Office of Public Sector Information
PART III continued
(1) The Taxes Act 1988 shall be amended as follows.
(2) In Schedule 28B (requirements to be satisfied by qualifying investments of VCTs), after paragraph 10B there shall be inserted the following paragraphs—
10C (1) This paragraph applies where—
(a) arrangements are made for a company (“the new company”) to acquire all the shares (“old shares”) in another company (“the old company”);
(b) the acquisition provided for by the arrangements falls within sub-paragraph (2) below; and
(c) the Board have, before any exchange of shares takes place under the arrangements, given an approval notification.
(2) An acquisition of shares falls within this sub-paragraph if—
(a) the consideration for the old shares consists wholly of the issue of shares (“new shares”) in the new company;
(b) new shares are issued in consideration of old shares only at times when there are no issued shares in the new company other than subscriber shares and new shares previously issued in consideration of old shares;
(c) the consideration for new shares of each description consists wholly of old shares of the corresponding description; and
(d) new shares of each description are issued to the holders of old shares of the corresponding description in respect of, and in proportion to, their holdings.
(3) For the purposes of sub-paragraph (1)(c) above an approval notification is one which, on an application by either the old company or the new company, is given to the applicant company and states that the Board are satisfied that the exchange of shares under the arrangements—
(a) will be effected for bona fide commercial reasons; and
(b) will not form part of any such scheme or arrangements as are mentioned in section 137(1) of the 1992 Act.
(4) If the requirements of paragraph 3 above were satisfied in relation to the old company and any old shares immediately before the beginning of the period for giving effect to the arrangements, then (to the extent that it would not otherwise be the case) those requirements shall be deemed to be satisfied in relation to the new company and the matching new shares at all times which—
(a) fall in that period; and
(b) do not fall after a time when (apart from the arrangements) those requirements would have ceased by virtue of—
(i) sub-paragraph (4) or (5) of that paragraph, or
(ii) any cessation of a trade by any company,
to be satisfied in relation to the old company and the matching old shares.
(5) For the purposes of paragraph 3 above the period of two years mentioned in sub-paragraph (4) of that paragraph shall be deemed, in the case of any new shares, to expire at the same time as it would have expired (or by virtue of this sub-paragraph would have been deemed to expire) in the case of the matching old shares.
(6) Subject to sub-paragraph (7) below, where—
(a) there is an exchange under the arrangements of any new shares for any old shares, and
(b) those old shares are shares in relation to which the requirements of paragraphs 6 and 8 above were (or were deemed to be) satisfied to any extent immediately before the exchange,
those requirements shall be deemed, at all times after that time, to be satisfied to the same extent in relation to the matching new shares.
(7) Where there is a time following any exchange under the arrangements of any new shares for any old shares when (apart from the arrangements) the requirements of paragraph 6 above would have ceased under—
(a) sub-paragraph (2) of that paragraph, or
(b) this sub-paragraph,
to be satisfied in relation to those old shares, those requirements shall cease at that time to be satisfied in relation to the matching new shares.
(8) For the purposes of paragraph 7 above any new shares acquired under the arrangements shall be deemed to represent an investment which—
(a) raised the same amount of money as was raised (or, by virtue of this sub-paragraph, is deemed to have been raised) by the issue of the matching old shares, and
(b) raised that amount by an issue of shares in the new company made at the time when the issue of the matching old shares took place (or, as the case may be, is deemed to have taken place).
(9) In determining whether the requirements of paragraph 9 above are satisfied in relation to the old company or the new company at a time in the period for giving effect to the arrangements, both—
(a) the arrangements themselves, and
(b) any exchange of new shares for old shares that has already taken place under the arrangements,
shall be disregarded.
(10) For the purposes of paragraph 10B above the value of the new shares, both immediately after the time of their acquisition and immediately after the time of any subsequent relevant event occurring by virtue of the arrangements, shall be taken to be the same as the value, when last valued in accordance with that paragraph, of the old shares for which they are exchanged.
(11) Nothing in this paragraph shall deem any of the requirements of this Schedule to be satisfied in relation to any new shares unless the matching old shares were first issued to the trust company and have been held by that company from the time when they were issued until they are acquired by the new company.
(12) References in this paragraph to the period for giving effect to the arrangements are references to the period which—
(a) begins with the time when those arrangements first came into existence; and
(b) ends with the time when the new company completes its acquisition under the arrangements of all the old shares.
(13) If, at any time after the arrangements first came into existence and before the new company has acquired all the old shares, the arrangements—
(a) cease to be arrangements for the acquisition of all the old shares by the new company, or
(b) cease to be arrangements for an acquisition falling within sub-paragraph (2) above,
this paragraph shall not deem any requirement of this Schedule to be satisfied, and sub-paragraph (10) above shall not apply, in the case of any new shares at any time after the arrangements have so ceased.
(14) Subject to sub-paragraph (15) below, references in this paragraph, except in the expression “subscriber shares”, to shares in a company include references to any securities of that company.
(15) For the purposes of this paragraph, a relevant security of the old company shall not be treated as a security of that company if—
(a) the arrangements do not provide for the acquisition of the security by the new company; or
(b) such treatment prevents sub-paragraph (1)(b) above from being satisfied in connection with the arrangements.
(16) In sub-paragraph (15) above “relevant security” means an instrument which is a security for the purposes of this Schedule by reason only of section 842AA(12).
(17) For the purposes of this paragraph—
(a) old shares and new shares are of a corresponding description if, were they shares in the same company, they would be of the same description; and
(b) old shares and new shares are matching shares in relation to each other if the old shares are the shares for which those new shares are exchanged under the arrangements.
10D.—(1) This paragraph applies where—
shares have been issued to the trust company by virtue of the exercise by that company of any right of conversion attached to other shares, or securities, held by that company (“the convertibles”);
the shares so issued are in the same company as the convertibles to which the right was attached;
the convertibles to which the right was attached were first issued to the trust company and were held by that company from the time they were issued until converted; and
the right was attached to the convertibles when they were first so issued and was not varied before it was exercised.
(2) Sub-paragraphs (5) to (8) of paragraph 10C above shall apply in relation to the exchange of convertibles for shares by virtue of the exercise of the right of conversion as if—
(a) that exchange were an exchange under any such arrangements as are mentioned in that paragraph of new shares for old shares; and
(b) the references in those sub-paragraphs and sub-paragraph (17)(b) of that paragraph to the arrangements were references to the provision conferring the right of conversion.
(3) For the purposes of paragraph 10B above the value of the new shares immediately after the time of their acquisition by the trust company shall be taken to be the same as the value, when last valued in accordance with that paragraph, of the convertibles for which they are exchanged.”
(3) In paragraph 13 of Schedule 28B, at the beginning of sub-paragraph (1) there shall be inserted “Subject to paragraph 10C(15) above,”.
(4) In section 842AA (venture capital trusts), after subsection (5) there shall be inserted the following subsections—
“(5AA) For the purposes of subsection (2)(b) to (d) above where—
(a) any shares (“new shares”) are exchanged for other shares (“old shares”) under arrangements in relation to which paragraph 10C of Schedule 28B applies, and
(b) those arrangements have not ceased by virtue of sub-paragraph (13) of that paragraph to be arrangements by reference to which requirements of that Schedule are deemed to be satisfied,
the value of the new shares, both at the time of their acquisition and immediately after any subsequent addition to a holding of the new shares that is made under those arrangements, shall be taken to be the same as the value, when last valued in accordance with subsection (5) above, of the old shares for which they are exchanged.
(5AB) References in subsection (5AA) above to shares in a company include references to any securities of that company.
(5AC) For the purposes of subsection (2)(b) to (d) above, where—
(a) shares (“new shares”) are issued to a company by virtue of the exercise by that company of any right of conversion attached to other shares, or securities, held by that company (“convertibles”), and
(b) paragraph 10D of Schedule 28B applies in relation to the issue of the new shares,
the value of the new shares at the time of their acquisition shall be taken to be the same as the value, when last valued in accordance with subsection (5) above, of the convertibles for which they are exchanged.”
(5) This section—
(a) shall have effect in relation to any arrangements made, and rights of conversion exercised, on or after 16th June 1999; and
(b) shall be deemed to have come into force on that date.
(1) In Schedule 15B to the Taxes Act 1988 (VCTs: relief from income tax), in paragraph 7 (relief on distributions), in sub-paragraph (3)(a), after “trust,” there shall be inserted—
“(ia) were so acquired for bona fide commercial purposes and not as part of a scheme or arrangement the main purpose of which, or one of the main purposes of which, is the avoidance of tax,”.
(2) This section applies in relation to shares acquired on or after 9th March 1999.
(1) In section 289 of the Taxes Act 1988 (eligibility for EIS relief), in subsection (1A)—
(a) for paragraph (a) there shall be substituted—
“(a) is a company which—
(i) is such a company as is mentioned in section 293(2)(a), and
(ii) if it is a subsidiary of the qualifying company, is a 90 per cent subsidiary of that company, or”; and
(b) in paragraph (b), for “such a company” there shall be substituted “a company falling within paragraph (a) above”.
(2) This section applies in relation to shares issued on or after 6th April 1999.
(1) After section 150C of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 insert—
Schedule 5BA to this Act (which provides for the application of taper relief in cases where relief under Schedule 5B, or Chapter III of Part VII of the Taxes Act, applies) shall have effect.”
(2) Schedule 7 to this Act (which inserts Schedule 5BA into that Act) shall have effect.
(3) In consequence of the insertion of Schedule 5BA, in that Act—
(a) in section 2A(8) (qualifying holding period for taper relief), after “that Schedule” insert “and paragraph 3 of Schedule 5BA”; and
(b) in paragraph 2(4) of Schedule A1 (effect of periods not counting for taper relief purposes), after “paragraphs 10 to 12 below” insert “or paragraph 4 of Schedule 5BA”.
(1) Schedule 8 to this Act (which amends Schedule 5B to the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 in relation to cases where there is a disposal of some, but not all, of the shares to which relief under that Schedule is attributable) shall have effect.
(2) The amendments made by Schedule 8 to this Act have effect in relation to shares issued on or after 6th April 1999.
Schedule 9 to this Act (which makes provision about tax-free benefits in relation to value shifting) shall have effect.
(1) For subsection (2) of section 71 of the Taxation of Chargeable Gains Act 1992 (allowable losses of trustees treated as transferred to a person becoming absolutely entitled to settled property) there shall be substituted the following subsections—
“(2) Where, in any case in which a person (“the beneficiary”) becomes absolutely entitled to any settled property as against the trustee, an allowable loss would (apart from this subsection) have accrued to the trustee on the deemed disposal under subsection (1) above of an asset comprised in that property—
(a) that loss shall be treated, to the extent only that it cannot be deducted from pre-entitlement gains of the trustee, as an allowable loss accruing to the beneficiary (instead of to the trustee); but
(b) any allowable loss treated as accruing to the beneficiary under this subsection shall be deductible under this Act from chargeable gains accruing to the beneficiary to the extent only that it can be deducted from gains accruing to the beneficiary on the disposal by him of—
(i) the asset on the deemed disposal of which the loss accrued; or
(ii) where that asset is an estate, interest or right in or over land, that asset or any asset deriving from that asset.
(2A) In subsection (2) above “pre-entitlement gain”, in relation to an allowable loss accruing to a trustee on the deemed disposal of any asset comprised in any settled property, means a chargeable gain accruing to that trustee on—
(a) a disposal which, on the occasion on which the beneficiary becomes absolutely entitled as against the trustee to that property, is deemed under subsection (1) above to have taken place; or
(b) any other disposal taking place before that occasion but in the same year of assessment.
(2B) For the purposes of subsection (2)(b)(ii) above an asset (“the relevant asset”) derives from another 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 the relevant asset is wholly or partly derived (through one or more successive events falling within paragraphs (a) to (c) above but not otherwise) from the other asset.
(2C) The rules set out in subsection (2D) below shall apply (notwithstanding any other rules contained in this Act or in section 113(2) of the [1995 c. 4.] Finance Act 1995 (order of deduction))—
(a) for determining for the purposes of this section whether an allowable loss accruing to the trustee, or treated as accruing to the beneficiary, can be deducted from particular chargeable gains for any year of assessment; and
(b) for the making of deductions of allowable losses from chargeable gains in cases where it has been determined that such an allowable loss can be deducted from particular chargeable gains.
(2D) Those rules are as follows—
(a) allowable losses accruing to the trustee on a deemed disposal under subsection (1) above shall be deducted before any deduction is made in respect of any other allowable losses accruing to the trustee in that year;
(b) allowable losses treated as accruing to the beneficiary under this section, so far as they cannot be deducted in a year of assessment as mentioned in subsection (2)(b) above, may be carried forward from year to year until they can be so deducted; and
(c) allowable losses treated as accruing to the beneficiary for any year of assessment under this section, and allowable losses carried forward to any year of assessment under paragraph (b) above—
(i) shall be deducted before any deduction is made in respect of any allowable losses accruing to the beneficiary in that year otherwise than by virtue of this section; and
(ii) in the case of losses carried forward to any year, shall be deductible as if they were losses actually accruing in that year.”
(2) This section applies in relation to any occasion on or after 16th June 1999 on which a person becomes absolutely entitled to settled property as against the trustee.
(1) In Part VIII of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (supplemental), after section 284 there shall be inserted the following sections—
(1) This section applies where—
(a) a person (“the original taxpayer”) has at any time obtained for any chargeable period (“the first chargeable period”) the benefit of any capital gains relief to which he had no statutory entitlement;
(b) the benefit of the relief was obtained in reliance on any concession;
(c) the concession was first published by the Board before 9th March 1999 or (having been published on or after that date) replaced a concession satisfying the requirements of this paragraph with a concession to the same or substantially the same effect; and
(d) the concession involved the application (with or without modifications), to a case to which they would not otherwise have applied, of the provisions of any enactment (“the relevant statutory provisions”).
(2) This section applies only if, at the time when the original taxpayer obtained the benefit of the relief, the concession was one available generally to any person falling within its terms.
(3) If the benefit obtained for the first chargeable period by the original taxpayer is repudiated for any later chargeable period (whether by the original taxpayer or by another person), the enactments relating to the taxation of chargeable gains shall have effect as if a chargeable gain equal to the amount of that benefit accrued in the later chargeable period to the person repudiating the benefit.
(4) For the purposes of this section—
(a) a capital gains relief for any chargeable period is a relief (of whatever description) the effect of which is that the amount of the chargeable gains taken to have accrued to that person in that period is less than it otherwise would have been; and
(b) the amount of the benefit of any such relief is the amount by which, as a consequence of that relief, those gains are less than they otherwise would have been.
(5) Where, without applying a specific enactment, any concession has the effect that—
(a) any asset is treated as the same as another asset and as acquired as the other asset was acquired,
(b) any two or more assets are treated as a single asset, or
(c) any disposal is treated as having been a disposal on which neither a gain nor a loss accrued,
that concession shall be assumed for the purposes of this section to have involved the application, to a case to which it would not otherwise have applied, of the provisions of an enactment to the corresponding effect.
(6) For the purposes of this section the benefit of any relief obtained by the original taxpayer for the first chargeable period is repudiated by a person for a later chargeable period if—
(a) circumstances arise such that, had the equivalent circumstances arisen in the case of the corresponding relief under the relevant statutory provisions, the whole or a part of the benefit of that relief would have fallen to be recouped from that person in the later chargeable period;
(b) apart from this section, the recoupment in the actual circumstances of the whole or a part of the benefit obtained by the original taxpayer is prevented by the fact that the original taxpayer relied on a concession (rather than on the relevant statutory provisions) to obtain that benefit; and
(c) the person from whom, in the equivalent circumstances, the amount of the benefit or any part of it would have fallen to be recouped is not precluded by subsection (8) below from relying on that fact in relation to that amount or part.
(7) For the purposes of this section an amount of the benefit of a capital gains relief is recouped from any person in a chargeable period to the extent that an amount is so brought into account in his case for that period as to secure that—
(a) the amount of his chargeable gains for that period is taken to be more than it otherwise would have been by an amount directly or indirectly representing the whole or a part of the amount of the benefit; or
(b) the amount of his allowable losses for that period is taken to be less than it otherwise would have been by an amount directly or indirectly representing the whole or a part of the amount of the benefit.
(8) Where—
(a) any such circumstances as are mentioned in subsection (6)(a) above have arisen in relation to the relief the benefit of which has been obtained by the original taxpayer,
(b) the person from whom, in the equivalent circumstances, the whole or any part of the amount of the benefit would have fallen to be recouped has accepted that, in the actual circumstances, the whole or a part of the benefit obtained by the original taxpayer may be recouped from him, and
(c) that acceptance is indicated in writing to the Board (whether by the making or amendment of a self-assessment or otherwise),
that person’s rights subsequently to amend, appeal against or otherwise challenge any assessment shall not be exercised in any manner inconsistent with his acceptance of that matter (which shall be irrevocable).
(9) In this section “concession” includes any practice, interpretation or other statement in the nature of a concession.
(1) Chargeable gains that are treated as accruing to any person under section 284A(3) shall not be eligible for taper relief.
(2) The total amount of chargeable gains that are treated as accruing to any person under subsection (3) of section 284A in respect of any such benefit as is referred to in that subsection shall not exceed the amount of that benefit.
(3) Where, after any assessment to tax has been made on the basis that any chargeable gain is treated as having accrued to any person under section 284A(3)—
(a) the person assessed, within any of the periods allowed by subsection (4) below, gives an indication for the purposes of section 284A(8), or
(b) a final determination of the original taxpayer’s liability to tax for the first chargeable period is made on the basis that the original taxpayer did not, or was not entitled to, rely on the concession in question,
all such adjustments shall be made (whether by way of assessment, amendment of an assessment, repayment of tax or otherwise) as are necessary to secure that no person is subjected to any greater liability by virtue of section 284A(3) than he would have been had the indication been given, or the final determination made, before the making of the assessment.
(4) The periods allowed by this subsection are—
(a) the period of twelve months beginning with the making of the assessment;
(b) the period within which the person is entitled to amend his self-assessment or company tax return for the chargeable period in which the chargeable gain under section 284A(3) is treated as having accrued to him;
(c) where the person makes a claim for any further relief against the amount that may be recouped from him by virtue of his indication under section 284A(8), the period allowed for making that claim.
(5) Subsection (3) above has effect notwithstanding any time limits relating to the making or amendment of an assessment for any chargeable period.”
(2) Sections 284A and 284B of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 have effect in relation to any case in which the circumstances arising as mentioned in subsection (6)(a) of section 284A are circumstances arising on or after 9th March 1999, whether the benefit mentioned in subsection (1) of that section was obtained as so mentioned before or after the passing of this Act.
In section 22(3D) of the [1990 c. 1.] Capital Allowances Act 1990 (first year allowances: transitional relief), for “1st July 1999” there shall be substituted “1st July 2000”.
(1) In section 22 of the Capital Allowances Act 1990 (“the 1990 Act”) (first-year allowances), in subsection (3CC) (which restricts the expenditure on machinery and plant for use in Northern Ireland which is eligible for 100 per cent. allowances), after paragraph (b) there shall be inserted “; or
(c) expenditure on the provision of a goods vehicle for the purposes of a trade which consists primarily of the conveyance of goods; or
(d) unauthorised expenditure on the provision of machinery or plant for use primarily in—
(i) agriculture, fishing or fish farming, or
(ii) any relevant activity carried out in relation to agricultural produce, fish or any fish product for the purpose of bringing it to market.”
(2) After subsection (3CC) of that section there shall be inserted—
“(3CD) For the purposes of subsection (3CC) above—
(a) expenditure is unauthorised expenditure unless it is authorised, for the purposes of subsection (3CA) above, by the Department of Agriculture for Northern Ireland; and
(b) “relevant activity” means transportation, storage, preparation, processing or packaging.
(3CE) An authorisation given, for the purposes of subsection (3CA) above, by the Department of Agriculture for Northern Ireland—
(a) may be given either specially (that is to say, so as to apply only to a specified item of expenditure or a specified person) or generally (that is to say, so as not only so to apply);
(b) may, if given generally, be modified by that Department; and
(c) may in any case be absolute or conditional.”
(3) In subsection (10) of that section, after “section” there shall be inserted—
““agriculture” and “agricultural produce” have the same meanings as in section 6 of the [1972 c. 68.] European Communities Act 1972;
“fish” includes shellfish;
“fish farming” means the intensive rearing, on a commercial basis, of fish intended for human consumption;
“fishing” means a trade, or part of a trade, which consists of the catching or taking of fish;
“goods vehicle” has the same meaning as in the [S.I. 1995/2994 (N.I. 18).] Road Traffic (Northern Ireland) Order 1995;”.
(4) In section 22B of the 1990 Act (withdrawal of first-year allowance on change of use)—
(a) in subsection (2)(a), for “the period of two years beginning with the date of the incurring of that expenditure” there shall be substituted “the relevant period”; and
(b) after subsection (2) there shall be inserted—
“(2A) In subsection (2) above “the relevant period” means—
(a) where the expenditure concerned exceeds £3.5 million, the period of five years beginning with the date of the incurring of that expenditure, and
(b) in any other case, the period of two years beginning with that date.”
(5) After section 22B of the 1990 Act there shall be inserted—
(1) No obligation as to secrecy or other restriction on the disclosure of information imposed by statute or otherwise shall prevent—
(a) the Board or an authorised officer of the Board from disclosing to the Department of Agriculture for Northern Ireland (“the Department”) or an authorised officer of the Department, or
(b) the Department or an authorised officer of the Department from disclosing to the Board or an authorised officer of the Board,
information for the purpose of assisting the Board in the carrying out of their functions with respect to claims for capital allowances made under section 22 by virtue of subsection (3CA) of that section or, as the case may be, the Department in the carrying out of its functions under that section.
(2) Information obtained by virtue of a disclosure authorised by this section shall not be disclosed except—
(a) to the Board or the Department or to an authorised officer of the Board or of the Department; or
(b) for the purposes of any proceedings connected with a matter in relation to which the Board or the Department carry out the functions mentioned in subsection (1) above.”
(6) The preceding provisions of this section have effect in relation to every chargeable period ending on or after 12th May 1998.
Finance Act 1999