Office of Public Sector Information
SCHEDULE 20 continued
(5) In sub-paragraphs (3) and (4) above the references to a relevant holding shall be construed, in relation to any case in which value has passed out of one asset into another asset consisting of shares in a company, as a reference to any holding by—
(a) the person who, following the exercise of control or other transaction by virtue of which the value has passed, held the other asset, or
(b) a person connected with him,
of any shares in that company or in a company under the control of the same person or persons as that company.
(6) For the purposes of sub-paragraph (4)(b) above the reference to the qualifying holding period of a holding or other asset at the time when a shift of value takes place shall be taken to be what, in relation to a disposal at that time of that holding or other asset by the person then entitled to dispose of it, would be taken to have been its qualifying holding period for the purposes of section 2A.
(7) In this paragraph references to shares in a company include references to rights over a company.
(8) 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.
13 (1) This paragraph applies where by virtue of section 144—
(a) the grant of an option and the transaction entered into by the grantor in fulfilment of his obligations under the option, or
(b) the acquisition of an option and the transaction entered into by the person exercising the option,
fall to be treated as one transaction.
(2) The time of the disposal of any asset disposed of in pursuance of the transaction shall be the time of the following disposal—
(a) if the option binds the grantor to sell, the disposal made in fulfilment of the grantor’s obligations under the option;
(b) if the option binds the grantor to buy, the disposal made to the grantor in consequence of the exercise of the option.
(3) The time of the acquisition of any asset acquired in pursuance of the option, or in consequence of its exercise, shall be the time of the exercise of the option.
(4) Any question whether the asset disposed of or acquired was a business asset at any time shall be determined by reference to the asset to which the option related, and not the option.
14 (1) This paragraph applies if, in a case where—
(a) assets have merged,
(b) an asset has divided or otherwise changed its nature, or
(c) different rights or interests in or over any asset have been created or extinguished at different times,
the value of any asset disposed of is derived (through one or more successive events falling within paragraphs (a) to (c) above but not otherwise) from one or more other assets acquired into the same ownership at a time before the acquisition of the asset disposed of.
(2) The asset disposed of shall be deemed for the purposes of this Schedule to have been acquired at the earliest time at which any asset from which its value is derived was acquired into the same ownership.
(3) Any determination of whether the asset disposed of was a business asset at a time when another asset from which its value is derived was in the ownership of the person making the disposal shall be made as if that other asset were the asset disposed of or, as the case may be, were comprised in it.
15 (1) This paragraph applies where a person (“the transferring spouse”) has disposed of any asset to another (“the transferee spouse”) by a disposal falling within section 58(1).
(2) Paragraph 2 above shall have effect in relation to any subsequent disposal of the asset as if the time when the transferee spouse acquired the asset were the time when the transferring spouse acquired it.
(3) Where for the purposes of paragraph 2 above the transferring spouse would be treated—
(a) in a case where there has been one or more previous disposals falling within section 58(1), by virtue of sub-paragraph (2) above, or by virtue of that sub-paragraph together with any other provision of this Schedule, or
(b) in a case where there has not been such a previous disposal, by virtue of such another provision,
as having acquired the asset at a time other than the time when the transferring spouse did acquire it, the reference in that sub-paragraph to the time when the transferring spouse acquired it shall be read as a reference to the time when for the purposes of that paragraph the transferring spouse is treated as having acquired it.
(4) Where there is a disposal by the transferee spouse, any question whether the asset was a business asset at a time before that disposal shall be determined as if—
(a) in relation to times when the asset was held by the transferring spouse, references in paragraph 5(2) above to the individual by whom the disposal is made included references to the transferring spouse; and
(b) the reference in paragraph 5(5) above to the acquisition of the asset as a legatee by the individual by whom the disposal is made included a reference to its acquisition as a legatee by the transferring spouse.
(5) Where, in the case of any asset, there has been more than one transfer falling within section 58(1) during the period after 5th April 1998 for which the transferee spouse has held it at the time of that spouse’s disposal of that asset, sub-paragraph (4) above shall have effect as if a reference, in relation to any time, to the transferring spouse were a reference to the individual who was the transferring spouse in relation to the next disposal falling within section 58(1) to have been made after that time.
16 (1) Sub-paragraph (3) below applies where the whole or any part of any gain which—
(a) would (but for any provision of this Act) have accrued on the disposal of any asset, or
(b) would have accrued on any disposal assumed under any enactment to have been made at any time,
falls by virtue of an enactment mentioned in sub-paragraph (2) below to be treated as accruing on or after 6th April 1998 at a time (whether or not the time of a subsequent disposal) which falls after the time of the actual or assumed disposal mentioned in paragraph (a) or (b) above (“the charged disposal”).
(2) Those enactments are—
(a) section 10A,
(b) section 116(10),
(c) section 134,
(d) section 154(2) or (4),
(e) Schedule 5B or 5C, or
(f) paragraph 27 of Schedule 15 to the [1996 c. 8.] Finance Act 1996 (qualifying indexed securities).
(3) In relation to the gain or part of a gain that is treated as accruing after the time of the charged disposal—
(a) references in this Schedule (except this sub-paragraph) to the disposal on which the gain or part accrues are references to the charged disposal; and
(b) references in this Schedule to the asset disposed of by that disposal are references to the asset that was or would have been disposed of by the charged disposal;
and, accordingly, the end of the period after 5th April 1998 for which that asset had been held at the time of the disposal on which that gain or part accrues shall be deemed to have been the time of the charged disposal.
(4) In relation to any gain that is treated by virtue of—
(a) subsection (1) of section 12, or
(b) subsection (2) of section 279,
as accruing after the time of the disposal from which it accrues, references in this Schedule to the disposal on which the gain accrues, to the asset disposed of on that disposal and to the time of that disposal shall be construed disregarding that subsection.
(5) It shall be immaterial for the purposes of this paragraph—
(a) that the time of the charged disposal or, as the case may be, the time of the actual disposal from which the gain accrues was before 6th April 1998; and
(b) that the time at which the charged disposal is treated as accruing is postponed on more than one occasion under an enactment specified in sub-paragraph (2) above.
17 (1) No part of any chargeable gain accruing to the trustees of a settlement on the disposal of any asset shall be treated as a gain on the disposal of a business asset if—
(a) the settlor is a company, and
(b) that company has an interest in the settlement at the time of the disposal.
(2) Subject to the following provisions of this paragraph, a company which is a settlor in relation to any settlement shall be regarded as having an interest in a settlement if—
(a) any property which may at any time be comprised in the settlement, or any derived property is, or will or may become, payable to or applicable for the benefit of that company or an associated company; or
(b) that company or an associated company enjoys a benefit deriving directly or indirectly from any property which is comprised in the settlement or any derived property.
(3) This paragraph does not apply unless the settlor or an associated company is within the charge to corporation tax in respect of chargeable gains for the accounting period in which the chargeable gain accrues.
(4) In this paragraph “derived property”, in relation to any property, means income from that property or any other property directly or indirectly representing proceeds of, or of income from, that property or income therefrom.
(5) 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.
(6) In this paragraph “settlor” has the meaning given by section 660G(1) and (2) of the Taxes Act.
(7) This paragraph has effect subject to paragraph 20 below.
18 (1) Where—
(a) shares in a company have been issued under any arrangements for the issue of shares in that company in respect of the interests of the members of a mutual company; and
(b) a person to whom shares were issued under those arrangements falls by virtue of subsection (3) of section 136 to be treated as having exchanged interests of his as a member of the mutual company for shares issued under those arrangements,
paragraph 2 above shall have effect (notwithstanding that section) as if the time of that person’s acquisition of the shares were the time when they were issued to him.
(2) Where—
(a) a registered friendly society has been incorporated under the [1992 c. 40.] Friendly Societies Act 1992, and
(b) there has been a change under Schedule 4 to that Act as a result of which a member of the registered society, or of a branch of the registered society, has become a member of the incorporated society or of a branch of the incorporated society,
paragraph 2 above shall have effect (notwithstanding anything in section 217B) in relation to the interests and rights in the incorporated society, or the branch of the incorporated society, which that person had immediately after the change, as if the time of their acquisition by him were the time of the change.
(3) In this paragraph—
“the incorporated society”, in relation to the incorporation of a registered friendly society, means the society after incorporation;
“insurance company” has the meaning given by section 96(1) of the [1982 c. 50.] Insurance Companies Act 1982;
“mutual company” means—
a mutual insurance company; or
a company of another description carrying on a business on a mutual basis;
“mutual insurance company” means any insurance company carrying on a business without having a share capital;
“the registered society”, in relation to the incorporation of a registered friendly society, means the society before incorporation.
19 (1) Use of an asset as part of an ancillary trust fund of a member of Lloyd's—
(a) shall not be regarded as a use in respect of which the asset is to be treated as a business asset at any time; but
(b) shall be disregarded in any determination for the purposes of paragraph 9 above of whether it was being put to a non-qualifying use at the same time as it was being used for purposes mentioned in paragraph 5(2) to (5) above.
(2) In this section “ancillary trust fund” has the same meaning as in Chapter III of Part II of the [1993 c. 34.] Finance Act 1993.
20 (1) Where, in the case of any settlement, the settled property originates from more than one settlor, this Schedule shall have effect as if there were a separate and distinct settlement for the property originating from each settlor, and references in this Schedule to an eligible beneficiary shall be construed accordingly.
(2) Subsections (1) to (5) of section 79 apply for the purposes of this paragraph as they apply for the purposes of that section.
21 Where any apportionment falls to be made for the purposes of this Schedule it shall be made—
(a) on a just and reasonable basis; and
(b) on the assumption that an amount falling to be apportioned by reference to any period arose or accrued at the same rate throughout the period over which it falls to be treated as having arisen or accrued.
22 (1) In this Schedule—
“51 per cent. subsidiary” (except in paragraph 11 above) has the meaning given by section 838 of the Taxes Act;
“commercial association of companies” means a company together with such of its associated companies (within the meaning of section 416 of the Taxes Act) as carry on businesses which are of such a nature that the businesses of the company and the associated companies, taken together, may be reasonably considered to make up a single composite undertaking;
“eligible beneficiary” shall be construed in accordance with paragraphs 7 and 20 above;
“full-time working officer or employee”, in relation to any company, means an individual who—
is an officer or employee of that company or of that company and one or more other companies with which that company has a relevant connection; and
is required in that capacity to devote substantially the whole of his time to the service of that company, or to the service of those companies taken together;
“group of companies” means a company which has one or more 51 per cent. subsidiaries, together with those subsidiaries;
“holding company” means a company whose business (disregarding any trade carried on by it) consists wholly or mainly of the holding of shares in one or more companies which are its 51 per cent. subsidiaries;
“office” and “employment” have the same meanings as in the Income Tax Acts;
“qualifying office or employment”, in relation to any time, means an office or employment with a person who was at that time carrying on a trade;
“qualifying company” shall be construed in accordance with paragraph 6 above;
“relevant period of ownership” shall be construed in accordance with paragraph 2 above;
“shares”, in relation to a company, includes any securities of that company;
“trade” means (subject to section 241(3)) anything which—
is a trade, profession or vocation, within the meaning of the Income Tax Acts; and
is conducted on a commercial basis and with a view to the realisation of profits;
“trading company” means a company which is either—
a company existing wholly for the purpose of carrying on one or more trades; or
a company that would fall within paragraph (a) above apart from any purposes capable of having no substantial effect on the extent of the company’s activities;
“trading group” means a group of companies the activities of which (if all the activities of the companies in the group are taken together) do not, or not to any substantial extent, include activities carried on otherwise than in the course of, or for the purposes of, a trade; and
“transaction” includes any agreement, arrangement or understanding, whether or not legally enforceable, and a series of transactions.
(2) For the purposes of this Schedule one company has a relevant connection with another company at any time when they are both members of the same group of companies or of the same commercial association of companies.
(3) References in this Schedule to the acquisition of an asset that was provided, rather than acquired, by the person disposing of it are references to its provision.
(4) References in this Schedule, in relation to a part disposal, to the asset disposed of are references to the asset of which there is a part disposal.”
Finance Act 1998 (C. 36)