 17th March 1998 as may be specified in the regulations.

Propose a change

124 New identification rules for CGT.

(1) After section 106 of the Taxation of Chargeable Gains Act 1992 there shall be inserted the following section— Identification of securities: general rules for capital gains tax. 106A (1) This section has effect for the purposes of capital gains tax (but not corporation tax) where any securities are disposed of by any person. (2) The securities disposed of shall be identified in accordance with the following provisions of this section with securities of the same class that have been acquired by the person making the disposal. (3) The provisions of this section have effect in the case of any disposal notwithstanding that some or all of the securities disposed of are otherwise identified— (a) by the disposal, or (b) by a transfer or delivery giving effect to it; but where a person disposes of securities in one capacity, they shall not be identified under those provisions with any securities which he holds, or can dispose of, only in some other capacity. (4) Securities disposed of on an earlier date shall be identified before securities disposed of on a later date; and, accordingly, securities disposed of by a later disposal shall not be identified with securities already identified as disposed of by an earlier disposal. (5) Subject to subsection (4) above, if within the period of thirty days after the disposal the person making it acquires securities of the same class, the securities disposed of shall be identified— (a) with securities acquired by him within that period, rather than with other securities; and (b) with securities acquired at an earlier time within that period, rather than with securities acquired at a later time within that period. (6) Subject to subsections (4) and (5) above, securities disposed of shall be identified with securities acquired at a later time, rather than with securities acquired at an earlier time. (7) Subsection (6) above shall not require securities to be identified with particular securities comprised in a section 104 holding or a 1982 holding. (8) Accordingly, that subsection shall have effect for determining whether, and to what extent, any securities should be identified with the whole or any part of a section 104 holding or a 1982 holding— (a) as if the time of the acquisition of a section 104 holding were the time when it first came into being; and (b) as if 31st March 1982 were the time of the acquisition of a 1982 holding. (9) The identification rules set out in the preceding provisions of this section have effect subject to subsection (1) of section 105, and securities disposed of shall not be identified with securities acquired after the disposal except in accordance with that section or subsection (5) above. (10) In this section— “1982 holding” has the same meaning as in section 109; “securities” means any securities within the meaning of section 104 or any relevant securities within the meaning of section 108. (11) For the purposes of this section securities of a company shall not be treated as being of the same class unless they are so treated by the practice of a recognised stock exchange, or would be so treated if dealt with on that recognised stock exchange. (2) In subsection (1) of section 105 of that Act (disposal and acquisition on the same day), for “The following provisions" there shall be substituted “ Paragraphs (a) and (b) below ”; and for subsection (2) of that section there shall be substituted the following subsection— (2) Where the quantity of securities disposed of by any person exceeds the aggregate quantity of— (a) the securities (if any) which are required by subsection (1) above to be identified with securities acquired on the day of the disposal, (b) the securities (if any) which are required by any of the provisions of section 106 or 106A(5) to be identified with securities acquired after the day of the disposal, and (c) the securities (if any) which are required by any of the provisions of sections 104, 106, 106A or 107, or of Schedule 2, to be identified with securities acquired before the day of the disposal, the disposal shall be treated as diminishing a quantity of securities subsequently acquired, and as so diminishing any quantity so acquired at an earlier date, rather than one so acquired at a later date. (3) In section 107 of that Act (general identification rules) for subsections (1) and (2) there shall be substituted the following subsections— (1) This section has effect for the purposes of corporation tax where any securities are disposed of by a company. (1A) The securities disposed of shall be identified in accordance with the following provisions of this section with securities of the same class that have been acquired by the company making the disposal and could be comprised in that disposal. (2) The provisions of this section have effect in the case of any disposal notwithstanding that some or all of the securities disposed of are otherwise identified— (a) by the disposal, or (b) by a transfer or delivery giving effect to it; but where a company disposes of securities in one capacity, they shall not be identified with securities which it holds, or can dispose of, only in some other capacity. (4) In section 108 of that Act (relevant securities), at the beginning there shall be inserted the following subsection— (A1) This section has effect for the purposes of corporation tax where any relevant securities are disposed of by a company. (5) In that section— (a) in subsections (2) and (7), for “person", in each place where it occurs, there shall be substituted “ company ”; and (b) in subsection (2), for “him" and “he" there shall be substituted, respectively, “ the company ” and “ it ”. (6) In each of section 151B(1) and (7) of that Act and paragraph 4(2) of Schedule 5C to that Act (disapplication of share pooling and identification rules in relation to shares in a VCT), for “107" there shall be substituted “ 106A ”. (7) Subject to subsection (8) below, the preceding provisions of this section have effect in relation to any disposal on or after 6th April 1998. (8) For the purposes of capital gains tax for the year 1997-98 (but not for the purposes of corporation tax), the following provisions have effect in relation to any disposal of securities made on or after 17th March 1998 and before 6th April 1998, that is to say— (a) the identification rule in subsection (5) of the section 106A of the Taxation of Chargeable Gains Act 1992 set out in subsection (1) above shall apply in accordance with subsections (3) and (4) of that section; (b) that rule shall have priority over any other rule, except the one in section 105(1) of that Act; and (c) section 104(1) of that Act shall not apply to any securities identified by virtue of this subsection with the securities disposed of. (9) In subsection (8) above “securities” means any securities within the meaning of section 104 of the Taxation of Chargeable Gains Act 1992 or any relevant securities within the meaning of section 108 of that Act.

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125 Indexation and share pooling etc.

(1) In subsection (1) of section 110 of the Taxation of Chargeable Gains Act 1992 (indexation allowance for section 104 holdings), for “This" there shall be substituted “ For the purposes of corporation tax this ”. (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) Subject to subsection (5) below, the preceding provisions of this section have effect in relation to disposals on or after 6th April 1998. (5) This section does not affect the computation of the amount of so much of any gain as— (a) is treated for the purposes of the taxation of chargeable gains as having accrued on a disposal on or after 6th April 1998; but (b) is taken for those purposes to be equal to the whole or any part of a gain that— (i) would (but for any enactment relating to the taxation of chargeable gains) have accrued on an actual disposal made before that date, or (ii) would have accrued on a disposal assumed under any such enactment to have been made before that date.

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126 Capital gains on stock dividends.

(1) For sections 141 and 142 of the Taxation of Chargeable Gains Act 1992 (stock dividends) there shall be substituted the following section— Capital gains on stock dividends. 142 (1) This section applies where any share capital to which section 249 of the Taxes Act applies is issued as mentioned in subsection (4), (5) or (6) of that section in respect of shares in the company held by any person. (2) The case shall not constitute a reorganisation of the company’s share capital for the purposes of sections 126 to 128. (3) The person who acquires the share capital by means of its issue shall (notwithstanding section 17(1)) be treated for the purposes of section 38(1)(a) as having acquired that asset for a consideration equal to the appropriate amount in cash (within the meaning of section 251(2) to (4) of the Taxes Act). (2) This section applies to any share capital issued on or after 6th April 1998.

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127 Charge to CGT on temporary non-residents.

(1) After section 10 of the Taxation of Chargeable Gains Act 1992 there shall be inserted the following section— Temporary non-residents. 10A (1) This section applies in the case of any individual (“the taxpayer") if— (a) he satisfies the residence requirements for any year of assessment (“the year of return"); (b) he did not satisfy those requirements for one or more years of assessment immediately preceding the year of return but there are years of assessment before that year for which he did satisfy those requirements; (c) there are fewer than five years of assessment falling between the year of departure and the year of return; and (d) four out of the seven years of assessment immediately preceding the year of departure are also years of assessment for each of which he satisfied those requirements. (2) Subject to the following provisions of this section and section 86A, the taxpayer shall be chargeable to capital gains tax as if— (a) all the chargeable gains and losses which (apart from this subsection) would have accrued to him in an intervening year, (b) all the chargeable gains which under section 13 or 86 would be treated as having accrued to him in an intervening year if he had been resident in the United Kingdom throughout that intervening year, and (c) any losses which by virtue of section 13(8) would have been allowable in his case in any intervening year if he had been resident in the United Kingdom throughout that intervening year, were gains or, as the case may be, losses accruing to the taxpayer in the year of return. (3) Subject to subsection (4) below, the gains and losses which by virtue of subsection (2) above are to be treated as accruing to the taxpayer in the year of return shall not include any gain or loss accruing on the disposal by the taxpayer of any asset if— (a) that asset was acquired by the taxpayer at a time in the year of departure or any intervening year when he was neither resident nor ordinarily resident in the United Kingdom; (b) that asset was so acquired otherwise than by means of a relevant disposal which by virtue of section 58, 73 or 258(4) is treated as having been a disposal on which neither a gain nor a loss accrued; (c) that asset is not an interest created by or arising under a settlement; and (d) the amount or value of the consideration for the acquisition of that asset by the taxpayer does not fall, by reference to any relevant disposal, to be treated as reduced under section 23(4)(b) or (5)(b), 152(1)(b), 162(3)(b) or 247(2)(b) or (3)(b). (4) Where— (a) any chargeable gain that has accrued or would have accrued on the disposal of any asset (“the first asset”) is a gain falling (apart from this section) to be treated by virtue of section 116(10) or (11), 134 or 154(2) or (4) as accruing on the disposal of the whole or any part of another asset, and (b) the other asset is an asset falling within paragraphs (a) to (d) of subsection (3) above but the first asset is not, subsection (3) above shall not exclude that gain from the gains which by virtue of subsection (2) above are to be treated as accruing to the taxpayer in the year of return. (5) The gains and losses which by virtue of subsection (2) above are to be treated as accruing to the taxpayer in the year of return shall not include any chargeable gain or allowable loss accruing to the taxpayer in an intervening year which, in the taxpayer’s case, has fallen to be brought into account for that year by virtue of section 10 or 16(3). (6) The reference in subsection (2)(c) above to losses allowable in an individual’s case in an intervening year is a reference to only so much of the aggregate of the losses that would have been available in accordance with subsection (8) of section 13 for reducing gains accruing by virtue of that section to that individual in that year as does not exceed the amount of the gains that would have accrued to him in that year if it had been a year throughout which he was resident in the United Kingdom. (7) Where this section applies in the case of any individual, nothing in any enactment imposing any limit on the time within which an assessment to capital gains tax may be made shall prevent any such assessment for the year of departure from being made in the taxpayer’s case at any time before the end of two years after the 31st January next following the year of return. (8) In this section— “intervening year” means any year of assessment which, in a case where the conditions in paragraphs (a) to (d) of subsection (1) above are satisfied, falls between the year of departure and the year of return; “relevant disposal”, means a disposal of an asset acquired by the person making the disposal at a time when that person was resident or ordinarily resident in the United Kingdom; and “the year of departure” means the last year of assessment before the year of return for which the taxpayer satisfied the residence requirements. (9) For the purposes of this section an individual satisfies the residence requirements for a year of assessment if that year of assessment is one during any part of which he is resident in the United Kingdom or during which he is ordinarily resident in the United Kingdom. (10) This section is without prejudice to any right to claim relief in accordance with any double taxation relief arrangements. (2) In section 9(3) of that Act (exclusion from charge of persons temporarily resident), for “section 10(1)" there shall be substituted “ sections 10(1) and 10A ”. (3) In section 96 of that Act (payments by and to companies), after subsection (9) there shall be inserted the following subsections— (9A) For the purposes of this section an individual shall be deemed to have been resident in the United Kingdom at any time in any year of assessment which in his case is an intervening year for the purposes of section 10A. (9B) If— (a) it appears after the end of any year of assessment that any individual is to be treated by virtue of subsection (9A) above as having been resident in the United Kingdom at any time in that year, and (b) as a consequence, any adjustments fall to be made to the amounts of tax taken to have been chargeable by virtue of this section on any person, nothing in any enactment limiting the time for the making of any claim or assessment shall prevent the making of those adjustments (whether by means of an assessment, an amendment of an assessment, a repayment of tax or otherwise). (4) This section has effect— (a) in any case in which the year of departure is the year 1998-99 or a subsequent year of assessment; and (b) in any case in which the year of departure is the year 1997-98 and the taxpayer was resident or ordinarily resident in the United Kingdom at a time in that year on or after 17th March 1998.

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128 Disposal of interests in a settlement.

(1) In section 76 of the Taxation of Chargeable Gains Act 1992 (disposal of interests in settled property)— (a) in subsection (1), at the beginning there shall be inserted “Subject to subsection (1A) below"; (b) after that subsection there shall be inserted the subsections set out in subsection (2) below; and (c) after subsection (2) there shall be inserted the subsection set out in subsection (3) below. (2) The subsections inserted after subsection (1) are as follows— (1A) Subject to subsection (3) below, subsection (1) above does not apply if— (a) the settlement falls within subsection (1B) below; or (b) the property comprised in the settlement is or includes property deriving directly or indirectly from a settlement falling within that subsection. (1B) A settlement falls within this subsection if there has been a time when the trustees of that settlement— (a) were not resident or ordinarily resident in the United Kingdom; or (b) fell to be regarded for the purposes of any double taxation relief arrangements as resident in a territory outside the United Kingdom. (3) The subsection inserted after subsection (2) is as follows— (3) Subsection (1A) above shall not prevent subsection (1) above from applying where the disposal in question is a disposal in consideration of obtaining settled property that is treated as made under subsection (2) above. (4) This section has effect in relation to any disposal on or after 6th March 1998.

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129 Attribution of gains to settlor in section 10A cases.

(1) After section 86 of the Taxation of Chargeable Gains Act 1992 there shall be inserted the following section— Attribution of gains to settlor in section 10A cases. 86A (1) Subsection (2) below applies in the case of a person who is a settlor in relation to any settlement (“the relevant settlement") where— (a) by virtue of section 10A, amounts falling within section 86(1)(e) for any intervening year or years would (apart from this section) be treated as accruing to the settlor in the year of return; and (b) there is an excess of the relevant chargeable amounts for the non-residence period over the amount of the section 87 pool at the end of the year of departure. (2) Only so much (if any) of— (a) the amount falling within section 86(1)(e) for the intervening year, or (b) if there is more than one intervening year, the aggregate of the amounts falling within section 86(1)(e) for those years, as exceeds the amount of the excess mentioned in subsection (1)(b) above shall fall in accordance with section 10A to be attributed to the settlor for the year of return. (3) In subsection (1) above, the reference to the relevant chargeable amounts for the non-residence period is (subject to subsection (5) below) a reference to the aggregate of the amounts on which beneficiaries of the relevant settlement are charged to tax under section 87 or 89(2) for the intervening year or years in respect of any capital payments received by them. (4) In subsection (1) above, the reference to the section 87 pool at the end of the year of departure is (subject to subsection (5) below) a reference to the amount (if any) which, in accordance with subsection (2) of that section, fell in relation to the relevant settlement to be carried forward from the year of departure to be included in the amount of the trust gains for the year of assessment immediately following the year of departure. (5) Where the property comprised in the relevant settlement has at any time included property not originating from the settlor, only so much (if any) of any capital payment or amount carried forward in accordance with section 87(2) as, on a just and reasonable apportionment, is properly referable to property originating from the settlor shall be taken into account for the purposes of subsections (3) and (4) above. (6) Where any reduction falls to be made by virtue of subsection (2) above in any amount to be attributed in accordance with section 10A to any settlor for any year of assessment, the reduction to be treated as made for that year in accordance with section 87(3) in the case of the settlement in question shall not be made until— (a) the reduction (if any) falling to be made by virtue of that subsection has been made in the case of every settlor to whom any amount is so attributed; and (b) effect has been given to any reduction required to be made under subsection (7) below. (7) Where in the case of any settlement there is (after the making of any reduction or reductions in accordance with subsection (2) above) any amount or amounts falling in accordance with section 10A to be attributed for any year of assessment to settlors of the settlement, the amount or (as the case may be) aggregate amount falling in accordance with that section to be so attributed shall be applied in reducing the amount carried forward to that year in accordance with section 87(2). (8) Where an amount or aggregate amount has been applied, in accordance with subsection (7) above, in reducing the amount which in the case of any settlement is carried forward to any year in accordance with section 87(2), that amount (or, as the case may be, so much of it as does not exceed the amount which it is applied in reducing) shall be deducted from the amount used for that year for making the reduction under section 87(3) in the case of that settlement. (9) Expressions used in this section and section 10A have the same meanings in this section as in that section; and paragraph 8 of Schedule 5 shall apply for the construction of the references in subsection (5) above to property originating from the settlor as it applies for the purposes of that Schedule. (2) In section 97(1) to (5), (7) and (8) of that Act (interpretation of sections 87 to 96), for the words “sections 87", wherever occurring, there shall be substituted “ sections 86A ”. (3) This section has effect where the year of departure is the year 1997-98 or any subsequent year of assessment.

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130 Charge on beneficiaries of settlements with non-resident settlors.

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) In subsection (1) of section 88 of that Act (charge on beneficiaries of a settlement treated as resident outside the United Kingdom if the settlor is or has been domiciled and resident in the United Kingdom)— (a) the word “and” shall be inserted at the end of paragraph (a); and (b) paragraph (c) and the word “and" immediately preceding it shall be omitted. (3) Subject to subsection (4) below, the preceding provisions of this section apply for the year 1998-99 and subsequent years of assessment and shall be deemed to have applied for the year 1997-98. (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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131 Charge on settlors of settlements for grandchildren.

(1) In paragraph 2 of Schedule 5 to the Taxation of Chargeable Gains Act 1992 (test whether settlor has interest)— (a) after sub-paragraph (3)(d) there shall be inserted the following paragraphs— (da) any grandchild of the settlor or of the settlor’s spouse; (db) the spouse of any such grandchild; (b) in sub-paragraph (3)(e), for “(d)" there shall be substituted “ (db) ”. (2) For sub-paragraph (7) of that paragraph, there shall be substituted the following sub-paragraph— (7) In this paragraph— “child” includes a stepchild; and “grandchild” means a child of a child. (3) Schedule 22 to this Act (which makes transitional provision and consequential amendments in connection with the provisions of this section) shall have effect. (4) The preceding provisions of this section and Schedule 22 to this Act apply for the year 1998-99 and subsequent years of assessment and shall be deemed to have applied for the year 1997-98.

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