Office of Public Sector Information
PART II continued CHAPTER I continued
(1) For the purposes of section 203 and regulations under it a payment of, or on account of, any income assessable to income tax under Schedule E shall be treated as made at the time found in accordance with the following rules (taking the earlier or earliest time in a case where more than one rule applies)—
(a) the time when the payment is actually made;
(b) the time when a person becomes entitled to the payment;
(c) in a case where the income is income from an office or employment with a company, the holder of the office or employment is a director of the company and sums on account of the income are credited in the company’s accounts or records, the time when sums on account of the income are so credited;
(d) in a case where the income is income from an office or employment with a company, the holder of the office or employment is a director of the company and the amount of the income for a period is determined before the period ends, the time when the period ends;
(e) in a case where the income is income from an office or employment with a company, the holder of the office or employment is a director of the company and the amount of the income for a period is not known until the amount is determined after the period has ended, the time when the amount is determined.
(2) Subsection (1)(c), (d) or (e) above applies whether or not the office or employment concerned is that of director.
(3) Paragraph (c), (d) or (e) of subsection (1) above applies if the holder of the office or employment is a director of the company at any time in the year of assessment in which the time mentioned in the paragraph concerned falls.
(4) For the purposes of the rule in subsection (1)(c) above, any fetter on the right to draw the sums is to be disregarded.
(5) Subsections (5) and (6) of section 202B shall apply for the purposes of subsection (1) above as they apply for the purposes of section 202B(1).”
(3) Section 203(4) (regulations may define payment) shall cease to have effect.
(4) Subsection (2) above shall have effect to determine whether anything occurring on or after the day on which this Act is passed constitutes a payment for the purposes mentioned in the new section 203A.
(5) But if an event occurring before the day on which this Act is passed constituted a payment of or on account of income for the purposes mentioned in the new section 203A, nothing occurring on or after that day shall constitute a payment of or on account of the same income for those purposes.
For the year 1989-90 the qualifying maximum defined in section 367(5) of the Taxes Act 1988 (limit on relief for interest on certain loans) shall be £30,000.
In section 360 of the Taxes Act 1988 (loans to buy interest in close company), after subsection (3) there shall be inserted—
“(3A) Interest shall not be eligible for relief under section 353 by virtue of paragraph (a) of subsection (1) above in respect of shares acquired on or after 14th March 1989 if at any time the person by whom they are acquired, or that person’s husband or wife, makes a claim for relief in respect of them under Chapter III of Part VII.”
(1) In section 360 of the Taxes Act 1988 for subsection (4) there shall be substituted—
“(4) Subject to section 360A, in this section expressions to which a meaning is assigned by Part XI have that meaning.”
(2) The following section shall be inserted after that section—
(1) For the purposes of section 360(2)(a) an individual shall be treated as having a material interest in a company—
(a) if he, either on his own or with one or more of his associates, or if any associate of his with or without other such associates, is the beneficial owner of, or able (directly or through the medium of other companies or by any other indirect means) to control, more than 5 per cent. of the ordinary share capital of the company, or
(b) if, on an amount equal to the whole distributable income of the company falling to be apportioned under Part XI for the purpose of computing total income, more than 5 per cent. of that amount could be apportioned to him together with his associates (if any), or to any associate of his, or any such associates taken together.
(2) Subject to the following provisions of this section, in subsection (1) above “associate”, in relation to an individual, means—
(a) any relative or partner of the individual;
(b) the trustee or trustees of a settlement in relation to which the individual is, or any relative of his (living or dead) is or was, a settlor (“settlement” and “settlor” having the same meaning as in section 681(4)); and
(c) where the individual is interested in any shares or obligations of the company which are subject to any trust, or are part of the estate of a deceased person, the trustee or trustees of the settlement concerned or, as the case may be, the personal representative of the deceased.
(3) In relation to any loan made after 5th April 1987, there shall be disregarded for the purposes of subsection (2)(c) above—
(a) the interest of the trustees of an approved profit sharing scheme (within the meaning of section 187) in any shares which are held by them in accordance with the scheme and have not yet been appropriated to an individual; and
(b) any rights exercisable by those trustees by virtue of that interest.
(4) In relation to any loan made on or after the day on which the Finance Act 1989 was passed, where the individual has an interest in shares or obligations of the company as a beneficiary of an employee benefit trust, the trustees shall not be regarded as associates of his by reason only of that interest unless subsection (6) below applies in relation to him.
(5) In subsection (4) above “employee benefit trust” has the same meaning as in paragraph 7 of Schedule 8, except that in its application for this purpose paragraph 7(5)(b) shall have effect as if it referred to the day on which the Finance Act 1989 was passed instead of to 14th March 1989.
(6) This subsection applies in relation to an individual if at any time on or after the day on which the Finance Act 1989 was passed—
(a) the individual, either on his own or with any one or more of his associates, or
(b) any associate of his, with or without other such associates,
has been the beneficial owner of, or able (directly or through the medium of other companies or by any other indirect means) to control, more than 5 per cent. of the ordinary share capital of the company.
(7) Sub-paragraphs (9) to (12) of paragraph 7 of Schedule 8 shall apply for the purposes of subsection (6) above in relation to an individual as they apply for the purposes of that paragraph in relation to an employee.
(8) In relation to any loan made before 14th November 1986, where the individual is interested in any shares or obligations of the company which are subject to any trust, or are part of the estate of a deceased person, subsection (2)(c) above shall have effect as if for the reference to the trustee or trustees of the settlement concerned or, as the case may be, the personal representative of the deceased there were substituted a reference to any person (other than the individual) interested in the settlemet or estate, but subject to subsection (9) below.
(9) Subsection (8) above shall not apply so as to make an individual an associate as being entitled or eligible to benefit under a trust—
(a) if the trust relates exclusively to an exempt approved scheme as defined in section 592; or
(b) if the trust is exclusively for the benefit of the employees, or the employees and directors, of the company or their dependants (and not wholly or mainly for the benefit of directors or their relatives), and the individual in question is not (and could not as a result of the operation of the trust become), either on his own or with his relatives, the beneficial owner of more than 5 per cent. of the ordinary share capital of the company;
and in applying paragraph (b) above any charitable trusts which may arise on the failure or determination of other trusts shall be disregarded.
(10) In this section “relative” means husband or wife, parent or remoter forebear, child or remoter issue or brother or sister.”
(1) In Schedule 6 to the Taxes Act 1988 (taxation of directors and others in respect of cars) for Part I (tables of flat rate cash equivalents) there shall be substituted—
| Cylinder capacity of car in cubic centimetres | Age of car at end of relevant year of assessment | |
|---|---|---|
| Under 4 years | 4 years or more | |
| 1400 or less | £1,400 | £950 |
| More than 1400 but not more than 2000 | £1,850 | £1,250 |
| More than 2000 | £2,950 | £1,950 |
| Original market value of car | Age of car at end of relevant year of assessment | |
|---|---|---|
| Under 4 years | 4 years or more | |
| Less than £6,000 | £1,400 | £950 |
| £6,000 or more but less than £8,500 | £1,850 | £1,250 |
| £8,500 or more but not more than £19,250 | £2,950 | £1,950 |
| Original market value of car | Age of car at end of relevant year of assessment | |
|---|---|---|
| Under 4 years | 4 years or more | |
| More than £19,250 but not more than £29,000 | £3,850 | £2,600 |
| More than £29,000 | £6,150 | £4,100 |
(2) This section shall have effect for the year 1989-90 and subsequent years of assessment.
(1) For the purposes of this section a security asset is an asset which improves personal security, and a security service is a service which improves personal security.
(2) In a case where—
(a) a security asset or security service is provided for an employee by reason of his employment, or is used by an employee, and
(b) the cost is wholly or partly borne by or on behalf of a person (the provider) other than the employee,
in charging tax under Schedule E on the emoluments from the employment a deduction shall be allowed of an amount equal to so much of the cost so borne as falls to be included in the emoluments of the employment.
(3) In a case where—
(a) a security asset or security service is provided for or used by an employee,
(b) expenses in connection with the provision or use are incurred out of the emoluments of the employment, and
(c) the expenses are reimbursed by or on behalf of a person (the provider) other than the employee,
in charging tax under Schedule E on the emoluments from the employment a deduction shall be allowed of an amount equal to the amount of the expenses.
(4) Subsection (2) or (3) above shall not apply unless the asset or service is provided for or used by the employee to meet a threat which—
(a) is a special threat to his personal physical security, and
(b) arises wholly or mainly by virtue of the particular employment concerned.
(5) Subsection (2) or (3) above shall not apply unless the provider has the meeting of that threat as his sole object in wholly or partly bearing the cost or reimbursing the expenses (as the case may be).
(6) Subsection (2) or (3) above shall not apply in the case of a service unless the benefit resulting to the employee consists wholly or mainly of an improvement of his personal physical security.
(7) Subsection (2) or (3) above shall not apply in the case of an asset unless the provider intends the asset to be used solely to improve personal physical security.
(1) In a case where—
(a) apart from section 50(7) above, section 50(2) above would apply in the case of an asset, and
(b) the provider intends the asset to be used partly to improve personal physical security,
section 50(2) shall nevertheless apply, but only so as to allow a deduction of the appropriate proportion of the amount there mentioned.
(2) For the purposes of subsection (1) above the appropriate proportion of the amount mentioned in section 50(2) above is such proportion of that amount as is attributable to the provider’s intention that the asset be used to improve personal physical security.
(3) In a case where—
(a) apart from section 50(7) above, section 50(3) above would apply in the case of an asset, and
(b) the provider intends the asset to be used partly to improve personal physical security,
section 50(3) shall nevertheless apply, but only so as to allow a deduction of the appropriate proportion of the amount there mentioned.
(4) For the purposes of subsection (3) above the appropriate proportion of the amount mentioned in section 50(3) above is such proportion of that amount as is attributable to the provider’s intention that the asset be used to improve personal physical security.
(1) If the provider intends the asset to be used solely to improve personal physical security, but there is another use for the asset which is incidental to improving personal physical security, that other use shall be ignored in construing section 50(7) above.
(2) The fact that an asset or service improves the personal physical security of any member of the employee’s family or household, as well as that of the employee, shall not prevent section 50(2) or (3) above from applying.
(3) In sections 50 and 51 above and this section—
(a) references to an asset do not include references to a car, a ship or an aircraft,
(b) references to an asset or service do not include references to a dwelling, grounds appurtenant to a dwelling, or living accommodation,
(c) references to an asset include references to equipment and a structure (such as a wall),
(d) references to an employee are to a person who holds an employment, and
(e) references to an employment include references to an office.
(4) For the purposes of sections 50 and 51 above and this section in their application to an asset, it is immaterial whether or not the asset becomes affixed to land (whether constituting a dwelling or otherwise).
(5) For the purposes of sections 50 and 51 above and this section in their application to an asset, it is immaterial whether or not the employee is or becomes entitled to the property in the asset or (in the case of a fixture) an estate or interest in the land concerned.
(6) Sections 50 and 51 above and this section apply where expenditure is incurred on or after 6th April 1989 in or towards bearing a cost or in reimbursing expenses (as the case may be).
(1) For section 167 of the Taxes Act 1988 (which defines “director’s or higher-paid employment” for the purposes of Chapter II of Part V) there shall be substituted—
(1) This Chapter applies—
(a) to employment as a director of a company (but subject to subsection (5) below), and
(b) to employment with emoluments at the rate of £8,500 a year or more.
(2) For this purpose emoluments are to be calculated—
(a) on the basis that they include all such amounts as come, or would but for section 157(3) come, into charge under this Chapter or section 141, 142, 143 or 145, and
(b) without any deduction under section 198, 201 or 332(3).
(3) Where a person is employed in two or more employments by the same employer and either—
(a) the total of the emoluments of those employments (applying this section) is at the rate of £8,500 a year or more, or
(b) this Chapter applies (apart from this subsection) to one or more of those employments,
this Chapter shall apply to all the employments.
(4) All employees of a partnership or body over which an individual or another partnership or body has control are to be treated for the purposes of this section (but not for any other purpose) as if the employment were an employment by the individual or by that other partnership or body as the case may be.
(5) This Chapter shall not apply to a person’s employment by reason only of its being employment as a director of a company (without prejudice to its application by virtue of subsection (1)(b) or (3) above) if he has no material interest in the company and either—
(a) his employment is as a full-time working director; or
(b) the company is non-profit making (meaning that neither does it carry on a trade nor do its functions consist wholly or mainly in the holding of investments or other property) or is established for charitable purposes only.”
(2) In consequence of subsection (1) above—
(a) for the heading to Chapter II of Part V of the Taxes Act 1988 there shall be substituted “EMPLOYEES EARNING £8,500 OR MORE AND DIRECTORS”;
(b) the words “employment to which this Chapter applies” shall be substituted for the words “director’s or higher-paid employment” in sections 153(1), 154(1), 157(1), 158(1), 160(1) and (2), 162(1), 163(1) and 165(6)(b) of that Act;
(c) for section 160(3) of that Act there shall be substituted—
“(3) Where—
(a) there was outstanding, at any time when a person was in employment to which this Chapter applies, the whole or part of a loan to him (or a relative of his) the benefit of which was obtained by reason of his employment, and
(b) that employment has terminated or ceased to be employment to which this Chapter applies,
subsection (2) above applies as if the employment had not terminated or, as the case may be, had not ceased to be employment to which this Chapter applies.”;
(d) in section 162(5) of that Act, after the words “section 160(2)” there shall be inserted the words “(and where appropriate section 160(3))”;
(e) for section 162(7) of that Act there shall be substituted—
“(7) If at the time of the event giving rise to a charge by virtue of subsection (6) above the employment in question has terminated, that subsection shall apply as if it had not.”
(f) the words “employment to which Chapter II of Part V applies” shall be substituted for the words from “director's” to “section 167)” in sections 332(2)(c) and 418(3)(a) of that Act;
(g) the words “employment to which Chapter II of Part V of the principal Act applies” shall be substituted for the words “director’s or higher paid employment” in section 15(3)(a) of the [1970 c. 9.] Taxes Management Act 1970.
(1) This section applies where—
(a) on or after 6th April 1990 an individual makes a payment in respect of a premium under a contract of private medical insurance (whenever issued),
(b) the contract meets the requirement in subsection (2) below as to the person or persons insured,
(c) at the time the payment is made the contract is an eligible contract,
(d) the individual making the payment does not make it out of resources provided by another person for the purpose of enabling it to be made, and
(e) the individual making the payment is not entitled to claim any relief or deduction in respect of it under any other provision of the Tax Acts.
(2) The requirement mentioned in subsection (1)(b) above is that the contract insures—
(a) an individual who at the time the payment is made is aged 60 or over and resident in the United Kingdom,
(b) individuals each of whom at that time is aged 60 or over and resident in the United Kingdom, or
(c) two individuals who are married to each other at that time, at least one of whom is aged 60 or over at that time, and each of whom is resident in the United Kingdom at that time.
(3) If the payment is made by an individual who at the time it is made is resident in the United Kingdom (whether or not he is the individual or one of the individuals insured by the contract) it shall be deducted from or set off against his income for the year of assessment in which it is made; but relief under this subsection shall be given only on a claim made for the purpose, except where subsections (4) to (6) below apply.
(4) In such cases and subject to such conditions as the Board may specify in regulations, relief under subsection (3) above shall be given in accordance with subsections (5) and (6) below.
(5) An individual who is entitled to such relief in respect of a payment may deduct and retain out of it an amount equal to income tax on it at the basic rate for the year of assessment in which it is made.
(6) The person to whom the payment is made—
(a) shall accept the amount paid after deduction in discharge of the individual’s liability to the same extent as if the deduction had not been made, and
(b) may, on making a claim, recover from the Board an amount equal to the amount deducted.
(7) The Treasury may make regulations providing that in circumstances prescribed in the regulations—
(a) an individual who has made a payment in respect of a premium under a contract of private medical insurance shall cease to be and be treated as not having been entitled to relief under subsection (3) above; and
(b) he or the person to whom the payment was made (depending on the terms of the regulations) shall account to the Board for tax from which relief has been given on the basis that the individual was so entitled.
(8) Regulations under subsection (7) above may include provision adapting or modifying the effect of any enactment relating to income tax in order to secure the performance of any obligation imposed under paragraph (b) of that subsection.
(9) In this section—
(a) references to a premium, in relation to a contract of insurance, are to any amount payable under the contract to the insurer, and
(b) references to an individual who is resident in the United Kingdom at any time include references to an individual who is at that time performing duties which are treated by virtue of section 132(4)(a) of the Taxes Act 1988 as performed in the United Kingdom.
(1) This section has effect to determine whether a contract is at a particular time (the relevant time) an eligible contract for the purposes of section 54 above.
(2) A contract is an eligible contract at the relevant time if—
(a) it was entered into by an insurer who at the time it was entered into was a qualifying insurer and was approved by the Board for the purposes of this section,
(b) the period of insurance under the contract does not exceed one year (commencing with the date it was entered into),
(c) the contract is not connected with any other contract at the relevant time and has not been connected with any other contract at any time since it was entered into,
(d) no benefit has been provided by virtue of the contract other than an approved benefit, and
(e) the contract meets one or more of the three conditions set out below.
(3) The first condition is that the contract is certified by the Board under section 56 below at the relevant time.
(4) The second condition is that, at the time the contract was entered into, it conformed with a standard form certified by the Board as a standard form of eligible contract.
(5) The third condition is that, at the time the contract was entered into, it conformed with a form varying from a standard form so certified in no other respect than by making additions—
(a) which were (at the time the contract was entered into) certified by the Board as compatible with an eligible contract when made to that standard form, and
(b) which (at that time) satisfied any conditions subject to which the additions were so certified.
(6) Where a contract is varied, and the relevant time falls after the time the variation takes effect, subsections (1) to (5) above shall have effect as if “entered into” read “varied” in each place where it occurs in subsections (4) and (5) above.
(7) For the purposes of this section a contract is connected with another contract at any time if—
(a) they are simultaneously in force at that time,
(b) either of them was entered into with reference to the other, or with a view to enabling the other to be entered into on particular terms, or with a view to facilitating the other being entered into on particular terms, and
(c) the terms on which either of them was entered into would have been significantly less favourable to the insured if the other had not been entered into.
(8) For the purposes of this section each of the following is a qualifying insurer—
(a) an insurer lawfully carrying on in the United Kingdom business of any of the classes specified in Part I of Schedule 2 to the [1982 c. 50.] Insurance Companies Act 1982;
(b) an insurer not carrying on business in the United Kingdom but carrying on business in another member State and being either a national of a member State or a company or partnership formed under the law of any part of the United Kingdom or another member State and having its registered office, central administration or principal place of business in a member State.
(9) For the purposes of this section a benefit is an approved benefit if it is provided in pursuance of a right of a description mentioned in section 56(3)(a) below.
(1) The Board shall certify a contract under this section if it satisfies the conditions set out in subsection (3) below; and the certification shall be expressed to take effect from the time the conditions are satisfied, and shall take effect accordingly.
(2) The Board shall revoke a certification of a contract under this section if it comes to their notice that the contract has ceased to satisfy the conditions set out in subsection (3) below; and the revocation shall be expressed to take effect from the time the conditions ceased to be satisfied, and shall take effect accordingly.
(3) The conditions referred to above are that—
(a) the contract either provides indemnity in respect of all or any of the costs of all or any of the treatments, medical services and other matters for the time being specified in regulations made by the Treasury, or in addition to providing indemnity of that description provides cash benefits falling within rules for the time being so specified,
(b) the contract does not confer any right other than such a right as is mentioned in paragraph (a) above or is for the time being specified in regulations made by the Treasury,
(c) the premium under the contract is in the Board’s opinion reasonable, and
(d) the contract satisfies such other requirements as are for the time being specified in regulations made by the Treasury.
(4) The certification of a contract by the Board under this section shall cease to have effect if the contract is varied; but this is without prejudice to the application of the preceding provisions of this section to the contract as varied.
(5) Where the Board refuse to certify a contract under this section, or they revoke a certification, an appeal may be made to the Special Commissioners by—
(a) the insurer, or
(b) any person who (if the policy were certified) would be entitled to relief under section 54 above.
(6) Where a contract is certified under this section, or a certification is revoked or otherwise ceases to have effect, any adjustments resulting from the certification or from its revocation or ceasing to have effect shall be made.
(7) Subsection (6) above applies where a certification or revocation takes place on appeal as it applies in the case of any other certification or revocation.
(8) In this section the reference to a premium, in relation to a contract of insurance, is to any amount payable under the contract to the insurer.
(1) The Board may by regulations—
(a) provide that a claim under section 54(3) or (6)(b) above shall be made in such form and manner, shall be made at such time, and shall be accompanied by such documents, as may be prescribed;
(b) make provision, in relation to payments in respect of which a person is entitled to relief under section 54 above, for the giving by insurers in such circumstances as may be prescribed of certificates of payment in such form as may be prescribed to such persons as may be prescribed;
(c) provide that a person who provides (or has at any time provided) insurance under contracts of private medical insurance shall comply with any notice which is served on him by the Board and which requires him within a prescribed period to make available for the Board’s inspection documents (of a prescribed kind) relating to such contracts;
(d) provide that persons of such a description as may be prescribed shall, within a prescribed period of being required to do so by the Board, furnish to the Board information (of a prescribed kind) about contracts of private medical insurance;
(e) make provision with respect to the approval of insurers for the purposes of section 55 above and the withdrawal of approval for the purposes of that section;
(f) make provision for and with respect to appeals against decisions of the Board with respect to the giving or withdrawal of approval of insurers for the purposes of section 55 above;
(g) make provision with respect to the certification by the Board of standard forms of eligible contract and variations from standard forms of eligible contract certified by them;
(h) make provision for and with respect to appeals against decisions of the Board with respect to the certification of standard forms of eligible contract or variations from standard forms of eligible contract certified by them;
(i) provide that certification, or the revocation of a certification, under section 56 above shall be carried out in such form and manner as may be prescribed;
(j) make provision with respect to appeals against decisions of the Board with respect to certification or the revocation of certification under section 56 above;
(k) make provision generally as to administration in connection with sections 54 to 56 above.
Finance Act 1989