Office of Public Sector Information
PART 4 continued CHAPTER 8 continued
(1) This section applies if—
(a) a person makes a loss on the disposal of a strip (apart from this section), and
(b) the person’s original acquisition cost for the strip exceeds the amount that falls to be brought into account as the amount payable on the disposal of the strip in determining the amount of the loss.
(2) If the amount that falls to be brought into account as the amount paid by the person to acquire the strip in determining the amount of the loss exceeds the person’s original acquisition cost for the strip, the amount of the loss is reduced.
(3) The amount of the reduction is A − B where—
A is the person’s original acquisition cost for the strip, and
B is the amount that falls to be brought into account as the amount payable on the disposal of the strip in determining the amount of the loss.
(4) If subsection (2) does not apply, the person is treated as not making a loss on the disposal.
(5) In this section any reference to making a loss on the disposal of a strip has the meaning given in section 446(3) and (4).
(1) This section applies if—
(a) as a result of a scheme or arrangement an amount referred to in subsection (2)(a), (b) or (c) differs from the market value of a strip in a way specified in that subsection, and
(b) the obtaining of a tax advantage by any person is the main benefit, or one of the main benefits, that might have been expected to accrue from, or from any provision of, the scheme or arrangement.
(2) The ways are that—
(a) the amount paid by a person in respect of the acquisition of the strip is or was more than the market value at the time of the acquisition,
(b) the amount payable to a person on transferring the strip is less than the market value at the time of the transfer, or
(c) on redemption of the strip the amount payable to a person, as the person holding the strip, is less than the market value on the day before redemption.
(3) In a case within subsection (2)(a), for the purposes of sections 439(1) and 446(3) on transferring the strip the person is treated as if the person had paid to acquire the strip an amount equal to the market value of the strip at the time of the acquisition.
(4) In a case within subsection (2)(b), for those purposes the person is treated as if the amount payable to the person on the transfer were an amount equal to the market value of the strip at the time of the transfer.
(5) In a case within subsection (2)(c), for those purposes the person is treated as if the amount payable to the person on redemption were an amount equal to the market value of the strip on the day before redemption.
(6) For the purposes of this section, no account is to be taken of any incidental expenses incurred in connection with any disposal or acquisition of a strip.
(1) This section and section 451 (market value of strips etc. quoted in foreign stock exchange lists) deal with—
(a) determining the market value at any time of a strip for the purposes of this Chapter, and
(b) determining the market value at any time of a security exchanged for strips of that security for the purposes of section 445(1).
(2) The market value on any day on which the Stock Exchange is open of any strip or security quoted in The Stock Exchange Daily Official List is—
(a) the lower of the two figures shown in that List for the strip or security for that day, plus
(b) one-quarter of the difference between those two figures.
(3) The market value on any day on which the Stock Exchange is closed of any such strip or security is the lower of—
(a) its market value on the latest previous day on which the Stock Exchange is open, and
(b) its market value on the earliest subsequent day on which the Stock Exchange is open.
(4) The Treasury may by regulations make provision as to the manner of determining, for any of the purposes mentioned in subsection (1), the market value at any time of—
(a) any strip, or
(b) any security exchanged for strips of that security.
(5) The regulations may amend or modify—
(a) subsection (2) or (3), or
(b) any provision of section 451.
(6) The regulations may—
(a) make different provision for different cases, and
(b) contain such incidental, supplemental, consequential and transitional provision and savings as the Treasury consider appropriate.
(1) This section applies if the strip or security referred to in section 450(1)—
(a) is a security, or a strip of a security, issued by or on behalf of the government of a territory outside the United Kingdom, and
(b) is not quoted in The Stock Exchange Daily Official List, but
(c) is quoted in a foreign stock exchange list.
(2) The market value on any day on which the foreign stock exchange to which that list relates is open is—
(a) the lower of the two figures shown in that list for the strip or security for that day, plus
(b) one-quarter of the difference between those two figures.
(3) The market value on any day on which the foreign stock exchange to which that list relates is closed is the lower of—
(a) its market value on the latest previous day on which that exchange is open, and
(b) its market value on the earliest subsequent day on which that exchange is open.
(4) But subsections (2) and (3) have effect subject to any modifications that are necessary because of the form of quotation adopted in the exchange in question.
(5) In particular, if a single figure only is published, that figure is to be taken as the market value.
(6) If a strip or security is quoted in more than one foreign stock exchange list—
(a) any such list published for a foreign stock exchange in the territory of the issuing government is to be used for the purposes of this section in preference to any other such list, and
(b) any such list published for a foreign stock exchange which is regarded as the major exchange in that territory for strips or securities is to be used for those purposes in preference to any other such list.
(7) In this section—
“foreign stock exchange” means a recognised stock exchange in a territory outside the United Kingdom on which strips are traded,
“foreign stock exchange list” means any publication which performs in the case of a foreign stock exchange a function equivalent, or broadly similar, to that performed by The Stock Exchange Daily Official List in relation to strips, and
“issuing government” means the government which issued the security mentioned in subsection (1)(a).
(1) The Treasury may by regulations provide that this Chapter is to apply to a strip with such modifications as they consider appropriate.
(2) This section is without prejudice to the general power to make regulations under section 202 of FA 1996 (gilt stripping).
(1) In the case of a disposal of a deeply discounted security that meets conditions A and B, the rules in sections 454 to 456 apply for—
(a) providing for relief for losses on the disposal, and
(b) calculating the amount of profits chargeable under this Chapter on the disposal or the losses for which such relief may be given.
(2) Condition A is that the person making the disposal has held the security continuously since a time before 27th March 2003.
(3) Condition B is that the security was listed on a recognised stock exchange at any time before 27th March 2003.
(1) A person may claim relief from income tax under this section for a loss the person has made on disposing of deeply discounted securities.
(2) For this purpose a person makes such a loss only if A exceeds B, where—
A is the amount the person paid for the securities, excluding any incidental expenses incurred in connection with the acquisition, and
B is the amount payable on the disposal, excluding any incidental expenses incurred in connection with the disposal.
(3) For the calculation of the amount of the loss, see section 455(2) to (4) (under which those expenses are taken into account).
(4) If a claim under this section is made by a person other than a trustee, an amount of income for the tax year in which the disposal occurs which is equal to that loss is not charged to income tax.
(5) If such a claim is made by a trustee, the amount of profits arising in the tax year in which the disposal occurs that is charged under this Chapter is reduced by the amount of the loss.
(6) A claim under this section must be made on or before the first anniversary of the normal self-assessment filing date for the tax year in which the disposal occurs.
(7) This section is subject to section 458(2) (securities held by non-UK resident trustees).
(1) A person’s profit on a disposal, as calculated under section 439, is reduced by any incidental expenses incurred by that person in connection with the disposal or the acquisition of the security that have not been deducted under section 439(4).
(2) A person’s loss on a disposal for the purposes of section 454 (relief for losses) is the amount by which the deductible costs exceed the amount payable on the disposal.
(3) In this section the “deductible costs” means—
(a) the amount paid by the person to acquire the security, and
(b) the incidental expenses incurred by that person in connection with the disposal or the acquisition.
(4) Where a person re-acquires a security, any previous acquisition of it is ignored in determining the person’s incidental expenses within subsection (1) or deductible costs on a subsequent disposal.
(5) For the purposes of this section, no incidental expenses are treated as incurred in connection with transfers and reacquisitions within section 445(2) and (3) (transfer and immediate reacquisition of strips on 5th April).
(1) No loss is taken to occur for the purposes of section 454 on a transfer of a deeply discounted security to a person connected with the transferor if conditions A and B and either condition C or conditions D and E are met.
(2) Condition A is that the transferor acquired the security on its issue.
(3) Condition B is that the amount paid by the transferor to acquire the security exceeded the market value of the security at the time of its issue.
(4) Condition C is that at that time the transferor was connected with the issuer.
(5) Condition D is that at that time the issuer was a close company.
(6) Condition E is that at that time the transferor controlled that company with other persons to whom securities of the same kind were also issued.
(7) Section 414 of ICTA (close companies) has effect for the purposes of this section with the omission of subsection (1)(a) (which excludes non-UK resident companies).
(8) In this section “control” has the meaning given by section 416 of ICTA.
(1) This section applies if profits are taken to arise on a disposal of a deeply discounted security by trustees.
(2) For the purposes of Chapter 5 of Part 5 (settlements: amounts treated as income of settlor), the profits are to be taken to be income arising under the settlement from the security.
(3) For the purposes of Chapter 1C of Part 15 of ICTA (settlements: liability of trustees), the profits are to be taken to be income arising to the trustees.
(4) Income tax that is charged on the trustees is to be charged at the rate applicable to trusts for the tax year in which the disposal occurs.
(5) If the trustees are trustees of a scheme to which section 469 of ICTA applies (unauthorised unit trusts), subsections (2) to (4) do not apply to any profits treated as income in the scheme’s accounts.
(1) Tax is not charged under this Chapter if the disposal is made by the trustees of a settlement and they are non-UK resident.
(2) The following provisions do not apply if the disposal falls within subsection (1)—
section 446 (strips of government securities: relief for losses), and
section 454 (listed securities held since 26th March 2003: relief for losses).
(3) In this section “settlement” has the same meaning as in Chapter 5 of Part 5 (see section 620).
(1) This section applies if profits are taken to arise on the disposal of a deeply discounted security by a person resident or domiciled outside the United Kingdom (“A”).
(2) For the purpose of determining whether an individual ordinarily UK resident is liable for income tax in respect of the profits, sections 739 and 740 of ICTA (transfer of assets abroad) have effect as if the profits, when arising, constituted income becoming payable to A.
(3) For this purpose it does not matter if A is not liable to income tax under this Chapter because of section 458 (non-UK resident trustees).
(1) In this Chapter “share”, in the case of a share in a company, means any share under which an entitlement to receive distributions may arise, but does not include a share in a building society.
(2) In this Chapter “tax advantage” has the meaning given by section 709(1) of ICTA.
(3) In this Chapter “market value” has the same meaning as in TCGA 1992 (see sections 272 to 274 of that Act), except as provided in section 450 or 451 (market value of strips etc.).
(1) Income tax is charged on gains treated as arising from policies and contracts to which this Chapter applies.
(2) For the policies and contracts to which this Chapter applies, see sections 473 to 483.
(3) See also sections 530 to 538 (provisions relating to tax treated as paid on gains and to reliefs).
(4) For exemptions, see in particular Chapter 3 of Part 6 (income from individual investment plans).
(5) For the application of this Chapter where corresponding provision for corporation tax purposes is also relevant, see section 544 (application of Chapter to policies and contracts in which companies interested).
(1) For the purposes of this Chapter, a gain from a policy or contract arises when a chargeable event occurs in relation to the policy or contract (see section 484).
(2) But certain chargeable events are only treated as occurring because a calculation required to be made as at a particular time shows that the gain has arisen.
(3) See, in particular—
(a) section 509(1) (under which a chargeable event is treated as occurring where a periodic calculation following a part surrender or assignment shows a gain),
(b) section 514(1) (under which a part surrender or assignment is treated as a chargeable event where a calculation related to it shows a gain), and
(c) section 525(2) (under which a chargeable event is treated as occurring where an annual personal portfolio bond calculation shows a gain).
(1) Tax is charged under this Chapter on the amount of the gains arising in the tax year.
(2) Subsection (1) is subject to section 514(4) (under which certain gains are charged for a later tax year).
(3) See section 469(3) for the apportionment of gains where two or more persons are interested in a policy or contract.
(4) See sections 491 to 497, 507, 508, 511 to 513, 522 to 524 and 527 to 529 for the rules as to how the gains are calculated.
(1) The person liable for any tax charged under this Chapter is the person indicated by—
section 465 (person liable: individuals),
section 466 (person liable: personal representatives), and
section 467 (person liable: UK resident trustees),
according to how the rights under the policy or contract are owned or held immediately before the chargeable event in question occurs.
(2) References in those sections to the ownership or holding of those rights are references to their ownership or holding at that time.
(3) If there has been a surrender or assignment of only a part of or share in rights under the policy or contract, the references in this section and those sections to the rights are references to that part or share.
(4) For cases where such surrenders or assignments are taken to occur, see—
section 500 (events treated as part surrenders), and
section 505 (assignments etc. involving co-ownership).
(5) This section and sections 470 to 472 are subject to section 469(4) (application of this section and those sections where two or more persons are interested in the policy or contract in question).
(6) See also—
section 468 (non-UK resident trustees and foreign institutions),
section 471 (determination of shares etc.), and
section 472 (trusts created by two or more persons).
(1) An individual is liable for tax under this Chapter if the individual is UK resident in the tax year in which the gain arises and condition A, B or C is met.
(2) Condition A is that the individual beneficially owns the rights under the policy or contract in question.
(3) Condition B is that those rights are held on non-charitable trusts which the individual created.
(4) Condition C is that those rights are held as security for the individual’s debt.
(5) For the purposes of calculating the total income of an individual liable for tax under this Chapter, the amount charged is treated as income.
(6) References in this Chapter to trusts which an individual created include references to trusts arising under any of the following provisions (and references to a settlor or to a person creating trusts are to be read accordingly)—
(a) section 11 of the Married Women’s Property Act 1882 (c. 75),
(b) section 2 of the Married Women’s Policies of Assurance (Scotland) Act 1880 (c. 26), and
(c) section 4 of the Law Reform (Husband and Wife) Act (Northern Ireland) 1964 (c. 23 (N.I.)).
(7) For the right of an individual to recover certain amounts from the trustees of non-charitable trusts, see section 538 (recovery of tax from trustees).
(1) Personal representatives are liable for tax under this Chapter if the rights under the policy or contract are held by them and the condition in subsection (2) is met (and accordingly the gain is treated for income tax purposes as income of the personal representatives in that capacity).
(2) The condition is that if an individual were liable for tax on a gain in respect of the policy or contract, section 530(1) (individual treated as having paid tax at the lower rate) would be disapplied as a result of—
(a) section 531(1) (exceptions from section 530 for policies and contracts specified in section 531(3)), or
(b) paragraph 109(2) of Schedule 2 (contracts in accounting periods beginning before 1st January 1992).
(3) For cases where the condition in subsection (2) is not met, see section 664 of this Act and section 701(8) of ICTA (under which the gain is treated as part of the aggregate income of the estate for the purposes of Chapter 6 of Part 5 of this Act and Part 16 of ICTA respectively).
(1) Trustees are liable for tax under this Chapter if immediately before the chargeable event in question occurs they are UK resident and condition A, B, C or D is met.
(2) Condition A is that the rights under the policy or contract are held by the trustees on charitable trusts.
(3) Condition B is that—
(a) those rights are held by the trustees on non-charitable trusts, and
(b) one or more of the absent settlor conditions is met.
(4) The absent settlor conditions are that the person who created the trusts—
(a) is non-UK resident,
(b) has died, or
(c) in the case of a company or foreign institution (see section 468(5)), has been dissolved or wound up or has otherwise come to an end.
(5) Condition C is that—
(a) the rights under the policy or contract are held by the trustees on non-charitable trusts,
(b) condition B does not apply, and
(c) neither section 465 or 466 above nor section 547(1)(b) of ICTA (circumstances in which a company is liable for tax under Chapter 2 of Part 13 of ICTA) applies.
(6) Condition D is that the rights under the policy or contract are held as security for a debt owed by the trustees.
(7) If trustees are liable for tax under this Chapter, it is charged—
(a) at the lower rate if—
(i) condition A is met, or
(ii) condition D is met and the trustees are trustees of a charitable trust, and
(b) at the rate applicable under section 686(1A) of ICTA (rate applicable to trusts) in any other case.
(1) This section applies if a gain is treated as arising under this Chapter and either—
(a) trustees who are non-UK resident would be liable for tax in respect of the gain as a result of section 467 if the trustees were UK resident immediately before the chargeable event in question occurs, or
(b) immediately before that event occurs—
(i) a foreign institution beneficially owns a share in the rights,
(ii) the rights are held for the purposes of a foreign institution, or
(iii) a share in them is held as security for a foreign institution’s debt.
(2) Section 740 of ICTA (which prevents avoidance of tax where an individual who is ordinarily UK resident benefits from a transfer of assets) applies with the modifications specified in subsection (3) or (4).
(3) In a case within subsection (1)(a), section 740 applies as if—
(a) the gain were income becoming payable to the trustees, and
(b) that income arose to the trustees in the tax year in which the gain arises.
(4) In a case within subsection (1)(b), section 740 applies as if—
(a) the gain were income becoming payable to the institution, and
(b) that income arose to the institution in the tax year in which the gain arises.
(5) In this Chapter “foreign institution” means a company or other institution resident or domiciled outside the United Kingdom.
(6) If there has been a surrender or assignment of only a part of or share in rights under the policy or contract, the references in this section to those rights are references to that part or share.
(1) This section applies if immediately before a chargeable event two or more persons have material interests in the rights under the policy or contract.
(2) Section 470 sets out the circumstances in which persons have such interests for the purposes of this section (which correspond to the circumstances referred to in sections 465 to 468 above and section 547(1) of ICTA (persons liable for tax etc.)).
(3) Section 463 (income charged) applies in the case of any of the persons with such interests as if the amount of the gain arising when the event occurs were such part of it as is proportionate to the share of the rights to which the person’s interest relates.
(4) Sections 464 to 468 (persons liable for tax etc.) apply in relation to each of those persons as if that person were the only person with such an interest at that time.
(5) Section 539(1) (relief for deficiencies) applies in relation to each of those persons as if the amount of deficiency arising when that event occurs were such part of it as is proportionate to the share of the rights to which that person’s interest relates.
(6) If a person (“A”) has two or more material interests in the rights under a policy or contract, this section applies in the same way as where two or more persons have separate such interests, unless A—
(a) is the only person with such interests, and
(b) has all those interests in the same capacity.
(7) If there has been a surrender or assignment of only a part of or share in rights under the policy or contract, the references to those rights in this section and sections 470 to 472 are references to that part or share.
(1) This section sets out the circumstances in which a person has a material interest in the rights under a policy or contract for the purposes of section 469.
(2) An individual has such an interest if—
(a) the individual beneficially owns a share in the rights,
(b) a share in them is held on non-charitable trusts which the individual created, or
(c) a share in them is held as security for the individual’s debt.
(3) A company has such an interest if—
(a) the company beneficially owns a share in the rights,
(b) a share in them is held on non-charitable trusts which the company created, or
(c) a share in them is held as security for the company’s debt.
(4) Personal representatives have such an interest if they hold a share in the rights.
(5) Trustees of a charitable trust have such an interest if a share in the rights—
(a) is held by them, or
(b) is held as security for a debt owed by them.
(6) Trustees of a non-charitable trust have such an interest if—
(a) a share in the rights is held by the trustees and one of the absent settlor conditions specified in section 467(4) is met,
(b) a share in the rights is held by them, none of those conditions is met and no individual, company or personal representatives have an interest in the share, or
(c) a share in them is held as security for a debt owed by the trustees.
(7) A foreign institution has such an interest if—
(a) the institution beneficially owns a share in the rights,
(b) the rights are held for the institution’s purposes, or
(c) a share in them is held as security for the institution’s debt.
Income Tax (Trading and Other Income) Act 2005