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Finance Bill
Schedule 29 — Transfers of value: attribution of gains to beneficiaries

    360

 

Schedule 29

Section 163(2)

 

Transfers of value: attribution of gains to beneficiaries

Introduction

  1        Schedule 4C to the Taxation of Chargeable Gains Act 1992 (c. 12) (transfers

of value: attribution of gains to beneficiaries) is amended as follows.

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Scope and scheme of Schedule

  2        For paragraphs 1 and 2 (introduction and general scheme of Schedule)

substitute—

“Introduction

          1                 (1)                  This Schedule applies where the trustees of a settlement (“the

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transferor settlement”) make a transfer of value to which Schedule

4B applies (“the original transfer”).

                           (2)                                    Where this Schedule applies, the following gains—

                      (a)                     any Schedule 4B trust gains accruing by virtue of the

transfer (see paragraphs 3 to 7), and

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                      (b)                     any outstanding section 87/89 gains of the transferor

settlement at the end of the year of assessment in which the

transfer is made (see paragraph 7A),

                                             are pooled for the purpose of attributing them, in accordance with

this Schedule, to beneficiaries who receive capital payments.

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                                             Paragraph 7B provides for further gains to be brought into the

pool in the case of a further transfer of value.

                           (3)                   The gains mentioned in sub-paragraph (2) are referred to in this

Schedule as “Schedule 4C gains” and the pool is referred to as the

transferor settlement’s “Schedule 4C pool”.

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                           (4)                  Paragraphs 8 to 9 provide for the attribution of gains in a

settlement’s Schedule 4C pool.

                           (5)                  References in this Schedule to a transfer to which Schedule 4B

applies include any such transfer, whether or not any chargeable

gain or allowable loss accrues under that Schedule by virtue of the

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transfer.

Other gains to be brought into Schedule 4C pool

  3        After paragraph 7 insert—

“Outstanding section 87/89 gains

          7A                 (1)                  The amount of outstanding section 87/89 gains of a settlement at

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the end of a year of assessment is given by—equation: plus[char[G],minus[char[B]],times[char[N],char[C]]]

                                             where—

 

 

Finance Bill
Schedule 29 — Transfers of value: attribution of gains to beneficiaries

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                       G is the amount of the settlement’s section 87/89 gains for

the year (see sub-paragraph (2)),

                       B is the amount of the gains treated in accordance with

section 87(4) or 89(2) as accruing in that year to

beneficiaries, and

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                       NC is the amount of gains so treated as accruing in that year

to beneficiaries who were not chargeable to tax for that

year.

                           (2)                  The amount of a settlement’s section 87/89 gains for a year of

assessment is—

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                      (a)                     if section 87 applies to the settlement for the year—

                             (i)                            the amount of the settlement’s trust gains within

the meaning of section 87(2), together with

                             (ii)                           any amount by which that amount falls to be

increased under section 90(1)(a), or would fall to be

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increased but for section 90(2) or (3);

                      (b)                     if section 89(2) applies to the settlement for the year

(otherwise than by virtue of section 90(1)(c))—

                             (i)                            the amount of the trust gains referred to in section

89(2), together with

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                             (ii)                           any amount by which that amount falls to be

increased under section 90(1)(b), or would fall to be

increased but for section 90(2) or (3);

                      (c)                     if section 90(1)(c) applies to the settlement for the year, the

amount that falls to be treated as trust gains in accordance

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with that provision, or would fall to be so treated but for

section 90(2) or (3).

Gains to be brought into pool on subsequent transfer of value

          7B                 (1)                  Where the trustees of a settlement who have made a transfer of

value to which Schedule 4B applies make a further transfer of

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value to which that Schedule applies, the following provisions

apply.

                           (2)                  If the further transfer is made in the same year of assessment as the

original transfer, any Schedule 4B trust gains accruing by virtue of

the further transfer are brought into the settlement’s Schedule 4C

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pool at the end of the year.

                           (3)                  If the further transfer is made in a later year of assessment at the

beginning of which there are outstanding gains in the settlement’s

Schedule 4C pool—

                      (a)                     any Schedule 4B trust gains accruing by virtue of the

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further transfer, and

                      (b)                     any outstanding section 87/89 gains of the settlement at

the end of the later year of assessment,

                                             are brought into the settlement’s Schedule 4C pool at the end of

the later year.

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                                             “Outstanding gains in the settlement’s Schedule 4C pool” means

gains in that pool that have not been attributed to beneficiaries in

accordance with this Schedule.

 

 

Finance Bill
Schedule 29 — Transfers of value: attribution of gains to beneficiaries

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                           (4)                  If the further transfer is made in a later year of assessment at the

beginning of which the settlement no longer has a Schedule 4C

pool, the provisions of this Schedule apply in relation to the

further transfer as they applied in relation to the original transfer.

                           (5)                  For the purposes of this paragraph a settlement is treated as

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continuing to have a Schedule 4C pool until the end of the last year

of assessment in which there are any gains in the pool.”.

Attribution of gains to beneficiaries

  4       (1)      For paragraphs 8 and 9 (attribution of gains to beneficiaries) substitute—

“Attribution of Schedule 4C gains to beneficiaries

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          8                 (1)                  The gains in a settlement’s Schedule 4C pool at the end of any year

of assessment are treated as chargeable gains accruing in that year

to beneficiaries who receive in that year, or have received in an

earlier year, capital payments from the trustees of any settlement

that is a relevant settlement in relation to the pool.

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                                             Paragraph 8A defines “relevant settlement” for this purpose.

                           (2)                  The attribution of chargeable gains to beneficiaries under this

paragraph shall be made in proportion to, but shall not exceed, the

amounts of the capital payments made to them.

                                             Paragraphs 8B and 8C provide for the matching of gains with

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available capital payments.

                           (3)                  A chargeable gain shall not be treated as accruing to a beneficiary

under this Schedule unless he is chargeable to tax for that year of

assessment.

                           (4)                   For the purposes of this Schedule a beneficiary is “chargeable to

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tax” for a year of assessment if, and only if—

                      (a)                     he is resident in the United Kingdom for any part of that

year or is ordinarily resident in the United Kingdom for

that year, and

                      (b)                     he is domiciled in the United Kingdom for any part of that

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year.

                           (5)                  Any gains in a settlement’s Schedule 4C pool that are not

attributed to beneficiaries in a year of assessment are carried

forward to the following year of assessment, when this paragraph

applies again.

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Relevant settlements

          8A                 (1)                  This paragraph specifies what settlements are relevant settlements

in relation to a Schedule 4C pool.

                           (2)                  The transferor and transferee settlements in relation to the original

transfer of value are relevant settlements.

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                           (3)                  If the trustees of any settlement that is a relevant settlement in

relation to a Schedule 4C pool—

                      (a)                     make a transfer of value to which Schedule 4B applies, or

 

 

Finance Bill
Schedule 29 — Transfers of value: attribution of gains to beneficiaries

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                      (b)                     make a transfer of settled property to which section 90

applies,

                                             any settlement that is a transferee settlement in relation to that

transfer is also a relevant settlement in relation to that pool.

                           (4)                  If the trustees of a settlement that is a relevant settlement in

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relation to a Schedule 4C pool make a transfer of value to which

Schedule 4B applies, any other settlement that is a relevant

settlement in relation to that pool is also a relevant settlement in

relation to the Schedule 4C pool arising from the further transfer.

Attribution of gains in Schedule 4C pool

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          8B                 (1)                  The following rules apply as regards the attribution of the gains in

a settlement’s Schedule 4C pool to beneficiaries of relevant

settlements.

                                             This paragraph has effect subject to paragraph 8C (order of

attribution as between gains in Schedule 4C pool and other trust

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gains).

                           (2)                  Gains of earlier years are attributed to beneficiaries before gains of

later years.

                           (3)                  For the purposes of this Schedule the year of a gain is determined

as follows—

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                      (a)                     a Schedule 4B trust gain is a gain of the year of assessment

in which the transfer of value in question takes place;

                      (b)                     a section 87/89 gain is a gain of the year of assessment in

which it first forms part of a settlement’s trust gains in

accordance with section 87(2).

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                           (4)                  Gains of the same year are matched with available capital

payments made at any time by trustees of any relevant settlement.

                           (5)                  If gains of one year are wholly matched, gains of the next year are

then matched, and so on.

                           (6)                  The gains are attributed to beneficiaries in proportion to, but not

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so as to exceed, the amount of available capital payments received

by them.

Attribution of gains: Schedule 4C pool gains and other gains

          8C                 (1)                  Where in a year of assessment—

                      (a)                     gains in a settlement’s Schedule 4C pool fall to be

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attributed to beneficiaries of relevant settlements, and

                      (b)                     one or more of those settlements also have gains that fall to

be attributed to beneficiaries under section 87(4) or 89(2),

                                             the provisions of paragraph 8B have effect as follows.

                           (2)                  The rules in that paragraph apply in relation to all the gains falling

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to be so attributed.

                           (3)                  As between gains of the same year, Schedule 4C gains are

attributed to beneficiaries before other gains.

 

 

Finance Bill
Schedule 29 — Transfers of value: attribution of gains to beneficiaries

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Attribution of gains: available capital payments

          9                 (1)                  In any year of assessment capital payments made to a beneficiary

by the trustees of a relevant settlement, in that year or any earlier

year, are available for the purposes of paragraphs 8 to 8C subject

to the following provisions.

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                           (2)                  A capital payment is no longer available to the extent that

chargeable gains have, by reason of it, been treated as accruing to

the recipient in an earlier year of assessment—

                      (a)                     under this Schedule, or

                      (b)                     under section 87(4) or 89(2).

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                           (3)                  Capital payments received—

                      (a)                     before 21st March 2000, or

                      (b)                     before the year of assessment preceding the year of

assessment in which the original transfer of value was

made,

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                                             shall be disregarded.”.

          (2)      After paragraph 12 insert—

“Attribution of gains to beneficiaries in section 10A cases

          12A                 (1)                  This paragraph applies where by virtue of section 10A an amount

of gains would (apart from this Schedule) be treated under section

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87 as accruing to a person (“the beneficiary”) in the year of return

by virtue of a capital payment made to him in an intervening year.

                           (2)                  Where this paragraph applies, a capital payment equal to so much

of that capital payment as exceeds the amount otherwise charged

shall be deemed for the purposes of this Schedule to be made to

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the beneficiary in the year of return.

                           (3)                  The “amount otherwise charged” means the total of any

chargeable gains attributed to the beneficiary under section 87(4)

or 89(2) by virtue of the capital payment.

                           (4)                  For the purposes of paragraph 13(5)(b) a deemed capital payment

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under this paragraph shall be treated as made when the actual

capital payment mentioned in sub-paragraph (1) above was made.

                           (5)                  Expressions used in this paragraph and section 10A have the same

meanings in this paragraph as in that section”.

Gains attributed to settlor

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  5       (1)      Paragraph 6 is amended as follows.

          (2)      In sub-paragraph (1), in the opening words, for “the amount of any

chargeable gains” substitute “the tapered amount of any chargeable gains”.

          (3)      After that sub-paragraph insert—

          “(1A)                                   The reference in sub-paragraph (1) to the tapered amount of any

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chargeable gains is a reference—

                      (a)                     where section 86(4) applies, to the tapered section 86(4)

amount as defined in section 87(3A);

 

 

Finance Bill
Schedule 30 — First-year allowances for expenditure on environmentally beneficial plant or machinery

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                      (b)                     where section 10A applies, to the tapered section 86(1)(e)

amount as defined in section 86A(7A).”.

Minor and consequential amendments

  6       (1)      In paragraph 10(1) for “of the transferor settlement, or of any transferee

settlement,” substitute “of any relevant settlement”.

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          (2)      In paragraph 12—

              (a)             in sub-paragraph (1)(a) for “arising under Schedule 4B” substitute

“included in a settlement’s Schedule 4C pool”,

              (b)             in sub-paragraph (2) for “the Schedule 4B trust gains” substitute “the

settlement’s Schedule 4C gains”, and

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              (c)             in sub-paragraph (3) for “the transferor or transferee settlements”

substitute “any relevant settlement”.

          (3)      In paragraph 13(5)(a) for “that in which the transfer of value was made”

substitute “the year of the gain (determined in accordance with paragraph

8B(3))”.

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          (4)      After paragraph 13 insert—

“Effect of settlement ceasing to exist after transfer of value

          13A                                   Where a settlement ceases to exist after the trustees have made a

transfer of value to which Schedule 4B applies, this Schedule has

effect as if a year of assessment had ended immediately before the

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settlement ceased to exist.”.

Schedule 30

Section 167

 

First-year allowances for expenditure on environmentally beneficial plant

or machinery

Introductory

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  1        The Capital Allowances Act 2001 (c. 2) is amended as follows.

Types of expenditure for which first-year allowances available

  2        In section 39—

              (a)             after “under” insert “any of the following provisions”;

              (b)             at the end of the entry relating to section 45E, omit “or”;

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              (c)             after the entry relating to section 45F add—

 

“section 45H

expenditure on environmentally beneficial

 
  

plant or machinery.”.

 
 

 

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Schedule 30 — First-year allowances for expenditure on environmentally beneficial plant or machinery

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First-year qualifying expenditure on environmentally beneficial plant or machinery

  3        After section 45G insert—

       “45H   Expenditure on environmentally beneficial plant or machinery

              (1)             Expenditure is first-year qualifying expenditure if—

                    (a)                   it is expenditure on environmentally beneficial plant or

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machinery that is unused and not second-hand,

                    (b)                   it is incurred on or after 1st April 2003,

                    (c)                   it is not long-life asset expenditure, and

                    (d)                   it is not excluded by section 46 (general exclusions).

              (2)             Environmentally beneficial plant or machinery means plant or

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machinery in relation to which the following conditions are met—

                    (a)                   when the expenditure is incurred, or

                    (b)                   when the contract for the provision of the plant or machinery

is entered into.

              (3)             The conditions are that the plant or machinery—

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                    (a)                   is of a description specified by Treasury order, and

                    (b)                   meets the environmental criteria specified by Treasury order

for plant or machinery of that description.

              (4)             The Treasury may make such orders under subsection (3) as appear

to them appropriate to promote the use of technologies, or products,

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designed to remedy or prevent damage to the physical environment

or natural resources.

              (5)             Any such order may make provision by reference to any technology

list, or product list, issued by the Secretary of State (whether before

or after the coming into force of this section).

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       45I    Certification of environmentally beneficial plant and machinery

              (1)             The Treasury may by order provide that, in such cases as may be

specified in the order, no section 45H allowance may be made unless

a relevant certificate of environmental benefit is in force.

                              A “section 45H allowance” means a first-year allowance in respect of

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expenditure that is first-year qualifying expenditure under section

45H.

              (2)             A certificate of environmental benefit is one certifying that—

                    (a)                   particular plant or machinery, or

                    (b)                   plant or machinery constructed to a particular design,

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                              meets the environmental criteria specified in relation to that

description of plant or machinery by order under section 45H.

              (3)             A relevant certification of environmental benefit means one issued—

                    (a)                   by the Secretary of State or a person authorised by the

Secretary of State;

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                    (b)                   in the case of plant or machinery used or for use in Scotland,

by the Scottish Ministers or a person authorised by them;

                    (c)                   in the case of plant or machinery used or for use in Wales, by

the National Assembly for Wales or a person authorised by it;

 

 

 
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