Office of Public Sector Information
SCHEDULE 1 continued PART 1 continued
118 Omit section 574 (share loss relief for individuals).
119 (1) Amend section 575 (exclusion of relief under section 573 or 574 in certain cases) as follows.
(2) In the sidenote omit “or 574”.
(3) In subsection (1) for “Sections 573 and 574 do” substitute “Section 573 does”.
(4) In subsection (2)—
(a) for “person” substitute “company”,
(b) for “him” and, in both places where it occurs, “he” substitute “it”, and
(c) omit “or 574”, in each place where it occurs.
(5) In subsection (3) omit “or 574”.
(6) After subsection (3) insert—
“(4) In this section “new consideration” means consideration in money or money’s worth other than consideration of the kind excluded by paragraph (a) or (b) of section 128(2) of the 1992 Act.”
(7) Transpose section 575 as so amended to after section 573.
120 (1) Amend section 576 (provisions supplementary to sections 573 to 575) as follows.
(2) In the sidenote for “sections 573 to 575” substitute “sections 573 and 575”.
(3) In subsection (1)—
(a) for “subsections (1A) to (1C)” substitute “subsection (1C)”,
(b) for “a person” substitute “a company”,
(c) for “a company” substitute “another company”,
(d) for “he” and “him”, in each place where they occur, substitute “it”, and
(e) omit “or 574”.
(4) Omit subsections (1A) and (1B).
(5) After subsection (1C) insert—
“(1D) In this section “holding” means any number of shares of the same class held by one company in one capacity, growing or diminishing as shares of that class are acquired or disposed of.
For this purpose—
(a) shares are not to be treated as being of the same class unless they are so treated by the practice of a recognised stock exchange or would be so treated if dealt in on such an exchange, and
(b) subsection (4) of section 104 of the 1992 Act applies as it applies for the purposes of subsection (1) of that section.”
(6) Omit subsections (2) to (5).
(7) Transpose section 576 as so amended to after section 575.
121 After section 576 insert—
(1) For the purposes of this Chapter a qualifying trading company is a company which meets each of conditions A to D.
(2) Condition A is that the company either—
(a) meets each of the following requirements on the date of the disposal—
(i) the trading requirement (see section 576B),
(ii) the control and independence requirement (see section 576D),
(iii) the qualifying subsidiaries requirement (see section 576E), and
(iv) the property managing subsidiaries requirement (see section 576F), or
(b) has ceased to meet any of those requirements at a time which is not more than 3 years before that date and has not since that time been an excluded company, an investment company or a trading company.
(3) Condition B is that the company either—
(a) has met each of the requirements mentioned in condition A for a continuous period of 6 years ending on that date or at that time, or
(b) has met each of those requirements for a shorter continuous period ending on that date or at that time and has not before the beginning of that period been an excluded company, an investment company or a trading company.
(4) Condition C is that the company—
(a) met the gross assets requirement (see section 576G) both immediately before and immediately after the issue of the shares in respect of which the relief is claimed under this Chapter, and
(b) met the unquoted status requirement (see section 576H) at the relevant time within the meaning of that section.
(5) Condition D is that the company has carried on its business wholly or mainly in the United Kingdom throughout the period—
(a) beginning with the incorporation of the company or, if later, 12 months before the shares in question were issued, and
(b) ending with the date of the disposal.”
122 After section 576A insert —
(1) The trading requirement is that—
(a) the company, disregarding any incidental purposes, exists wholly for the purpose of carrying on one or more qualifying trades, or
(b) the company is a parent company and the business of the group does not consist wholly or as to a substantial part in the carrying on of non-qualifying activities.
(2) If the company intends that one or more other companies should become its qualifying subsidiaries with a view to their carrying on one or more qualifying trades—
(a) the company is treated as a parent company for the purposes of subsection (1)(b), and
(b) the reference in subsection (1)(b) to the group includes the company and any existing or future company that will be its qualifying subsidiary after the intention in question is carried into effect.
This subsection does not apply at any time after the abandonment of that intention.
(3) For the purpose of subsection (1)(b) the business of the group means what would be the business of the group if the activities of the group companies taken together were regarded as one business.
(4) For the purpose of determining the business of a group, activities are disregarded to the extent that they are activities carried on by a mainly trading subsidiary otherwise than for its main purpose.
(5) For the purposes of determining the business of a group, activities of a group company are disregarded to the extent that they consist in—
(a) the holding of shares in or securities of a qualifying subsidiary of the parent company,
(b) the making of loans to another group company,
(c) the holding and managing of property used by a group company for the purpose of one or more qualifying trades carried on by a group company, or
(d) the holding and managing of property used by a group company for the purpose of research and development from which it is intended—
(i) that a qualifying trade to be carried on by a group company will be derived, or
(ii) that a qualifying trade carried on or to be carried on by a group company will benefit.
(6) Any reference in subsection (5)(d)(i) or (ii) to a group company includes a reference to any existing or future company which will be a group company at any future time.
(7) In this section—
“excluded activities” has the meaning given by section 192 of ITA 2007 read with sections 193 to 199 of that Act,
“group” means a parent company and all its qualifying subsidiaries,
“group company”, in relation to a group, means the parent company or any of its qualifying subsidiaries,
“incidental purposes” means purposes having no significant effect (other than in relation to incidental matters) on the extent of the activities of the company in question,
“mainly trading subsidiary” means a subsidiary which, apart from incidental purposes, exists wholly for the purpose of carrying on one or more qualifying trades, and any reference to the main purpose of such a subsidiary is to be read accordingly,
“non-qualifying activities” means—
excluded activities, and
activities (other than research and development) carried on otherwise than in the course of a trade,
“parent company” means a company that has one or more qualifying subsidiaries,
“qualifying subsidiary” is to be read in accordance with section 191 of ITA 2007,
“qualifying trade” has the meaning given by section 189 of that Act,
“research and development” has the meaning given by section 837A.
(8) In sections 189(1)(b) and 194(4)(c) of ITA 2007 (as applied by subsection (7) for the purposes of the definitions of “excluded activities” and “qualifying trade”) “period B” means the continuous period that is relevant for the purposes of section 576A(3).”
123 After section 576B insert—
(1) A company is not regarded as ceasing to meet the trading requirement by reason only of anything done in consequence of the company or any of its subsidiaries being in administration or receivership.
This has effect subject to subsections (2) and (3).
(2) Subsection (1) applies only if—
(a) the entry into administration or receivership, and
(b) everything done as a result of the company concerned being in administration or receivership,
is for genuine commercial reasons, and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.
(3) A company ceases to meet the trading requirement if before the time that is relevant for the purposes of section 576A(2)—
(a) a resolution is passed, or an order is made, for the winding up of the company or any of its subsidiaries (or, in the case of a winding up otherwise than under the Insolvency Act 1986 or the Insolvency (Northern Ireland) Order 1989, any other act is done for the like purpose), or
(b) the company or any of its subsidiaries is dissolved without winding up.
This is subject to subsection (4).
(4) Subsection (3) does not apply if —
(a) the winding up is for genuine commercial reasons, and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax, and
(b) the company continues, during the winding up, to be a trading company.
(5) References in this section to a company being “in administration” or “in receivership” are to be read in accordance with section 252 of ITA 2007.”
124 After section 576C insert—
(1) The control element of the requirement is that—
(a) the company must not control (whether on its own or together with any person connected with it) any company which is not a qualifying subsidiary of the company, and
(b) no arrangements must be in existence by virtue of which the company could fail to meet paragraph (a) (whether at a time during the continuous period that is relevant for the purposes of section 576A(3) or otherwise).
(2) The independence element of the requirement is that—
(a) the company must not—
(i) be a 51% subsidiary of another company, or
(ii) be under the control of another company (or of another company and any other person connected with that other company), without being a 51% subsidiary of that other company, and
(b) no arrangements must be in existence by virtue of which the company could fail to meet paragraph (a) (whether at a time during the continuous period that is relevant for the purposes of section 576A(3) or otherwise).
(3) This section is subject to section 576J(3).
(4) In this section—
“arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable,
“control” is to be read as follows—
in subsection (1)(a), in accordance with section 416(2) to (6),
in subsection (2)(a), in accordance with section 840,
“qualifying subsidiary” is to be read in accordance with section 191 of ITA 2007.”
125 After section 576D insert—
(1) The qualifying subsidiaries requirement is that any subsidiary that the company has must be a qualifying subsidiary of the company.
(2) In this section “qualifying subsidiary” is to be read in accordance with section 191 of ITA 2007.”
126 After section 576E insert—
(1) The property managing subsidiaries requirement is that any property managing subsidiary that the company has must be a qualifying 90% subsidiary of the company.
(2) In this section—
“property managing subsidiary” has the meaning given by section 188(2) of ITA 2007,
“qualifying 90% subsidiary” has the meaning given by section 190 of that Act.”
127 After section 576F insert—
(1) The gross assets requirement in the case of a single company is that the value of the company’s gross assets—
(a) must not exceed £7 million immediately before the shares in respect of which the relief is claimed under this Chapter are issued, and
(b) must not exceed £8 million immediately afterwards.
(2) The gross assets requirement in the case of a parent company is that the value of the group assets—
(a) must not exceed £7 million immediately before the shares in respect of which the relief is claimed under this Chapter are issued, and
(b) must not exceed £8 million immediately afterwards.
(3) The value of the group assets means the aggregate of the values of the gross assets of each of the members of the group, disregarding any that consist in rights against, or shares in or securities of, another member of the group.
(4) In this section—
“group” means a parent company and its qualifying subsidiaries,
“parent company” means a company that has one or more qualifying subsidiaries,
“qualifying subsidiary” is to be read in accordance with section 191 of ITA 2007, and
“single company” means a company that does not have one or more qualifying subsidiaries.”
128 After section 576G insert—
(1) The unquoted status requirement is that, at the time (“the relevant time”) at which the shares in respect of which the relief is claimed under this Chapter are issued—
(a) the company must be an unquoted company,
(b) there must be no arrangements in existence for the company to cease to be an unquoted company, and
(c) there must be no arrangements in existence for the company to become a subsidiary of another company (“the new company”) by virtue of an exchange of shares, or shares and securities, if—
(i) section 576J applies in relation to the exchange, and
(ii) arrangements have been made with a view to the new company ceasing to be an unquoted company.
(2) The arrangements referred to in subsection (1)(b) and (c)(ii) do not include arrangements in consequence of which any shares, stocks, debentures or other securities of the company or the new company are at any subsequent time—
(a) listed on a stock exchange that is a recognised stock exchange by virtue of an order made under section 1005 of ITA 2007, or
(b) listed on an exchange, or dealt in by any means, designated by an order made for the purposes of section 184(3)(b) or (c) of that Act,
if the order was made after the relevant time.
(3) In this section—
“arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable,
“debenture” has the meaning given by section 744 of the Companies Act 1985,
“unquoted company” has the meaning given by section 184(2) of ITA 2007.”
129 After section 576H insert—
The Treasury may by order make such amendments of sections 576B to 576H as they consider appropriate.”
130 After section 576I insert—
(1) This section and section 576K apply in relation to shares if—
(a) a company (“the new company”) in which the only issued shares are subscriber shares acquires all the shares (“old shares”) in another company (“the old company”),
(b) the consideration for the old shares consists wholly of the issue of shares (“new shares”) in the new company,
(c) the consideration for the new shares of each description consists wholly of old shares of the corresponding description,
(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, and
(e) by virtue of section 127 of the 1992 Act as applied by section 135(3) of that Act (company reconstructions etc), the exchange of shares is not to be treated as involving a disposal of the old shares or an acquisition of the new shares.
In this subsection references to shares, except the first and that in the expression “subscriber shares”, include securities.
(2) For the purposes of this Chapter the exchange of shares is not regarded as involving any disposal of the old shares or any acquisition of the new shares.
(3) Nothing in section 576D (the control and independence requirement) applies in relation to such an exchange of shares, or shares and securities, as is mentioned in subsection (1), or arrangements with a view to such an exchange.
(4) For the purposes of this section old shares and new shares are of a corresponding description if, on the assumption that they were shares in the same company, they would be of the same class and carry the same rights.
(5) References in section 576K to “old shares”, “new shares”, “the old company” and “the new company” are to be read in accordance with this section.”
131 After section 576J insert—
(1) Subsection (2) applies if, in the case of any new shares held by a company or by a nominee for a company, the old shares for which they were exchanged were shares that had been subscribed for by the company (“the investor”).
(2) This Chapter has effect as if—
(a) the new shares had been subscribed for by the investor at the time when, and for the amount for which, the old shares were subscribed for by the investor,
(b) the new shares had been issued by the new company at the time when the old shares were issued to the investor by the old company, and
(c) any requirements of this Chapter which were met at any time before the exchange by the old company had been met at that time by the new company.
(3) Section 573(6) applies for the purposes of this section.”
132 After section 576K insert—
(1) In this Chapter (subject to subsections (2) to (5))—
“excluded company” means a company which—
has a trade which consists wholly or mainly of dealing in land, in commodities or futures or in shares, securities or other financial instruments,
has a trade which is not carried on on a commercial basis and in such a way that profits in the trade can reasonably be expected to be realised,
is a holding company of a group other than a trading group, or
is a building society or a registered industrial and provident society,
“group” (except in sections 576B and 576G) means a company which has one or more 51% subsidiaries together with that or those subsidiaries,
“holding company” means a company whose business consists wholly or mainly in the holding of shares or securities of companies which are its 51% subsidiaries,
“investment company” has the meaning given by section 130 except that it does not include the holding company of a trading group,
“registered industrial and provident society” means a society registered or treated as registered under the Industrial and Provident Societies Act 1965 or the Industrial and Provident Societies Act (Northern Ireland) Act 1969,
“shares”—
includes stock, but
does not include shares or stock not forming part of a company’s ordinary share capital,
“trading company” means a company other than an excluded company which is—
a company whose business consists wholly or mainly of the carrying on of a trade or trades, or
the holding company of a trading group, and
“trading group” means a group the business of whose members, when taken together, consists wholly or mainly in the carrying on of a trade or trades.
(2) Except as provided by subsection (3), paragraph (b) of the definition of “shares” in subsection (1) does not apply in the definition of “excluded company” in subsection (1) or in section 576J(1) to (4).
(3) Paragraph (b) of that definition applies in relation to the first reference to “shares” in section 576J(1).
(4) The definition of “shares” in subsection (1) does not apply in sections 576B(5)(a), 576G(3) and 576H(1)(c) and (2).
(5) For the purposes of the definition of “trading group” in subsection (1), any trade carried on by a subsidiary which is an excluded company is treated as not constituting a trade.”
133 Omit section 581A (interest on foreign currency securities etc).
134 (1) Amend section 582 (funding bonds issued in respect of interest on certain debts) as follows.
(2) In subsection (1)(b) omit the words from “or section” to “income tax purposes)”.
(3) For subsections (2) and (2A) substitute—
“(2) Subsection (2A) applies if an issue of funding bonds is treated as a payment of interest as mentioned in subsection (1)(a) and—
(a) the person by or through whom the bonds are issued is required to retain bonds under section 939(2) of ITA 2007, but
(b) it is impracticable for the person to do so.
(2A) In that case, tax in respect of the amount of interest treated by virtue of subsection (1)(a) as having been paid by the issue of the bonds shall be charged under Case VI of Schedule D for the chargeable period in which the bonds are issued on the persons receiving or entitled to the bonds.”
135 Omit section 582A (designated international organisations: miscellaneous exemptions).
136 Omit section 587A (new issues of securities: extra return).
137 (1) Amend section 587B (gifts of shares, securities and real property to charities etc) as follows.
(2) In subsection (1)—
(a) for “Subsections (2) and (3) below apply” substitute “Subsection (2) below applies”, and
(b) for “an individual, or a company which is not itself a charity,” substitute “a company which is not itself a charity”.
(3) In subsection (2)—
(a) omit paragraph (a)(i),
(b) in paragraph (a)(ii) omit “in the case of a disposal by a company,”,
(c) in paragraph (b) omit the words from “of this Act” to the end, and
(d) omit the words from “but paragraph (a)(i)” to the end.
(4) Omit subsection (3).
(5) In subsection (5)—
(a) for “the person” substitute “the company”, and
(b) for “him” substitute “it”.
(6) In subsection (6) for “person” substitute “company”.
(7) In subsection (7)(a) for “person” substitute “company”.
(8) In subsection (8)(a) for “subsections (2) and (3)” substitute “subsection (2)”.
(9) In subsection (8B)(a)—
(a) for “the person” substitute “the company”, and
(b) for “him” substitute “it”.
(10) In subsection (9)—
(a) for the definitions of “authorised unit trust” and “open-ended investment company” substitute—
““authorised unit trust” has the meaning given by section 468;”,
(b) in the definition of “charity” for “each of the bodies mentioned in section 507(1);” substitute “—
(a) the Trustees of the National Heritage Memorial Fund;
(b) the Historic Buildings and Monuments Commission for England; and
(c) the National Endowment for Science, Technology and the Arts;”,
(c) in the definition of “the incidental costs of making the disposal to the person making it” for “person” substitute “company”, and
(d) after the definition of “offshore fund” insert—
““open-ended investment company” is to be read in accordance with section 468A(2) to (4);”.
(11) In subsection (9B)—
(a) for “person”, in both places where it occurs, substitute “company”, and
(b) for “his”, in both places where it occurs, substitute “its”.
(12) In subsection (9C)—
(a) for “a person, who” substitute “a company, which”, and
(b) for “the person” substitute “the company”.
(13) In subsection (12) for “section 587C” substitute “sections 587BA and 587C”.
138 After section 587B insert—
(1) This section applies for the purposes of section 587B where a qualifying investment is a qualifying interest in land.
(2) Where two or more persons (“the owners”)—
(a) are jointly beneficially entitled to the qualifying interest in land, or
(b) are, taken together, beneficially entitled in common to the qualifying interest in land,
relief under section 587B is available if at least one of the owners is a qualifying company and all the owners dispose of the whole of their beneficial interests in the qualifying interest in land to the charity.
Income Tax Act 2007