Office of Public Sector Information
SCHEDULE 19 continued
(4) In paragraph 14(1) omit the words from “(which correspond” to “Management Act)”.
(5) In paragraph 14(6) for “an amendment of a self-assessment under section 28A(4) of that Act” substitute “an amendment of a company tax return under paragraph 34(2) of Schedule 18 to the Finance Act 1998”.
(6) In paragraph 14(8) omit the words from “against an amendment” to the end.
51 (1) Schedule 19AB to the Taxes Act 1988 (pension business: payments on account of tax credits and deducted tax) is amended as follows.
(2) In paragraph 1(4), for “section 11 return” substitute “company tax return”.
(3) For paragraph 1(6) substitute—
“(6) Paragraphs 57 to 60 of Schedule 18 to the Finance Act 1998 (general provisions as to procedure on claims and elections) do not apply to a claim for a provisional repayment.”.
(4) In paragraph 1(7) for “section 7 of this Act” substitute “paragraph 9(2) of Schedule 18 to the Finance Act 1998”.
(5) For paragraph 1(10) and (11) substitute—
“(10) In this paragraph—
“latest company tax return”, in the case of an accounting period of a company (“the current accounting period”), means, subject to sub-paragraph (11) below, the company tax return for the latest preceding accounting period of the company for which such a return has been delivered before the making of the first claim for a provisional repayment for the current accounting period; and
“self-assessment” means an assessment included in a company tax return, and includes a reference to such an assessment as amended.
(11) In any case where—
(a) there is a company tax return which would, apart from this sub-paragraph, be the latest such return in the case of an accounting period of a company,
(b) the self-assessment required to be included in that return has been amended, and
(c) that amendment was made before the making of the first claim for a provisional repayment for the accounting period mentioned in paragraph (a) above,
the return which is to be regarded as the latest company tax return in the case of that accounting period shall be that return as it stands amended immediately after the making of that amendment of the self-assessment (or, if the self-assessment has been so amended more than once, that return as it stands amended immediately after the making of the last such amendment) but ignoring amendments which do not give rise to any change in the fraction which, on the basis of the return as it has effect from time to time, would be the relevant fraction for the purposes of section 432A(5) for the accounting period to which the return relates.”.
(6) In paragraph 2(1)(c), for “section 11 return” substitute “company tax return”.
(7) In paragraph 3(1) for “section 30 of the Management Act” substitute “paragraph 52 of Schedule 18 to the Finance Act 1998”.
(8) In paragraph 3(1A) for “section 7 of this Act” substitute “paragraph 9(2) of Schedule 18 to the Finance Act 1998”.
(9) For paragraph 3(1D) substitute—
“(1D) Paragraph 53 of Schedule 18 to the Finance Act 1998 (time limit for recovery of excessive repayments etc.) does not apply to an assessment under paragraph 52 of that Schedule made by virtue of this paragraph.
But such an assessment is not out of time under paragraph 46 of that Schedule (general six year time limit for assessments) if it is made not later than the end of the accounting period following that in which the self-assessment mentioned in sub-paragraph (1)(a) above becomes final.”.
(10) In paragraph 3(3) for “section 30 of that Act” substitute “paragraph 52 of Schedule 18 to the Finance Act 1998”.
(11) In paragraph 3(7) for “section 30 of the Management Act” substitute “paragraph 52 of Schedule 18 to the Finance Act 1998”.
(12) In paragraph 3(9) for “a return under section 11 of the Management Act by virtue of section 11AA of that Act” substitute “company tax return”.
(13) In paragraph 6(4)(b) for “return under that section” substitute “company tax return”.
Section 121.
The Schedule inserted before Schedule 1 to the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 is as follows:—
1 (1) Section 2A shall be construed subject to and in accordance with this Schedule.
(2) The different provisions of this Schedule have effect for construing the other provisions of this Schedule, as well as for construing section 2A.
2 (1) In relation to any gain on the disposal of a business or non-business asset, the period after 5th April 1998 for which the asset had been held at the time of its disposal is the period which—
(a) begins with whichever is the later of 6th April 1998 and the time when the asset disposed of was acquired by the person making the disposal; and
(b) ends with the time of the disposal on which the gain accrued.
(2) Where an asset is disposed of, its relevant period of ownership is whichever is the shorter of—
(a) the period after 5th April 1998 for which the asset had been held at the time of its disposal; and
(b) the period of ten years ending with that time.
(3) The following shall be disregarded for determining when a person is to be treated for the purposes of this paragraph as having acquired an asset, that is to say—
(a) so much of section 73(1)(b) as treats the asset as acquired at a date before 6th April 1965; and
(b) sections 239(2)(b), 257(2)(b) and 259(2)(b).
(4) Where the period after 5th April 1998 for which an asset had been held at the time of its disposal includes any period which, in accordance with any of paragraphs 10 to 12 below, is a period that does not count for the purposes of taper relief—
(a) the qualifying holding period of the asset shall be treated for the purposes of section 2A as reduced by the length of the period that does not count or, as the case may be, of the aggregate of the periods that do not count; and
(b) the period that does not count or, as the case may be, every such period—
(i) shall be left out of account in computing for the purposes of sub-paragraph (2) above the period of ten years ending with the time of the asset’s disposal; and
(ii) shall be assumed not to be comprised in the asset’s relevant period of ownership.
(5) Sub-paragraphs (1) to (3) above have effect subject to the provisions of paragraphs 13 to 19 below.
3 (1) Subject to the following provisions of this Schedule, a chargeable gain accruing to any person on the disposal of any asset is a gain on the disposal of a business asset if that asset was a business asset throughout its relevant period of ownership.
(2) Where—
(a) a chargeable gain accrues to any person on the disposal of any asset,
(b) that gain does not accrue on the disposal of an asset that was a business asset throughout its relevant period of ownership, and
(c) that asset has been a business asset throughout one or more periods comprising part of its relevant period of ownership,
a part of that gain shall be taken to be a gain on the disposal of a business asset and, in accordance with sub-paragraph (4) below, the remainder shall be taken to be a gain on the disposal of a non-business asset.
(3) Subject to the following provisions of this Schedule, where sub-paragraph (2) above applies, the part of the chargeable gain accruing on the disposal of the asset that shall be taken to be a gain on the disposal of a business asset is the part of it that bears the same proportion to the whole of the gain as is borne to the whole of its relevant period of ownership by the aggregate of the periods which—
(a) are comprised in its relevant period of ownership, and
(b) are periods throughout which the asset is to be taken (after applying paragraphs 8 and 9 below) to have been a business asset.
(4) So much of any chargeable gain accruing to any person on the disposal of any asset as is not a gain on the disposal of a business asset shall be taken to be a gain on the disposal of a non-business asset.
(5) Where, by virtue of sub-paragraphs (2) to (4) above, a gain on the disposal of a business asset accrues on the same disposal as a gain on the disposal of a non-business asset—
(a) the two gains shall be treated for the purposes of taper relief as separate gains accruing on separate disposals of separate assets; but
(b) the periods after 5th April 1998 for which each of the assets shall be taken to have been held at the time of their disposal shall be the same and shall be determined without reference to the length of the periods mentioned in sub-paragraph (3)(a) and (b) above.
4 (1) This paragraph applies, in the case of the disposal of any asset, for determining (subject to the following provisions of this Schedule) whether the asset was a business asset at a time before its disposal when it consisted of, or of an interest in, any shares in a company (“the relevant company”).
(2) Where the disposal is made by an individual, the asset was a business asset at that time if at that time the relevant company was a qualifying company by reference to that individual.
(3) Where the disposal is made by the trustees of a settlement, the asset was a business asset at that time if at that time the relevant company was a qualifying company by reference to the trustees of that settlement.
(4) Where the disposal is made by an individual’s personal representatives, the asset was a business asset at that time if at that time—
(a) the relevant company was a trading company or the holding company of a trading group; and
(b) the voting rights in that company were exercisable, as to not less than 25 per cent., by the deceased’s personal representatives.
(5) Where the disposal is made by an individual who acquired the asset as legatee (as defined in section 64) and that time is not a time when the asset was a business asset by virtue of sub-paragraph (2) above, the asset shall be taken to have been a business asset at that time if at that time—
(a) it was held by the personal representatives of the deceased; and
(b) the conditions in sub-paragraph (4)(a) and (b) above were satisfied.
5 (1) This paragraph applies, in the case of the disposal of any asset, for determining (subject to the following provisions of this Schedule) whether the asset was a business asset at a time before its disposal when it was neither shares in a company nor an interest in shares in a company.
(2) Where the disposal is made by an individual, the asset was a business asset at that time if at that time it was being used, wholly or partly, for purposes falling within one or more of the following paragraphs—
(a) the purposes of a trade carried on at that time by that individual or by a partnership of which that individual was at that time a member;
(b) the purposes of any trade carried on by a company which at that time was a qualifying company by reference to that individual;
(c) the purposes of any trade carried on by a company which at that time was a member of a trading group the holding company of which was at that time a qualifying company by reference to that individual;
(d) the purposes of any qualifying office or employment to which that individual was at that time required to devote substantially the whole of his time;
(e) the purposes of any office or employment that does not fall within paragraph (d) above but was an office or employment with a trading company in relation to which that individual falls to be treated as having, at that time, been a full-time working officer or employee.
(3) Where the disposal is made by the trustees of a settlement, the asset was a business asset at that time if at that time it was being used, wholly or partly, for purposes falling within one or more of the following paragraphs—
(a) the purposes of a trade carried on by the trustees of the settlement;
(b) the purposes of a trade carried on at that time by an eligible beneficiary or by a partnership of which an eligible beneficiary was at that time a member;
(c) the purposes of any trade carried on by a company which at that time was a qualifying company by reference to the trustees of the settlement or an eligible beneficiary;
(d) the purposes of any trade carried on by a company which at that time was a member of a trading group the holding company of which was at that time a qualifying company by reference to the trustees of the settlement or an eligible beneficiary;
(e) the purposes of any qualifying office or employment to which an eligible beneficiary was at that time required to devote substantially the whole of his time;
(f) the purposes of any office or employment that does not fall within paragraph (e) above but was an office or employment with a trading company in relation to which an eligible beneficiary falls to be treated as having, at that time, been a full-time working officer or employee.
(4) Where the disposal is made by an individual’s personal representatives, the asset was a business asset at that time if at that time it was being used, wholly or partly, for purposes falling within one or more of the following paragraphs—
(a) the purposes of a trade carried on by the deceased’s personal representatives;
(b) the purposes of any trade carried on by a company which at that time was a qualifying company by reference to the deceased’s personal representatives;
(c) the purposes of any trade carried on by a company which at that time was a member of a trading group the holding company of which was at that time a qualifying company by reference to the deceased’s personal representatives.
(5) Where the disposal is made by an individual who acquired the asset as legatee (as defined in section 64) and that time is not a time when the asset was a business asset by virtue of sub-paragraph (2) above, the asset shall be taken to have been a business asset at that time if at that time it was—
(a) being held by the personal representatives of the deceased, and
(b) being used, wholly or partly, for purposes falling within one or more of paragraphs (a) to (c) of sub-paragraph (4) above.
6 (1) The times when a company shall be taken to have been a qualifying company by reference to an individual, the trustees of a settlement or an individual’s personal representatives are—
(a) in the case of an individual, those set out in sub-paragraphs (2) and (3) below; and
(b) in the case of the trustees of a settlement, those set out in sub-paragraphs (2) and (4) below; and
(c) in the case of personal representatives, those set out in sub-paragraph (2) below.
(2) A company was a qualifying company by reference to an individual, the trustees of a settlement or personal representatives at any time when both the following conditions were satisfied, that is to say—
(a) the company was a trading company or the holding company of a trading group; and
(b) the voting rights in that company were exercisable, as to not less than 25 per cent., by that individual or, as the case may be, the trustees of the settlement or the personal representatives.
(3) A company was also a qualifying company by reference to an individual at any time when all of the following conditions were satisfied, that is to say—
(a) the company was a trading company or the holding company of a trading group;
(b) the voting rights in that company were exercisable, as to not less than 5 per cent., by that individual; and
(c) that individual was a full-time working officer or employee of that company or of a company which at the time had a relevant connection with that company.
(4) A company was also a qualifying company by reference to the trustees of a settlement at any time when all the following conditions were satisfied, that is to say—
(a) the company was a trading company or the holding company of a trading group;
(b) the voting rights in that company were exercisable, as to not less than 5 per cent., by the trustees of that settlement; and
(c) an eligible beneficiary was a full-time working officer or employee of that company or of a company which at the time had a relevant connection with that company.
7 (1) An eligible beneficiary, in relation to an asset comprised in a settlement and a time, is any individual having at that time a relevant interest in possession under the settlement in either—
(a) the whole of the settled property; or
(b) a part of the settled property that is or includes that asset.
(2) In this paragraph “relevant interest in possession”, in relation to property comprised in a settlement, means any interest in possession under that settlement other than—
(a) a right under that settlement to receive an annuity; or
(b) a fixed-term entitlement.
(3) In sub-paragraph (2) above “fixed-term entitlement”, in relation to property comprised in a settlement, means any interest under that settlement which is limited to a term that is fixed and is not a term at the end of which the person with that interest will become entitled to the property.
8 (1) This paragraph applies in the case of a disposal of an asset by the trustees of a settlement where the asset’s relevant period of ownership is or includes a period (“a sharing period”) throughout which—
(a) the asset was a business asset by reference to one or more eligible beneficiaries;
(b) the asset would not otherwise have been a business asset; and
(c) there is a non-qualifying part of the relevant income, or there would be if there were any relevant income for that period.
(2) The period throughout which the asset disposed of is to be taken to have been a business asset shall be determined as if the relevant fraction of every sharing period were a period throughout which the asset was not a business asset.
(3) In sub-paragraph (2) above “the relevant fraction”, in relation to any sharing period, means the fraction which represents the proportion of relevant income for that period which is, or (if there were such income) would be, a non-qualifying part of that income.
(4) Where a sharing period is a period in which the proportion mentioned in sub-paragraph (3) above has been different at different times, this paragraph shall require a separate relevant fraction to be determined for, and applied to, each part of that period for which there is a different proportion.
(5) For the purposes of this paragraph the non-qualifying part of any relevant income for any period is so much of that income for that period as is or, as the case may be, would be—
(a) income to which no eligible beneficiary has any entitlement; or
(b) income to which a non-qualifying eligible beneficiary has an entitlement.
(6) In sub-paragraph (5) above “non-qualifying eligible beneficiary”, in relation to a period, means an eligible beneficiary who is not a beneficiary by reference to whom (if he were the only beneficiary) the asset disposed of would be a business asset throughout that period.
(7) In this paragraph “relevant income” means income from the part of the settled property comprising the asset disposed of.
9 (1) This paragraph applies in the case of a disposal by any person of an asset where the asset’s relevant period of ownership is or includes a period (“a mixed-use period”) throughout which the asset—
(a) was a business asset by reference to its use for purposes mentioned in paragraph 5(2) to (5) above; but
(b) was, at the same time, being put to a non-qualifying use.
(2) The period throughout which the asset disposed of is to be taken to have been a business asset shall be determined as if the relevant fraction of every mixed-use period were a period throughout which the asset was not a business asset.
(3) In sub-paragraph (2) above “the relevant fraction”, in relation to any mixed-use period, means the fraction which represents the proportion of the use of the asset during that period that was a non-qualifying use.
(4) Where both this paragraph and paragraph 8 above apply in relation to the whole or any part of a period—
(a) effect shall be given to that paragraph first; and
(b) further reductions by virtue of this paragraph in the period for which the asset disposed of is taken to have been a business asset shall be made in respect of only the relevant part of any non-qualifying use.
(5) In sub-paragraph (4) above the reference to the relevant part of any non-qualifying use is a reference to the proportion of that use which is not a use to which a non-qualifying part of any relevant income is attributable.
(6) Where a mixed-use period is a period in which—
(a) the proportion mentioned in sub-paragraph (3) above has been different at different times, or
(b) different attributions have to be made for the purposes of sub-paragraphs (4) and (5) above for different parts of the period,
this paragraph shall require a separate relevant fraction to be determined for, and applied to, each part of the period for which there is a different proportion or attribution.
(7) In this paragraph—
“non-qualifying use”, in relation to an asset, means any use of the asset for purposes which are not purposes in respect of which the asset would fall to be treated as a business asset at the time of its use; and
“non-qualifying part” and “relevant income” have the same meanings as in paragraph 8 above.
10 (1) Where, in the case of any asset disposed of (“the relevant asset”), the period after 5th April 1998 for which that asset had been held at the time of its disposal is or includes a period during which—
(a) the person making the disposal, or
(b) a relevant predecessor of his,
had limited exposure to fluctuations in the value of the asset, the period during which that person or predecessor had that limited exposure shall not count for the purposes of taper relief.
(2) The times when a person shall be taken for the purposes of this paragraph to have had such limited exposure in the case of the relevant asset shall be all the times while he held that asset when a transaction entered into at any time by him, or by a relevant predecessor of his, had the effect that he—
(a) was not exposed, or not exposed to any substantial extent, to the risk of loss from fluctuations in the value of the relevant asset; and
(b) was not able to enjoy, or to enjoy to any substantial extent, any opportunities to benefit from such fluctuations.
(3) The transactions referred to in sub-paragraph (2) above do not include—
(a) any insurance policy which the person in question might reasonably have been expected to enter into and which is insurance against the loss of the relevant asset or against damage to it, or against both; or
(b) any transaction having effect in relation to fluctuations in the value of the relevant asset so far only as they are fluctuations resulting from fluctuations in the value of foreign currencies.
(4) In this paragraph “relevant predecessor”—
(a) in relation to a person disposing of an asset, means any person other than the person disposing of it who held that asset at a time falling in the period which is taken to be the whole period for which it had been held at the time of its disposal; and
(b) in relation to a relevant predecessor of a person disposing of an asset, means any other relevant predecessor of that person.
(5) In sub-paragraph (4) above, the reference, in relation to an asset, to the whole period for which it had been held at the time of its disposal is a reference to the period that would be given for that asset by paragraph 2(1) above if, in paragraph (a), the words “whichever is the later of 6th April 1998 and” were omitted.
11 (1) This paragraph applies where—
(a) there is a disposal of an asset consisting of shares in a close company; and
(b) the period beginning with the relevant time and ending with the time of the disposal includes at least one relevant change of activity involving that company.
(2) So much of the period after 5th April 1998 for which the asset had been held at the time of its disposal as falls before the time, or latest time, in that period when there was a relevant change of activity involving the close company shall not count for the purposes of taper relief.
(3) Where—
(a) a close company or any of its 51 per cent. subsidiaries has at any time begun to carry on a trade, and
(b) immediately before that time, neither that company nor any of its 51 per cent. subsidiaries was carrying on a trade,
a relevant change of activity involving the close company shall be taken to have occurred at that time.
(4) For the purposes of this paragraph where—
(a) at the time of the disposal of the shares, the close company was carrying on a business of holding investments, and
(b) there has been any occasion falling within—
(i) the period of twelve months ending with that time, or
(ii) the period of twelve months ending with any earlier time after the relevant time,
when the close company was not carrying on that business or when the size of that business was small by comparison with its size at the end of that period,
a relevant change of activity involving the close company shall be taken to have occurred immediately after the latest such occasion before the time of the disposal.
(5) For the purposes of sub-paragraph (4) above the size of any business at any time shall be determined by assuming it to correspond to the aggregate of the amounts and values given by way of consideration for the assets held at that time for the purposes of the business.
(6) In determining for the purposes of this paragraph whether a close company is at any time carrying on a business of holding investments, and in determining for those purposes the size at any time of such a business—
(a) all the activities of a close company and of all its 51 per cent. subsidiaries shall be taken together as if they were all being carried on by the close company; and
(b) the activities that are included in a business of holding investments shall be taken not to include—
(i) holding shares in a 51 per cent. subsidiary of the company holding the shares;
(ii) making loans to an associated company or to a participator in the company making the loan or in an associated company; or
(iii) placing money on deposit.
(7) In this paragraph—
(a) references to a company’s carrying on a trade, or to beginning to carry one on, do not include references to its carrying on or beginning to carry on a trade that is merely incidental to any non-trading activities carried on by that company or another company in the same group of companies; and
(b) references to a business of holding investments include references to a business of making investments.
(8) For the purposes of this paragraph a company is to be treated as another’s associated company at any time if at that time, or at another time within one year previously—
(a) one of them has had control of the other; or
(b) both have been under the control of the same person or persons.
(9) In this paragraph—
“51 per cent. subsidiary”, in relation to another company, means a company which, in accordance with section 170(7), is an effective 51 per cent. subsidiary of the other company for the purposes of sections 170 to 181; and
“participator”, in relation to a company, has the meaning given by section 417(1) of the Taxes Act.
(10) In this paragraph “the relevant time”, in relation to the disposal of an asset consisting of shares in a company, means the beginning of the period after 5th April 1998 for which that asset had been held at the time of its disposal.
12 (1) This paragraph applies (subject to sub-paragraph (4) below) where—
(a) there is a disposal of an asset consisting of shares in a close company, and
(b) at least one relevant shift of value involving that asset has occurred between the relevant time and the time of the disposal.
(2) So much of the period after 5th April 1998 for which the asset had been held at the time of its disposal as falls before the time, or latest time, in that period at which there was a relevant shift of value involving that asset shall not count for the purposes of taper relief.
(3) For the purposes of this paragraph a relevant shift of value involving any asset shall be taken to have occurred whenever—
(a) a person having control of a close company exercised his control of that company so that value passed into that asset out of a relevant holding; or
(b) effect was given to any other transaction by virtue of which value passed into that asset out of a relevant holding.
(4) A relevant shift of value involving an asset shall be disregarded for the purposes of this paragraph if—
(a) that shift of value is one in which the value passing into that asset out of the relevant holding is insignificant; or
(b) that shift of value took place at a time when the qualifying holding period of the relevant holding was at least as long as the qualifying holding period of that asset.
Finance Act 1998 (C. 36)