72 Distribution which is not a new holding within Chapter II.
(1) Where a person receives or becomes entitled to receive in respect of shares in a company any capital distribution from the company (other than a new holding as defined in section 77 below) he shall be treated as if he had in consideration of that capital distribution disposed of an interest in the shares.
(2) If the inspector is satisfied that the amount distributed is small, as compared with the value of the shares in respect of which it is distributed, and so directs—
(a) the occasion of the capital distribution shall not be treated for the purposes of this Act as a disposal of the asset, and
(b) the amount distributed shall be deducted from any expenditure allowable under this Act as a deduction in computing a gain or loss on the disposal of the shares by the person receiving or becoming entitled to receive the distribution of capital.
(3) A person who is dissatisfied with the refusal of the inspector to give a direction under this section may appeal to the Commissioners having jurisdiction on an appeal against an assessment to tax in respect of a gain accruing on the disposal.
(4) Where the allowable expenditure is less than the amount distributed (or is nil)—
(a) subsections (2) and (3) above shall not apply, and
(b) if the recipient so elects (and there is any allowable expenditure)—
(i) the amount distributed shall be reduced by the amount of the allowable expenditure, and
(ii) none of that expenditure shall be allowable as a deduction in computing a gain accruing on the occasion of the capital distribution, or on any subsequent occasion.
In this subsection “allowable expenditure” means the expenditure which immediately before the occasion of the capital distribution was attributable to the shares under paragraphs (a) and (b) of section 32(1) above.
(5) In this section—
(a) the “amount distributed” means the amount or value of the capital distribution,
(b) “capital distribution” means any distribution from a company, including a distribution in the course of dissolving or winding up the company, in money or money’s worth except a distribution which in the hands of the recipient constitutes income for the purposes of income tax.
(1) Where a person receives or becomes entitled to receive in respect of any shares in a company a provisional allotment of shares in or debentures of the company and he disposes of his rights section 72 above shall apply as if the amount of the consideration for the disposal were a capital distribution received by him from the company in respect of the first-mentioned shares, and as if that person had, instead of disposing of the rights, disposed of an interest in those shares.
(2) If under Schedule 5 to this Act it is to be assumed that, at a time after the creation of the rights and before their disposal, the said person sold and immediately re-acquired the shares in respect of which the rights were created, the same assumption shall be made as respect the rights.
(3) This section shall apply in relation to rights obtained in respect of debentures of a company as it applies in relation to rights obtained in respect of shares in a company.
74 Disposal of shares: relief in respect of income tax consequent on shortfall in distributions.
(1) If in pursuance of section 426 of the Taxes Act 1988 (consequences for income tax of apportionment of income etc. of close company) a person is assessed to income tax, then, in the computation under Chapter II of Part II of this Act of the gain accruing on a disposal by him of any shares forming part of his interest in the company to which the relevant apportionment relates, the amount of the income tax paid by him, so far as attributable to those shares, shall be allowable as a deduction.
(2) Subsection (1) above shall not apply in relation to tax charged in respect of undistributed income which has, before the disposal, been subsequently distributed and is then exempt from tax by virtue of section 427(4) of the Taxes Act 1988 or in relation to tax treated as having been paid by virtue of section 426(2)(b) of that Act.
(3) For the purposes of this section the income assessed to tax shall be the highest part of the individual’s income for the year of assessment in question, but so that if the highest part of the said income is taken into account under this section in relation to an assessment to tax the next highest part shall be taken into account in relation to any other relevant assessment, and so on.
(4) For the purpose of identifying shares forming part of an interest in a company with shares subsequently disposed of which are of the same class, shares bought at an earlier time shall be deemed to have been disposed of before shares bought at a later time.
(5) The provisions of this section shall be construed as if this section were included in sections 426 to 428 of the Taxes Act 1988.
75 Shares in close company transferring assets at an undervalue.
(1) If after 6th April 1965 a company which is a close company transfers an asset to any person otherwise than by way of a bargain made at arm’s length and for a consideration of an amount or value less than the market value of the asset an amount equal to the difference shall be apportioned among the issued shares of the company, and the holders of those shares shall be treated in accordance with the following provisions of this section.
(2) For the purposes of the computation under Chapter II of Part II of this Act of a gain accruing on the disposal of any of those shares by the person owning them on the date of transfer an amount equal to the amount so apportioned to that share shall be excluded from the expenditure allowable as a deduction under section 32(1)(a) above from the consideration for the disposal.
(3) If the person owning any of the said shares at the date of transfer is itself a close company an amount equal to the amount apportioned to the shares so owned under subsection (1) above to that close company shall be apportioned among the issued shares of that close company, and the holders of those shares shall be treated in accordance with subsection (2) above, and so on through any number of close companies.
(4) This section shall not apply where the transfer of the asset is a disposal to which section 273(1) of the Taxes Act 1970 (transfers within a group of companies) applies.
76 Consideration for acquisition of shares under share option schemes.
Section 19(3) above (assets deemed acquired and disposed of at market value) shall not apply in calculating the consideration for the acquisition of shares in pursuance of a share option scheme as defined in Schedule 12 to the Finance Act 1972.
(1) For the purposes of this section and sections 78 to 81 below “reorganisation” means a reorganisation or reduction of a company’s share capital, and in relation to the reorganisation—
(a) “original shares” means shares held before and concerned in the reorganisation,
(b) “new holding” means, in relation to any original shares, the shares in and debentures of the company which as a result of the reorganisation represent the original shares (including such, if any, of the original shares as remain).
(2) The reference in subsection (1) above to the reorganisation of a company’s share capital includes—
(a) any case where persons are, whether for payment or not, allotted shares in or debentures of the company in respect of and in proportion to (or as nearly as may be in proportion to) their holdings of shares in the company or of any class of shares in the company, and
(b) any case where there are more than one class of share and the rights attached to shares of any class are altered.
(3) The reference in subsection (1) above to a reduction of share capital does not include the paying off of redeemable share capital, and where shares in a company are redeemed by the company otherwise than by the issue of shares or debentures (with or without other consideration) and otherwise than in a liquidation, the shareholder shall be treated as disposing of the shares at the time of the redemption.
Subject to sections 79 to 81 below, a reorganisation shall not be treated as involving any disposal of the original shares or any acquisition of the new holding or any part of it, but the original shares (taken as a single asset) and the new holding (taken as a single asset) shall be treated as the same asset acquired as the original shares were acquired.
(1) Where, on a reorganisation, a person gives or becomes liable to give any consideration for his new holding or any part of it, that consideration shall in relation to any disposal of the new holding or any part of it be treated as having been given for the original shares, and if the new holding or part of it is disposed of with a liability attaching to it in respect of that consideration, the consideration given for the disposal shall be adjusted accordingly:
Provided that there shall not be treated as consideration given for the new holding or any part of it any surrender, cancellation or other alteration of the original shares or of the rights attached thereto, or any consideration consisting of any application, in paying up the new holding or any part of it, of assets of the company or of any dividend or other distribution declared out of those assets but not made.
Provided also that, in the case of a reorganisation on or after 10th March 1981, any consideration given for the new holding or any part of it otherwise than by way of a bargain made at arm’s length shall be disregarded to the extent that its amount or value exceeds the relevant increase in value; and for this purpose “the relevant increase in value” means the amount by which the market value of the new holding immediately after the reorganisation exceeds the market value of the original shares immediately before the reorganisation.
(2) Where on a reorganisation a person receives (or is deemed to receive), or becomes entitled to receive, any consideration, other than the new holding, for the disposal of an interest in the original shares, and in particular—
(a) where under section 72 above he is to be treated as if he had in consideration of a capital distribution disposed of an interest in the original shares, or
(b) where he receives (or is deemed to receive) consideration from other shareholders in respect of a surrender of rights derived from the original shares,
he shall be treated as if the new holding resulted from his having for that consideration disposed of an interest in the original shares (but without prejudice to the original shares and the new holding being treated in accordance with section 78 above as the same asset).
(3) Where for the purpose of subsection (2) above it is necessary in computing the gain or loss accruing on the disposal of the interest in the original shares mentioned in subsection (2) above to apportion the cost of acquisition of the original shares between what is disposed of and what is retained, the apportionment shall be made in the like manner as under section 80(1) below.
(1) Where for the purpose of computing the gain or loss accruing to a person from the acquisition and disposal of any part of the new holding it is necessary to apportion the cost of acquisition of any of the original shares between what is disposed of and what is retained, the apportionment shall be made by reference to market value at the date of the disposal (with such adjustment of the market value of any part of the new holding as may be required to offset any liability attaching thereto but forming part of the cost to be apportioned).
(2) This section has effect subject to section 81(2) below.
(1) This section shall apply to a new holding—
(a) if it consists of more than one class of shares in or debentures of the company and one or more of those classes is of shares or debentures which, at any time not later than the end of the period of three months beginning with the date on which the reorganisation took effect, or of such longer period as the Board may by notice in writing allow, had quoted market values on a recognised stock exchange in the United Kingdom or elsewhere, or
(b) if it consists of more than one class of rights of unit holders and one or more of those classes is of rights the prices of which were published daily by the managers of the scheme at any time not later than the end of that period of three months (or longer if so allowed).
(2) Where for the purpose of computing the gain or loss accruing to a person from the acquisition and disposal of the whole or any part of any class of shares or debentures or rights of unit holders forming part of a new holding to which this section applies it is necessary to apportion costs of acquisition between what is disposed of and what is retained, the cost of acquisition of the new holding shall first be apportioned between the entire classes of shares or debentures or rights of which it consists by reference to market value on the first day (whether that day fell before the reorganisation took effect or later) on which market values or prices were quoted or published for the shares, debentures or rights as mentioned in subsection (1)(a) or (1)(b) above (with such adjustment of the market value of any class as may be required to offset any liability attaching thereto but forming part of the cost to be apportioned).
(3) For the purposes of this section the day on which a reorganisation involving the allotment of shares or debentures or unit holders’ rights takes effect is the day following the day on which the right to renounce any allotment expires.
82 Equation of converted securities and new holding.
(1) Sections 78 to 81 above shall apply with any necessary adaptations in relation to the conversion of securities as they apply in relation to a reorganisation (that is to say a reorganisation or reduction of a company’s share capital).
(2) This section has effect subject to sections 83 and 84 below.
(3) For the purposes of this section and section 83 below—
(a) “conversion of securities” includes—
(i) a conversion of securities of a company into shares in the company, and
(ii) a conversion at the option of the holder of the securities converted as an alternative to the redemption of those securities for cash, and
(iii) any exchange of securities effected in pursuance of any enactment (including an enactment passed after this Act) which provides for the compulsory acquisition of any shares or securities and the issue of securities or other securities instead,
(b) “security” includes any loan stock or similar security whether of the Government of the United Kingdom or of any other government, or of any public or local authority in the United Kingdom or elsewhere, or of any company, and whether secured or unsecured.
(1) This section applies where, on a conversion of securities, a person receives, or becomes entitled to receive, any sum of money (in this section called “the premium”) which is by way of consideration (in addition to his new holding) for the disposal of the converted securities.
(2) If the inspector is satisfied that the premium is small, as compared with the value of the converted securities, and so directs—
(a) receipt of the premium shall not be treated for the purposes of this Act as a disposal of part of the converted securities, and
(b) the premium shall be deducted from any expenditure allowable under this Act as a deduction in computing a gain or loss on the disposal of the new holding by the person receiving or becoming entitled to receive the premium.
(3) A person who is dissatisfied with the refusal of the inspector to give a direction under subsection (2) above may appeal to the Commissioners having jurisdiction on an appeal against an assessment to tax in respect of a gain to him on a disposal of the securities.
(4) Where the allowable expenditure is less than the premium (or is nil)—
(a) subsections (2) and (3) above shall not apply, and
(b) if the recipient so elects (and there is any allowable expenditure)—
(i) the amount of the premium shall be reduced by the amount of the allowable expenditure, and
(ii) none of that expenditure shall be allowable as a deduction in computing a gain accruing on the occasion of the conversion, or on any subsequent occasion.
(5) In subsection (4) above “allowable expenditure” means expenditure which immediately before the conversion was attributable to the converted securities under paragraph (a) and (b) of section 32(1) above.
(1) This section has effect where gilt-edged securities are exchanged for shares in pursuance of any enactment (including an enactment passed after this Act) which provides for the compulsory acquisition of any shares and the issue of gilt-edged securities instead.
(2) The exchange shall not constitute a conversion of securities within section 82 above and accordingly the gilt-edged securities shall not be treated as having been acquired on any date earlier than that on which they were issued or for any consideration other than the value of the shares as determined for the purposes of the exchange.
(3) The exchange shall be treated as not involving any disposal of the shares by the person from whom they were compulsorily acquired but—
(a) there shall be calculated the gain or loss that would have accurued to him if he had then disposed of the shares for a consideration equal to the value mentioned in subsection (2) above, and
(b) on a subsequent disposal of the whole or part of the gilt-edged securities by the person to whom they were issued—
(i) there shall be deemed to accrue to him (in addition to any gain or loss that actually accrues) the whole or a corresponding part of the gain or loss mentioned in paragraph (a) above, and
(ii) if the disposal is within section 67(1) above (exemption for gilt-edged securities) that section shall have effect only in relation to any gain or loss that actually accrues and not in relation to any gain or loss that is deemed to accrue as aforesaid.
(4) Where a person to whom gilt-edged securities of any kind were issued as mentioned in subsection (1) above disposes of securities of that kind, the securities of which he disposes—
(a) shall, so far as possible, be identified with securities which were issued to him as mentioned in subsection (1) above rather than with other securities of that kind, and
(b) subject to paragraph (a) above, shall be identified with securities issued at an earlier time rather than with those issued at a later time.
(5) Subsection (3)(b) above shall not apply to any disposal falling within the provisions of—
(a) section 44(1) above (disposals between husband and wife),
(b) section 49(4) above (disposals by personal representatives to legatees), or
(c) section 273(1) of the Taxes Act 1970 (disposals within a group of companies);
but a person who has acquired the securities on a disposal falling within those provisions (and without there having been a previous disposal not falling within those provisions or a devolution on death) shall be treated for the purposes of subsections (3)(b) and (4) above as if the securities had been issued to him.
(6) Where the gilt-edged securities to be exchanged for any shares are not issued until after the date on which the shares are compulsorily acquired but on that date a right to the securities is granted, this section shall have effect as if the exchange had taken place on that date, as if references to the issue of the securities and the person to whom they were issued were references to the grant of the right and the person to whom it was granted and references to the disposal of the securities included references to disposals of the rights.
(7) In this section “shares” includes securities within the meaning of section 82 above.
(8) This section has effect subject to section 54 of the Finance Act 1976 (compulsory acquisition from certain companies of aircraft and shipbuilding shares).
85 Exchange of securities for those in another company.
(1) Subsection (3) below has effect where a company (company A) issues shares or debentures to a person in exchange for shares in or debenture of another company (company B) and—
(a) company A holds, or in consequence of the exchange will hold, more than one quarter of the ordinary share capital (as defined in section 832(1) of the Taxes Act 1988) of company B, or
(b) company A issues the shares or debentures in exchange for shares as the result of a general offer—
(i) which is made to members of company B or any class of them (with or without exceptions for persons connected with company A), and
(ii) which is made in the first instance on a condition such that if it were satisfied company A would have control of company B.
(2) Subsection (3) below also has effect where under section 86 below persons are to be treated as exchanging shares or debentures for shares or debentures held by them in consequence of the arrangement there mentioned.
(3) Subject to the provisions of sections 87 and 88 below, sections 78 to 81 above shall apply with any necessary adaptations as if the two companies mentioned in subsection (1) above, or as the case may be in section 86 below, were the same company and the exchange were a reorganisation of its share capital.
86 Reconstruction or amalgamation involving issue of securities.
(1) Where—
(a) an arrangement between a company and the persons holding shares in or debentures of the company, or any class of such shares or debentures, is entered into for the purposes of or in connection with a scheme of reconstruction or amalgamation, and
(b) under the arrangement another company issues shares or debentures to those persons in respect of and in proportion to (or as nearly as may be in proportion to) their holdings of shares in or debentures of the first-mentioned company, but the shares in or debentures of the first-mentioned company are either retained by those persons or cancelled.
then those persons shall be treated as exchanging the first-mentioned shares or debentures for those held by them in consequence of the arrangement (any shares or debentures retained being for this purpose regarded as if they had been cancelled and replaced by a new issue), and subsections (2) and (3) of section 85 above shall apply accordingly.
(2) In this section “scheme of reconstruction or amalgamation” means a scheme for the reconstruction of any company or companies or the amalgamation of any two or more companies, and references to shares or debentures being retained include their being retained with altered rights or in an altered form whether as the result of reduction, consolidation, division or otherwise.
(3) This section, and section 85(2) above, shall apply in relation to a company which has no share capital as if references to shares in or debentures of a company included references to any interests in the company possessed by members of the company.
87 Restriction on application of sections 85 and 86.
(1) Subject to subsection (2) below, and section 88 below, neither section 85 nor section 86 above shall apply to any issue by a company of shares in or debentures of that company in exchange for or in respect of shares in or debentures of another company unless the exchange, reconstruction or amalgamation in question is effected for bona fide commercial reasons and does not form part of a scheme or arrangements of which the main purpose, or one of the main purposes, is avoidance of liability to capital gains tax or corporation tax.
(2) Subsection (1) above shall not affect the operation of section 85 or 86 in any case where the person to whom the shares or debentures are issued does not hold more than 5 per cent. of, or of any class of, the shares in or debentures of the second company mentioned in subsection (1) above.
(3) For the purposes of subsection (2) above shares or debentures held by persons connected with the person there mentioned shall be treated as held by him.
(4) If any tax assessed on a person (the chargeable person) by virtue of subsection (1) above is not paid within six months from the date when it is payable, any other person who—
(a) holds all or any part of the shares or debentures that were issued to the chargeable person, and
(b) has acquired them without there having been, since their acquisition by the chargeable person, any disposal of them not falling within section 44(1) above or section 273 of the Taxes Act 1970 (disposals between spouses or members of a group of companies),
may, at any time within two years from the time when the tax became payable, be assessed and charged (in the name of the chargeable person) to all or, as the case may be, a corresponding part of the unpaid tax; and a person paying any amount of tax under this subsection shall be entitled to recover a sum of that amount from the chargeable person.
(5) In this section references to shares or debentures include references to any interest or options to which this Chapter applies by virtue of section 86(3) above (interests in a company with no share capital) or section 139 below (quoted options).
(1) Section 87 above shall not affect the operation of section 85 or 86 above in any case where, before the issue is made, the Board have, on the application of either company mentioned in section 87(1) above, notified the company that the Board are satisfied that the exchange, reconstruction or amalgamation will be effected for bona fide commercial reasons and will not form part of any such scheme or arrangements as are mentioned in section 87(1) above.
(2) Any application under subsection (1) above shall be in writing and shall contain particulars of the operations that are to be effected and the Board may, within thirty days of the receipt of the application or of any further particulars previously required under this subsection, by notice require the applicant to furnish further particulars for the purposes of enabling the Board to make their decision; and if any such notice is not complied with within thirty days or such longer period as the Board may allow, the Board need not proceed further on the application.
(3) The Board shall notify their decision to the applicant within thity days of receiving the application or, if they give a notice under subsection (2) above, within thirty days of the notice being complied with.
(4) If the Board notify the applicant that they are not satisfied as mentioned in subsection (1) above or do not notify their decision to the applicant within the time required by subsection (3) above, the applicant may within thirty days of the notification or of that time required by the Board to transmit the application, together with any notice given and further particulars furnished under subsection (2) above, to the Special Commissioners; and in that event any notification by the Special Commissioners shall have effect for the purposes of subsection (1) above as if it were a notification by the Board.
(5) If any particulars furnished under this section do not fully and accurately disclose all facts and considerations material for the decision of the Board or the Special Commissioners, any resulting notification that the Board or Commissioners are satisfied as mentioned in subsection (1) above shall be void.
89 Stock dividends: consideration for new holding.
(1) In applying section 79(1) above in relation to the issue of any share capital to which section 249 of the Taxes Act 1988 (stock dividends) applies as involving a reorganisation of the company’s share capital, there shall be allowed, as consideration given for so much of the new holding as was issued as mentioned in—
(a) subsection (4), (5) or (6) of that section, or
(b) paragraph 12(1) of Schedule 19 to that Act,
(read in each case with subsection (3) of that section) an amount equal to what is, for that much of the new holding, the appropriate amount in cash within the meaning of section 251(2) of the Taxes Act 1988.
(2) This section shall have effect notwithstanding the provisos to section 79(1) above.
(1) This section applies where a company issues any share capital to which section 249 of the Taxes Act 1988 applies in respect of shares in the company held by a person as trustee, and another person is at the time of the issue absolutely entitled thereto as against the trustee or would be so entitled but for being an infant or other person under disability (or two or more other persons are or would be jointly so entitled thereto).
(2) Notwithstanding paragraph (a) of section 77(2) above the case shall not constitute a reorganisation of the company’s share capital for the purposes of sections 77 to 79 above.
(3) Notwithstanding section 29A(1) above (disposal at market value) the person who is or would be so entitled to the share capital (or each of the persons who are or would be jointly so entitled thereto) shall be treated for the purposes of section 32(1) (a) above as having acquired that share capital, or his interest in it, for a consideration equal to the appropriate amount in cash within the meaning of section 251(2) to (4) of the Taxes Act 1988.
The preceding provisions of this Chapter have effect subject to section 139 below (quoted option to be regarded for the purposes of this Chapter as the shares which could be acquired by exercising the option).
(1) Subject to subsection (2) below, in this Act—
(a) “unit trust scheme” has the same meaning as in the Financial Services Act 1986,
(b) “authorised unit trust” has the meaning given by section 468(6) of the Taxes Act 1988,
(c) “investment trust” has the meaning given by section 842 of the Taxes Act 1988,
(d) “court investment fund” means a common investment fund established under section 1 of the Administration of Justice Act 1965.
(2) The Treasury may by regulations provide that any scheme of a description specified in the regulations shall be treated as not being a unit trust scheme for the purposes of this Act.
(3) Regulations under this section—
(a) may contain such supplementary and transitional provisions as appear to the Treasury to be necessary or expedient, and
(b) shall be made by statutory instrument, which shall be subject to annulment in pursuance of a resolution of the House of Commons.
This Act shall apply in relation to any unit trust scheme as if—
(a) the scheme were a company,
(b) the rights of the unit holders were shares in the company, and
(c) in the case of an authorised unit trust, the company were resident and ordinarily resident in the United Kingdom.
If throughout a year of assessment all the issued units in a unit trust scheme are assets such that any gain accruing if they were disposed of by the unit holder would be wholly exempt from capital gains tax or corporation tax (otherwise than by reason of residence) gains accruing to the unit trust scheme in that year of assessment shall not be chargeable gains.
98 Transfer of company’s assets to unit trust which later comes within section 96 or 97.
(1) Where section 267 of the Taxes Act 1970 (roll-over for assets transferred on company reconstruction or amalgamation) has applied on the transfer of a company’s business (in whole or in part) to a unit trust scheme or a company which at the time of the transfer was not such a unit trust scheme or investment trust as is mentioned in subsection (3) of that section, then if—
(a) at any time after the transfer—
(i) the unit trust scheme becomes in a year of assessment one which is such as is mentioned in that subsection; or
(ii) the company becomes for an accounting period an investment trust such as is there mentioned, and
(b) at the beginning of that year of assessment or accounting period the unit trust scheme or company still owns any of the assets of the business transferred,
the unit trust scheme or company shall be treated for all the purposes of this Act as if immediately after the transfer it had sold, and immediately re-acquired, the assets referred to in paragraph (b) above at their market value at that time.
(2) Notwithstanding any limitation on the time for making assessments, an assessment to corporation tax chargeable in consequence of subsection (1) above may be made at any time within six years after the end of the year of assessment or accounting period referred to in subsection (1) above, and where under this section a unit trust scheme or company is to be treated as having disposed of, and re-acquired, an asset of a business, all such recomputations of liability in respect of other disposals and all such adjustments of tax, whether by way of assessment or by way of discharge or repayment of tax, as may be required in consequence of the provisions of this section shall be carried out.
(1) For the purposes of section 46 above (nominees and bare trustees) funds in court held by the Accountant General shall be regarded as held by him as nominee for the persons entitled to or interested in the funds, or as the case may be for their trustees.
(2) Where funds in court standing to an account are invested or, after investment, are realised the method by which the Accountant General effects the investment or the realisation of investments shall not affect the question whether there is for the purposes of this Act an acquisition, or as the case may be a disposal, of an asset representing funds in court standing to the account, and in particular there shall for those purposes be an acquisition or disposal of shares in a court investment fund notwithstanding that the investment in such shares of funds in court standing to an account, or the realisation of funds which have been so invested, is effected by setting off, in the Accountant General’s accounts, investment in one account against realisation of investments in another.
(3) In this section “funds in court” means—
(a) money in the Supreme Court, money in county courts and statutory deposits described in section 40 of the Administration of Justice Act 1982, and
(b) money in the Supreme Court of Judicature of Northern Ireland and money in a county court in Northern Ireland,
and investments representing such money; and references in this section to the Accountant General are references to the Accountant General of the Supreme Court of Judicature in England and, in relation to money within paragraph (b) above and investments representing such money, include references to the Accountant General of the Supreme Court of Judicature of Northern Ireland or any other person by whom such funds are held.
(1) This section applies to a gain accruing to an individual so far as attributable to the disposal of, or of an interest in—
(a) a dwelling-house or part of a dwelling-house which is, or has at any time in his period of ownership been, his only or main residence, or
(b) land which he has for his own occupation and enjoyment with that residence as its garden or grounds up to the permitted area.
(2) In this section “the permitted area” means, subject to subsections (3) and (4) below, an area (inclusive of the site of the dwelling-house) of 0.5 of a hectare.
(3) In any particular case the permitted area shall be such area, larger than 0.5 of a hectare, as the Commissioners concerned may determine if satisfied that, regard being had to the size and character of the dwelling-house, that larger area is required for the reasonable enjoyment of it (or of the part in question) as a residence.
(4) Where part of the land occupied with a residence is and part is not within subsection (1) above, then (up to the permitted area) that part shall be taken to be within subsection (1) above which, if the remainder were separately occupied, would be the most suitable for occupation and enjoyment with the residence.
(5) So far as it is necessary for the purposes of this section to determine which of two or more residences is an individual’s main residence for any period—
(a) the individual may conclude that question by notice in writing to the inspector given within two years from the beginning of that period, or given by the end of the year 1966-67, if that is later, but subject to a right to vary that notice by a further notice in writing to the inspector as respects any period beginning not earlier than two years before the giving of the further notice,
(b) subject to paragraph (a) above, the question shall be concluded by the determination of the inspector, which may be as respects either the whole or specified parts of the period of ownership in question,
and notice of any determination of the inspector under paragraph (b) above shall be given to the individual who may appeal to the General Commissioners or the Special Commissioners against that determination within thirty days of service of the notice.
(6) In the case of a man and his wife living with him—
(a) there can only be one residence or main residence for both, so long as living together, and, where a notice under subsection (5)(a) above affects both the husband and the wife, it must be given by both, and
(b) any notice under subsection (5)(b) above which affects a residence owned by the husband and a residence owned by the wife shall be given to each and either may appeal under that subsection.
(7) In this section, and sections 102 to 105 below, “the period of ownership” where the individual has had different interests at different times shall be taken to begin from the first acquisition taken into account in arriving at the expenditure which under Chapter II of Part II of this Act is allowable as a deduction in computing under that Chapter the amount of the gain to which this section applies, and in the case of a man and his wife living with him—
(a) if the one disposes of, or of his or her interest in, the dwelling-house or part of a dwelling-house which is their only or main residence to the other, and in particular if it passes on death to the other as legatee, the other’s period of ownership shall begin with the beginning of the period of ownership of the one making the disposal, and
(b) if paragraph (a) above applies, but the dwelling-house or part of a dwelling-house was not the only or main residence of both throughout the period of ownership of the one making the disposal, account shall be taken of any part of that period during which it was his only or main residence as if it was also that of the other.
(8) If at any time (being a time after 30th July 1978) during an individual’s period of ownership of a dwelling-house or part of a dwelling-house he—
(a) resides in living accommodation which is for him job-related within the meaning of section 356 of the Taxes Act 1988, and
(b) intends in due course to occupy the dwelling-house or part of a dwelling-house as his only or main residence,
this section, and sections 102 to 105 below, shall apply as if the dwelling-house or part of a dwelling-house were at that time occupied by him as a residence.
(8A) Section 356(3)(b) and (5) of the Taxes Act 1988 shall apply for the purposes of subsection (8) above only in relation to residence on or after 6th April 1983 in living accommodation which is job-related within the meaning of that section.
(9) Apportionments of consideration shall be made wherever required by this section or sections 102 to 105 below and, in particular, where a person disposes of a dwelling-house only part of which is his only or main residence.
(1) No part of a gain to which section 101 above applies shall be a chargeable gain if the dwelling-house or part of a dwelling-house has been the individual’s only or main residence throughout the period of ownership, or throughout the period of ownership except for all or any part of the last thirty-six months of that period.
(2) Where subsection (1) above does not apply, a fraction of the gain shall not be a chargeable gain, and that fraction shall be—
(a) the length of the part or parts of the period of ownership during which the dwelling-house or the part of the dwelling-house was the individual’s only or main residence, but inclusive of the last thirty-six months of the period of ownership in any event, divided by
(b) the length of the period of ownership.
(3) For the purposes of subsections (1) and (2) above—
(a) a period of absence not exceeding three years (or periods of absence which together did not exceed three years), and in addition
(b) any period of absence throughout which the individual worked in an employment or office all the duties of which were performed outside the United Kingdom, and in addition
(c) any period of absence not exceeding four years (or periods of absence which together did not exceed four years) throughout which the individual was prevented from residing in the dwelling-house or part of the dwelling-house in consequence of the situation of his place of work or in consequence of any condition imposed by his employer requiring him to reside elsewhere, being a condition reasonably imposed to secure the effective performance by the employee of his duties,
shall be treated as if in that period of absence the dwelling-house or the part of the dwelling-house was the individual’s only or main residence if both before and after the period there was a time when the dwelling-house was the individual’s only or main residence.
In this subsection “period of absence” means a period during which the dwelling-house or the part of the dwelling-house was not the individual’s only or main residence and throughout which he had no residence or main residence eligible for relief under this section.
(4) In this section “period of ownership” does not include any period before 6th April 1965.
(5) Where at any time the number of months specified in subsections (1) and (2)(a) above is thirty-six, the Treasury may by order amend those subsections by substituting references to twenty-four for the references to thirty-six in relation to disposals on or after such date as is specified in the order.
(6) Subsection (5) above shall also have effect as if “thirty-six” (in both places) read “twenty-four” and as if “twenty-four” read “thirty-six”.
(7) Any power to make an order under this section shall be exercisable by statutory instrument subject to annulment in pursuance of a resolution of the House of Commons.
(1) If the gain accrues from the disposal of a dwelling-house or part of a dwelling-house part of which is used exclusively for the purposes of a trade or business, or of a profession or vocation, the gain shall be apportioned and section 102 above shall apply in relation to the part of the gain apportioned to the part which is not exclusively used for those purposes.
(2) If at any time in the period of ownership there is a change in what is occupied as the individual’s residence, whether on account of a reconstruction or conversion of a building or for any other reason, or there have been changes as regards the use of part of the dwelling-house for the purpose of a trade or business, or of a profession or vocation, or for any other purpose, the relief given by section 102 above may be adjusted in such manner as the Commissioners concerned may consider to be just and reasonable.
(3) Section 102 above shall not apply in relation to a gain if the acquisition of, or of the interest in, the dwelling-house or the part of a dwelling-house was made wholly or partly for the purpose of realising a gain from the disposal of it, and shall not apply in relation to a gain so far as attributable to any expenditure which was incurred after the beginning of the period of ownership and was incurred wholly or partly for the purpose of realising a gain from the disposal.
104 Private residence occupied under terms of settlement.
Sections 101 to 103 above shall also apply in relation to a gain accruing to a trustee on a disposal of settled property being an asset within section 101(1) above where during the period of ownership of the trustee the dwelling-house or part of the dwelling-house mentioned in that subsection has been the only or main residence of a person entitled to occupy it under the terms of the settlement, and in those sections as so applied—
(a) references to the individual shall be taken as references to the trustee except in relation to the occupation of the dwelling-house or part of the dwelling-house, and
(b) the notice which may be given to the inspector under section 101(5)(a) above shall be a joint notice by the trustee and the person entitled to occupy the dwelling-house or part of the dwelling-house.
105 Private residence occupied by dependent relative.
(1) This section applies to a gain accruing to an individual so far as attributable to the disposal of, or of an interest in, a dwelling-house or part of a dwelling-house which is, or has at any time in his period of ownership been, the sole residence of a dependent relative of the individual, provided rent-free and without any other consideration.
(2) If the individual so claims, such relief shall be given in respect of it and its garden or grounds as would be given under sections 101 to 103 above if the dwelling-house (or part of the dwelling-house) had been the individual’s only or main residence in the period of residence by the dependent relative, and shall be so given in addition to any relief available under those sections apart from this section.
(3) Not more than one dwelling-house (or part of a dwelling-house) may qualify for relief as being the residence of a dependent relative of the claimant at any one time nor, in the case of a man and his wife living with him, as being the residence of a dependent relative of the claimant or of the claimant’s husband or wife at any one time.
(4) The Inspector, before allowing a claim, may require the claimant to show that the giving of the relief claimed will not under section (3) above preclude the giving of relief to the claimant’s wife or husband or that a claim to any such relief has been relinquished.
(5) In this section “dependent relative” means, in relation to an individual—
(a) any relative of his or of his wife who is incapacitated by old age or infirmity from maintaining himself, or
(b) his or his wife’s mother who, whether or not incapacitated, is either widowed, or living apart from her husband, or a single woman in consequence of dissolution or annulment of marriage.
(6) If the individual mentioned in subsection (5) above is a woman the references in that subsection to the individual’s wife shall be construed as references to the individual’s husband.
(1) This section applies to a transfer of land forming part only of a holding of land, where—
(a) the amount or value of the consideration for the transfer does not exceed one-fifth of the market value of the holding as it subsisted immediately before the transfer, and
(b) the transfer is not one which, by virtue of section 44 above (transfers between husband and wife) or section 273(1) of the Taxes Act 1970 (transfers within groups of companies), is treated as giving rise to neither a gain nor a loss.
(2) Subject to subsection (3) below, if the transferor so claims, the transfer shall not be treated for the purposes of this Act as a disposal, but all sums which, if it had been so treated, would have been brought into account as consideration for that disposal in the computation under Chapter II of Part II of this Act of a gain accruing on the disposal shall be deducted from any expenditure allowable under that Chapter as a deduction in computing a gain on any subsequent disposal of the holding.
(3) This section shall not apply—
(a) if the amount or value of the consideration for the transfer exceeds £20,000, or
(b) where in the year of assessment in which the transfer is made, the transferor made any other disposal of land, if the total amount or value of the consideration for all disposals of land made by the transferor in that year exceeds £20,000.
(4) No account shall be taken under subsection (3) above of any transfer of land to which section 108 below applies.
(5) In relation to a transfer which is not for full consideration in money or money’s worth “the amount or value of the consideration” in this section shall mean the market value of the land transferred.
(6) For the purposes of this section the holding of land shall comprise only the land in respect of which the expenditure allowable under paragraphs (a) and (b) of section 32(1) above would be apportioned under section 35 above if the transfer had been treated as a disposal (that is, as a part disposal of the holding).
(7) In this section references to a holding of land include references to any estate or interest in a holding of land, not being an estate or interest which is a wasting asset, and references to part of a holding shall be construed accordingly.
108 Part disposal to authority with compulsory powers.
(1) This section applies to a transfer of land forming part only of a holding of land to an authority exercising or having compulsory powers where—
(a) the amount or value of the consideration for the transfer, or if the transfer is not for full consideration in money or money’s worth, the market value of the land transferred, is small, as compared with the market value of the holding as it subsisted immediately before the transfer, and
(b) the transferor had not taken any steps by advertising or otherwise to dispose of any part of the holding or to make his willingness to dispose of it known to the authority or others.
(2) If the transferor so claims, the transfer shall not be treated for the purposes of this Act as a disposal, but all sums which, if it had been so treated, would have been brought into account as consideration for that disposal in the computation under Chapter II of Part II of this Act of a gain accruing on the disposal shall be deducted from any expenditure allowable under that Chapter as a deduction in computing a gain on any subsequent disposal of the holding.
(3) For the purposes of this section the holding of land shall comprise only the land in respect of which the expenditure allowable under paragraphs (a) and (b) of section 32(1) above would be apportioned under section 35 above if the transfer had been treated as a disposal (that is, as a part disposal of the holding).
(4) In this section references to a holding of land include references to an estate or interest in a holding of land, not being an estate or interest which is a wasting asset, and references to part of a holding shall be construed accordingly.
(5) In this section “authority exercising or having compulsory powers” means, in relation to the land transferred, a person or body of persons acquiring it compulsorily or who has or have been, or could be, authorised to acquire it compulsorily for the purposes for which it is acquired, or for whom another person or body of persons has or have been, or could be, authorised so to acquire it.
109 Part disposal: consideration exceeding allowable expenditure.
(1) The provisions of sections 107(2) and 108(2) above shall have effect subject to this section.
(2) Where the allowable expenditure is less than the consideration for the part disposal (or is nil)—
(a) the said provisions shall not apply, and
(b) if the recipient so elects (and there is any allowable expenditure)—
(i) the consideration for the part disposal shall be reduced by the amount of the allowable expenditure, and
(ii) none of that expenditure shall be allowable as a deduction in computing a gain accruing on the occasion of the part disposal or on any subsequent occasion.
In this subsection “allowable expenditure” means expenditure which, immediately before the part disposal, was attributable to the holding of land under paragraphs (a) and (b) of section 32(1) above.
(1) Where land or an interest in or right over land is acquired and the acquisition is, or could have been, made under compulsory powers, then in considering whether, under section 43(4) above, the purchase price or compensation or other consideration for the acquisition should be apportioned and treated in part as a capital sum within section 20(1)(a) above (disposal arising on receipt of capital sum), whether as compensation for loss of goodwill or for disturbance or otherwise, or should be apportioned in any other way, the fact that the acquisition is or could have been made compulsorily, and any statutory provision treating the purchase price or compensation or other consideration as exclusively paid in respect of the land itself, shall be disregarded.
(2) In any case where land or an interest in land is acquired as mentioned in subsection (1) above from any person and the compensation or purchase price includes an amount in respect of severance of the land comprised in the acquisition or sale from other land in which that person is entitled in the same capacity to an interest, or in respect of that other land as being injuriously affected, there shall be deemed for the purposes of this Act to be a part disposal of that other land.
Where an interest in land is acquired, otherwise than under a contract, by an authority possessing compulsory purchase powers the time at which the disposal and acquisition is made is the time at which the compensation for the acquisition is agreed or otherwise determined (variations on appeal being disregarded for this purpose) or, if earlier (but after 20th April 1971), the time when the authority enter on the land in pursuance of their powers.