Law

Taxation of Chargeable Gains Act 1992

United Kingdom · statute

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In force since 2026-04-06, as the publisher states.

Copy read on 2026-11-08. The page it was read from

Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.

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Contents: 804 provisions

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804 provisions

103KFE Anti-avoidance

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103KG Meaning of “arise” in Chapter 5

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103KH Interpretation of Chapter 5

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104 Share pooling: general interpretative provisions.

(1) Any number of securities of the same class acquired by the same person in the same capacity shall for the purposes of this Act (subject to express provision to the contrary) be regarded as indistinguishable parts of a single asset growing or diminishing on the occasions on which additional securities of the same class are acquired or some of the securities of that class are disposed of. (2) For the purposes of corporation tax, subsection (1) does not apply to any securities acquired by a company before 1 April 1982. (2A) See also sections 105 to 105B and— (a) section 106A in the case of capital gains tax, or (b) sections 107 to 114 in the case of corporation tax. (3) For the purposes of this section and sections 105, 107, 110 ... and 114— “a section 104 holding” is a holding of securities which, by virtue of subsection (1) above, is to be regarded as a single asset; “securities” does not include relevant securities as defined in section 108 but, subject to that, means— shares or securities of a company; and any other assets where they are of a nature to be dealt in without identifying the particular assets disposed of or acquired; and “relevant allowable expenditure” has the meaning assigned to it by section 53(2)(b) and (3); but shares or securities of a company shall not 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 with on a recognised stock exchange. (3A) For the purposes of capital gains tax section 35(2) applies in relation to a section 104 holding as if the reference to an asset were to any of the securities constituting or forming part of the section 104 holding which were held by the person making the disposal on 31 March 1982. (4) For the purposes of this Chapter securities of a company which are held— (a) by a person who acquired them as an employee of the company or of any other person, and (b) on terms which for the time being restrict his right to dispose of them, shall (notwithstanding that they would otherwise fall to be treated as of the same class) be treated as of a different class from any securities acquired by him otherwise than as an employee of the company or of any other person and also from any shares that are not held subject to restrictions, or the same restrictions, on disposal or in the case of which the restrictions are no longer in force. (4A) For the purposes of this Chapter, securities of a company which are held by the trustees of a settlement, having been last acquired or deemed to be acquired by them in circumstances where section 236H or 236Q applied, shall (notwithstanding that they would otherwise fall to be treated as of the same class) be treated as of a different class from any other securities of the company acquired by those trustees. (5) Nothing in this section or sections 110 ... and 114 shall be taken as affecting the manner in which the market value of any securities is to be ascertained. (6) Without prejudice to the generality of subsections (1) and (2) above, a disposal of securities in a section 104 holding, other than a disposal of the whole of it, is a disposal of part of an asset and the provisions of this Act relating to the computation of a gain accruing on a disposal of part of an asset shall apply accordingly.

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105 Disposal on or before day of acquisition of shares and other unidentified assets.

(1) Paragraphs (a) and (b) below shall apply where securities of the same class are acquired or disposed of by the same person on the same day and in the same capacity— (a) all the securities so acquired shall be treated as acquired by a single transaction and all the securities so disposed of shall be treated as disposed of by a single transaction, and (b) all the securities so acquired shall, so far as their quantity does not exceed that of the securities so disposed of, be identified with those securities. (2) Where the quantity of securities disposed of by any person exceeds the aggregate quantity of— (a) the securities (if any) which are required by subsection (1) above to be identified with securities acquired on the day of the disposal, (b) the securities (if any) which are required by section 106A(5) to be identified with securities acquired after the day of the disposal, and (c) the securities (if any) which are required by any of the provisions of sections 104, ... 106A or 107, or of Schedule 2, to be identified with securities acquired before the day of the disposal, the disposal shall be treated as diminishing a quantity of securities subsequently acquired, and as so diminishing any quantity so acquired at an earlier date, rather than one so acquired at a later date. (3) None of the securities which, by virtue of this section, are identified with other securities shall be regarded as forming part of an existing section 104 holding or as constituting a section 104 holding. (4) Subsection (5) applies if an individual— (a) acquires shares (“the relevant shares”) of the same class, on the same day and in the same capacity, and (b) some of the relevant shares are relevant EMI shares (as defined by section 169I(7C) to (7G)). (5) This section has effect as if— (a) paragraph (a) of subsection (1) required the relevant EMI shares to be treated as acquired by the individual by a single transaction separate from the remainder of the relevant shares (which are also to be treated by virtue of that paragraph as acquired by the individual by a single transaction), and (b) subsection (1) required the relevant EMI shares to be treated as disposed of after the remainder of the relevant shares.

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105A Shares acquired on same day: election for alternative treatment

(1) Subsection (2) below applies where an individual— (a) acquires shares (“the relevant shares”) of the same class, on the same day and in the same capacity, and (b) some of the relevant shares (“the tax-advantaged-scheme shares”) are shares acquired by him as a result of— (i) the exercise of a qualifying option within the meaning given by section 527(4) of ITEPA 2003 (enterprise management incentives) in circumstances where section 530 or 531 of that Act (exercise of option to acquire shares) applies, or (ii) the exercise of an option to which Chapter 7 or 8 of Part 7 of that Act (... share option schemes) applies in circumstances where section 519(1) or 524(1) of that Act applies. (2) Where the individual first makes a disposal of any of the relevant shares, he may elect for subsections (3) to (5) below to have effect in relation to that disposal and all subsequent disposals of any of those shares. (3) In circumstances where section 105 applies, that section shall have effect as if— (a) paragraph (a) of subsection (1) of that section required the tax-advantaged-scheme shares to be treated as acquired by the individual by a single transaction separate from the remainder of the relevant shares (which shall also be treated by virtue of that paragraph as acquired by the individual by a single transaction), and (b) subsection (1) of that section required the tax-advantaged-scheme shares to be treated as disposed of after the remainder of the relevant shares. (4) If the relevant shares include shares to which relief under Chapter 3 of Part 7 of the Taxes Act, relief under Part 5 of ITA 2007 or deferral relief (within the meaning of Schedule 5B to this Act) is attributable— (a) paragraph 4(4) of that Schedule has effect as if it required the tax-advantaged-scheme shares falling within paragraph (a), (b), (c) or (d) of that provision to be treated as disposed of after the remainder of the relevant shares falling within the paragraph in question, and (b) section 299 of the Taxes Act or section 246 of ITA 2007 has effect for the purposes of section 150A(4) below as if it required— (i) the tax-advantaged-scheme shares falling within paragraph (a), (b), (c) or (d) of subsection (6A) of section 299 of the Taxes Act or subsection (3) of section 246 of ITA 2007 to be treated as disposed of after the remainder of the relevant shares falling within the paragraph in question, and (ii) the tax-advantaged-scheme shares to which subsection (6B) of section 299 of the Taxes Act or subsection (4) of section 246 of ITA 2007 applies to be treated as disposed of after the remainder of the relevant shares to which that subsection applies. (5) Where section 127 applies in relation to any of the relevant shares (“the reorganisation shares”), that section shall apply separately to such of those shares as are tax-advantaged-scheme shares and to the remainder of the reorganisation shares (so that those tax-advantaged-scheme shares and the remainder of the reorganisation shares are treated as comprised in separate holdings of original shares and identified with separate new holdings). (6) In subsection (5)— (a) the reference to section 127 includes a reference to that section as it is applied by virtue of any enactment relating to chargeable gains, and (b) “original shares” and “new holding” have the same meaning as in section 127 or (as the case may be) that section as applied by virtue of the enactment in question. (7) For the purposes of subsection (1) above— (a) any shares to which relief under Chapter 3 of Part 7 of the Taxes Act or relief under Part 5 of ITA 2007 is attributable and which were transferred to an individual as mentioned in section 304 of the Taxes Act or section 245 of ITA 2007, and (b) any shares to which deferral relief (within the meaning of Schedule 5B to this Act), but not relief under that Chapter or relief under that Part, is attributable and which were acquired by an individual on a disposal to which section 58 above applies, shall be treated as acquired by the individual on the day on which they were issued. (8) In this section the references to Chapter 3 of Part 7, section 299 and section 304 of the Taxes Act shall be read as references to those provisions as they apply to shares issued after 31st December 1993 (enterprise investment scheme). (9) In this section references to Part 5 of ITA 2007 or any provision of that Part are to a Part or provision that applies only in relation to shares issued after 5 April 2007.

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105B Provision supplementary to section 105A

(1) The provisions of section 105A have effect in the case of any disposal notwithstanding that some or all of the securities disposed of are otherwise identified— (a) by the disposal, or (b) by a transfer or delivery giving effect to it. (2) An election must be made, by a notice given to an officer of the Board, on or before the first anniversary of the 31st January next following the year of assessment in which the individual first makes a disposal of any of the relevant shares. (3) Where— (a) an election is made in respect of the relevant shares, and (b) any shares (“the other shares”) acquired by the individual on the same day and in the same capacity as the relevant shares cease to be treated under section 104(4) as shares of a different class from the relevant shares, the election shall have effect in respect of the other shares from the time they cease to be so treated. (4) In determining for the purposes of section 105A(2) and subsection (2) above whether the individual has made a disposal of any of the relevant shares, sections 122(1) and 128(3) shall be disregarded. (5) No election may be made in respect of ordinary shares in a venture capital trust. For this purpose “ordinary shares” has the meaning given in section 151A(7). (6) For the purposes of section 105A, shares in a company shall not 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 with on that recognised stock exchange. (7) In section 105A(2) to (5) and subsections (2) to (4) above, any reference to the relevant shares or to the tax-advantaged-scheme shares includes a reference to the securities (if any) directly or indirectly derived from the shares in question by virtue of one or more applications of section 127 (including that section as applied by virtue of any enactment relating to chargeable gains). (8) In this section— “the tax-advantaged-scheme shares” has the same meaning as in section 105A; “election” means an election under that section; “the relevant shares” has the same meaning as in that section; and “securities” has the meaning given in section 104(3); and in subsection (4) the reference to section 128(3) includes a reference to that provision as it is applied by virtue of any enactment relating to chargeable gains.

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106 Disposal of shares and securities by company within prescribed period of acquisition.

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106A Identification of securities: ... capital gains tax.

(1) This section has effect for the purposes of capital gains tax (but not corporation tax) where any securities are disposed of by any person. (2) The securities disposed of shall be identified in accordance with the following provisions of this section with securities of the same class that have been acquired by the person making the disposal. (3) The provisions of this section have effect in the case of any disposal notwithstanding that some or all of the securities disposed of are otherwise identified— (a) by the disposal, or (b) by a transfer or delivery giving effect to it; but where a person disposes of securities in one capacity, they shall not be identified under those provisions with any securities which he holds, or can dispose of, only in some other capacity. (4) Securities disposed of on an earlier date shall be identified before securities disposed of on a later date; and, accordingly, securities disposed of by a later disposal shall not be identified with securities already identified as disposed of by an earlier disposal. (5) Subject to subsection (4) above, if within the period of thirty days after the disposal the person making it acquires securities of the same class, the securities disposed of shall be identified— (a) with securities acquired by him within that period, rather than with other securities; ... (aa) with securities acquired by him within that period which are not relevant EMI shares, rather than with securities acquired by him within that period which are relevant EMI shares; and (b) subject to paragraph (aa), with securities acquired at an earlier time within that period, rather than with securities acquired at a later time within that period. (5ZA) None of the securities which, by virtue of subsection (5) above, are identified with other securities shall be regarded as forming part of an existing section 104 holding or as constituting a section 104 holding. (5A) Subsection (5) above shall not require securities to be identified with securities which the person making the disposal acquires at a time when— (a) he is not resident in the United Kingdom, or (b) he is resident ... in the United Kingdom but is Treaty non-resident. (6) Subject to subsections (4) and (5) above, relevant securities disposed of shall be identified with relevant securities acquired at a later time, rather than with relevant securities acquired at an earlier time. (6A) Subject to subsections (4) and (5) above, a company's shares which are disposed of shall be identified— (a) with relevant EMI shares, rather than with other shares, and (b) with relevant EMI shares acquired at an earlier time rather than with relevant EMI shares acquired at a later time. (6B) No shares identified with relevant EMI shares by virtue of subsection (6A)(a) or (b) above shall be regarded as forming part of an existing section 104 holding or as constituting a section 104 holding. (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9) The identification rules set out in the preceding provisions of this section have effect subject to subsection (1) of section 105, and securities disposed of shall not be identified with securities acquired after the disposal except in accordance with that section or subsection (5) above. (10) In this section— “relevant EMI shares” has the meaning given by section 169I(7C) to (7G), “securities” means any securities within the meaning of section 104 or any relevant securities, and “relevant securities” means— securities within the meaning of Chapter 2 of Part 12 of ITA 2007 (accrued income profits), qualifying corporate bonds, and securities which are interests in a non-reporting fund, within the meaning of the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001) (see regulation 4(2)). (11) For the purposes of this section securities of a company shall not 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 with on that recognised stock exchange.

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107 Identification of securities etc: general rules for corporation tax.

(1) This section has effect for the purposes of corporation tax where any securities are disposed of by a company. (1A) The securities disposed of shall be identified in accordance with the following provisions of this section with securities of the same class that have been acquired by the company making the disposal and could be comprised in that disposal. (2) The provisions of this section have effect in the case of any disposal notwithstanding that some or all of the securities disposed of are otherwise identified— (a) by the disposal, or (b) by a transfer or delivery giving effect to it; but where a company disposes of securities in one capacity, they shall not be identified with securities which it holds, or can dispose of, only in some other capacity. (3) Without prejudice to section 105 if, within a period of 10 days, a number of securities are acquired and subsequently a number of securities are disposed of and, apart from this subsection— (a) the securities acquired would increase the size of, or constitute a section 104 holding, and (b) the securities disposed of would decrease the size of, or extinguish, the same section 104 holding, then, subject to subsections (4) and (5) below, the securities disposed of shall be identified with the securities acquired and none of them shall be regarded as forming part of an existing section 104 holding or constituting a section 104 holding. (4) If, in a case falling within subsection (3) above, the number of securities acquired exceeds the number disposed of— (a) the excess shall be regarded as forming part of an existing section 104 holding or, as the case may be, as constituting a section 104 holding; and (b) if the securities acquired were acquired at different times (within the 10 days referred to in subsection (3) above) the securities disposed of shall be identified with securities acquired at an earlier time rather than with securities acquired at a later time. (5) If, in a case falling within subsection (3) above, the number of securities disposed of exceeds the number acquired, the excess shall not be identified in accordance with that subsection. (6) Securities which, by virtue of subsection (3) above, do not form part of or constitute a section 104 holding shall be treated for the purposes of section 54(2) as relevant securities within the meaning of section 108. (7) The identification rules set out in subsections (8) and (9) below have effect subject to section 105 but, subject to that, have priority according to the order in which they are so set out. (8) Securities disposed of shall be identified with securities forming part of a section 104 holding rather than with other securities. (9) Securities disposed of shall be identified with securities forming part of a 1982 holding, within the meaning of section 109, rather than with other securities and, subject to that, shall be identified with securities acquired at a later time rather than with securities acquired at an earlier time.

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108 Identification of relevant securities for corporation tax.

(A1) This section has effect for the purposes of corporation tax where any relevant securities are disposed of by a company. (1) In this section “relevant securities” means— (a) securities, within the meaning of Chapter 2 of Part 12 of ITA 2007 (accrued income profits); (aa) qualifying corporate bonds; (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ; and (c) securities which are ... interests in a non-reporting fund, within the meaning of regulations under section 354(1) of TIOPA 2010 (see Part 2 of the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001)); and shares or securities of a company shall not be treated for the purposes of this section 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 with on a recognised stock exchange. (2) Where a company disposes of relevant securities, the securities disposed of shall be identified in accordance with the rules contained in this section with the securities of the same class acquired by the company which could be comprised in that disposal, and shall be so identified notwithstanding that they are otherwise identified by the disposal or by a transfer or delivery giving effect to it (but so that where a company disposes of securities in one capacity, they shall not be identified with securities which it holds or can dispose of only in some other capacity). (3) Relevant securities disposed of on an earlier date shall be identified before securities disposed of on a later date, and the identification of the securities first disposed of shall accordingly determine the securities which could be comprised in the later disposal. (4) Relevant securities disposed of for transfer or delivery on a particular date or in a particular period— (a) shall not be identified with securities acquired for transfer or delivery on a later date or in a later period; and (b) shall be identified with securities acquired for transfer or delivery on or before that date or in or before that period, but on or after the date of the disposal, rather than with securities not so acquired. (5) The relevant securities disposed of shall be identified— (a) with securities acquired within the 12 months preceding the disposal rather than with securities not so acquired, and with securities so acquired on an earlier date rather than with securities so acquired on a later date, and (b) subject to paragraph (a) above, with securities acquired on a later date rather than with securities acquired on an earlier date; and (c) with securities acquired at different times on any one day in as nearly as may be equal proportions. (6) The rules contained in the preceding subsections shall have priority according to the order in which they are so contained. (7) Notwithstanding anything in subsections (3) to (5) above, where, under arrangements designed to postpone the transfer or delivery of relevant securities disposed of, a company by a single bargain acquires securities for transfer or delivery on a particular date or in a particular period and disposes of them for transfer or delivery on a later date or in a later period, then— (a) the securities disposed of by that bargain shall be identified with the securities thereby acquired; and (b) securities previously disposed of which, but for the operation of paragraph (a) above in relation to acquisitions for transfer or delivery on the earlier date or in the earlier period, would have been identified with the securities acquired by that bargain— (i) shall, subject to subsection (3) above, be identified with any available securities acquired for such transfer or delivery (that is to say, any securities so acquired other than securities to which paragraph (a) above applies and other than securities with which securities disposed of for such transfer or delivery would be identified apart from this subsection); and (ii) in so far as they cannot be so identified shall be treated as disposed of for transfer or delivery on the later date, or in the later period, mentioned above. (8) This section ... shall not apply— (a) where the disposal is of quoted securities (within the meaning of paragraph 8 of Schedule 2), unless an election has been made with respect to the securities under paragraph 4 of that Schedule or under section 109(4), or (b) where the disposal is of securities as respects which paragraph 17 or 18 of Schedule 2 has effect.

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109 Corporation tax: pre-April 1982 share pools.

(1) For the purposes of corporation tax, this section has effect in relation to any 1982 holding, and in this section “1982 holding” means a holding which, immediately before the coming into force of this section, was a 1982 holding for the purposes of Part II of Schedule 19 to the Finance Act 1985. (2) Subject to subsections (3) to (5) below— (a) the holding shall continue to be regarded as a single asset for the purposes of this Act (subject to express provision to the contrary), but one which cannot grow by the acquisition of additional securities of the same class, and (b) every sum, which on a disposal of the holding, would be an item of relevant allowable expenditure shall be regarded for the purposes of section 54 as having been incurred at such a time that the month which determines RI in the formula in subsection (1) of that section is March 1982. Securities of a company shall not be treated for the purposes of this section 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 with on a recognised stock exchange. (3) Nothing in subsection (2) above affects the operation of section 127 in relation to the holding, but without prejudice to section 131. (4) If a person so elects, quoted securities, as defined in paragraph 8 of Schedule 2 which are covered by the election— (a) shall be treated as an accretion to an existing 1982 holding or, as the case may be, as constituting a new 1982 holding; and (b) shall be excluded from paragraph 2 of that Schedule; and the relevant allowable expenditure which is attributable to that 1982 holding shall be adjusted or determined accordingly. (5) Paragraphs 4(8) to (13) and 5 to 8 of Schedule 2 shall apply in relation to an election under subsection (4) above as they apply in relation to an election under paragraph 4(2) of that Schedule, but with the substitution for any reference to 19th March 1968 of a reference to 31st March 1985 in the case of holdings or disposals by companies and 5th April 1985 in any other case. (6) For the purpose of computing the indexation allowance (if any) on a disposal of a 1982 holding, the relevant allowable expenditure attributable to the holding on the coming into force of this section shall be the amount which, if the holding had been disposed of immediately before the coming into force of this section, would have been the relevant allowable expenditure in relation to that holding on that disposal, and for the purposes of section 54(4) relevant allowable expenditure attributable to a 1982 holding shall be deemed to be expenditure falling within section 38(1)(a).

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110 Indexation for section 104 holdings for corporation tax.

(1) For the purposes of corporation tax this section and section 114— (a) apply in place of section 54 in relation to a disposal of a section 104 holding for the purpose of computing the indexation allowance; (b) have effect subject to section 105. (2) On any disposal of a section 104 holding, other than a disposal of the whole of it— (a) the qualifying expenditure and the indexed pool of expenditure shall each be apportioned between the part disposed of and the remainder in the same proportions as, under this Act, the relevant allowable expenditure is apportioned; and (b) the indexation allowance is the amount by which the portion of the indexed pool which is attributed to the part disposed of exceeds the portion of the qualifying expenditure which is attributed to that part. (3) On a disposal of the whole of a section 104 holding, the indexation allowance is the amount by which the indexed pool of expenditure at the time of the disposal exceeds the qualifying expenditure at that time. (4) In relation to a section 104 holding, the qualifying expenditure is at any time the amount which would be the aggregate of the relevant allowable expenditure in relation to a disposal of the whole of the holding occurring at that time. (5) Subject to subsection (6) below and section 114 the indexed pool of expenditure shall come into being at the time that the holding comes into being or, if it is earlier, when any of the qualifying expenditure is incurred and shall at the time it comes into being be the same as the qualifying expenditure at that time. (6) In relation to a section 104 holding which was in existence immediately before the coming into force of this section, the indexed pool of expenditure on the coming into force of this section shall be the same as it was for the purposes of Part III of Schedule 19 to the Finance Act 1985 immediately before then. (6A) Where a disposal to a person acquiring or adding to a section 104 holding is treated by virtue of any enactment as one on which neither a gain nor a loss accrues to the person making the disposal— (a) section 56(2) shall not apply to the disposal (and, accordingly, the amount of the consideration shall not be calculated on the assumption that a gain of an amount equal to the indexation allowance accrues to the person making the disposal), but (b) an amount equal to the indexation allowance on the disposal shall be added to the indexed pool of expenditure for the holding acquired or, as the case may be, held by the person to whom the disposal is made (and, where it is added to the indexed pool of expenditure for a holding so held, it shall be added after any increase required by subsection (8)(a) below). (7) Any reference below to an operative event is a reference to any event (whether a disposal or otherwise) which has the effect of reducing or increasing the qualifying expenditure referable to the section 104 holding. (8) Whenever an operative event occurs— (a) there shall be added to the indexed pool of expenditure the indexed rise, as calculated under subsection (10) or (11) below, in the value of the pool since the last operative event or, if there has been no previous operative event, since the pool came into being; and (b) if the operative event results in an increase in the qualifying expenditure then, in addition to any increase under paragraph (a) above, the same increase shall be made to the indexed pool of expenditure; and (c) if the operative event is a disposal resulting in a reduction in the qualifying expenditure, the indexed pool of expenditure shall be reduced in the same proportion as the qualifying expenditure is reduced; and (d) if the operative event results in a reduction in the qualifying expenditure but is not a disposal, the same reduction shall be made to the indexed pool of expenditure. (9) Where the operative event is a disposal— (a) any addition under subsection (8)(a) above shall be made before the calculation of the indexation allowance under subsection (2) above; and (b) the reduction under subsection (8)(c) above shall be made after that calculation. (10) At the time of any operative event, the indexed rise in the indexed pool of expenditure is a sum produced by multiplying the value of the pool immediately before the event by a figure expressed as a decimal and determined, subject to subsection (11) below, by the formula— RE - RL RL where— RE is the retail prices index for December 2017; and RL is the retail prices index for the month in which occurred the immediately preceding operative event or, if there has been no such event, in which the indexed pool of expenditure came into being. (11) The indexed rise is nil if— (a) RE, as defined in subsection (10), is equal to or less than RL, as so defined, or (b) the month referred to in the definition of RL in subsection (10) is after December 2017.

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110A Indexation for section 104 holdings: capital gains tax.

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111 Indexation: building society etc. shares.

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112 Parallel pooling regulations: corporation tax.

(1) The Capital Gains Tax (Parallel Pooling) Regulations 1986 made by the Treasury under paragraph 21 of Schedule 19 to the Finance Act 1985 shall continue to have effect notwithstanding the repeal by this Act of that Schedule, and for the purposes of section 14 of the Interpretation Act 1978 that paragraph shall be deemed not to have been repealed. (2) An election under Schedule 6 to the Finance Act 1983 which has not been revoked before 6th April 1992 shall not have effect in relation to any disposal after 5th April 1992 and may, if the Board allow, be revoked by notice to the inspector. (3) All such adjustments shall be made, whether by way of discharge or repayment of tax, or the making of assessments or otherwise, as are required in consequence of a revocation under subsection (2) above.

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113 Calls on shares: corporation tax.

(A1) This section has effect for the purposes of corporation tax. (1) Subsection (2) below applies where— (a) on a disposal to which section 53 applies, the relevant allowable expenditure is or includes the amount or value of the consideration given for the issue of shares or securities in, or debentures of, a company; and (b) the whole or some part of that consideration was given after the expiry of the period of 12 months beginning on the date of the issue of the shares, securities or debentures. (2) For the purpose of computing the indexation allowance (if any) on the disposal referred to in subsection (1)(a) above— (a) so much of the consideration as was given after the expiry of the period referred to in subsection (1)(b) above shall be regarded as an item of expenditure separate from any consideration given during that period; and (b) section 54(4) shall not apply to that separate item of expenditure which, accordingly, shall be regarded as incurred at the time the consideration in question was actually given.

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114 Consideration for options: corporation tax.

(A1) This section has effect for the purposes of corporation tax. (1) If, in a case where section 110(8)(b) applies, the increase in the qualifying expenditure is, in whole or in part, attributable to the cost of acquiring an option binding the grantor to sell (“the option consideration”), then, in addition to any increase under section 110(8)(a) or (b), the indexed pool of expenditure shall be increased by an amount equal to the indexed rise in the option consideration, as determined under subsection (2) below. (2) The indexed rise in the option consideration is a sum produced by multiplying the consideration by a figure expressed as a decimal and determined, subject to subsection (3) below, by the formula— RO - RA RA where— RO is the retail prices index for December 2017; and RA is the retail prices index for the month in which falls the date in which the option was acquired or, if it is later, March 1982. (3) The indexed rise is nil if— (a) RO, as defined in subsection (2), is equal to or less than RA, as so defined, or (b) the month referred to in the definition of RA in subsection (2) is after December 2017.

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115 Exemptions for gilt-edged securities and qualifying corporate bonds etc.

(1) A gain which accrues on the disposal by any person of— (a) gilt-edged securities or qualifying corporate bonds, or (b) any option or contract to acquire or dispose of gilt-edged securities or qualifying corporate bonds, shall not be a chargeable gain. (2) In subsection (1) above the reference to the disposal of a contract to acquire or dispose of gilt-edged securities or qualifying corporate bonds is a reference to the disposal of the outstanding obligations under such a contract. (3) Without prejudice to section 143(5), where a person who has entered into any such contract as is referred to in subsection (1)(b) above closes out that contract by entering into another contract with obligations which are reciprocal to those of the first-mentioned contract, that transaction shall for the purposes of this section constitute the disposal of an asset, namely, his outstanding obligations under the first-mentioned contract.

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116 Reorganisations, conversions and reconstructions.

(1) This section shall have effect in any case where a transaction occurs of such a description that, apart from the provisions of this section— (a) sections 127 to 130 would apply by virtue of any provision of Chapter II of this Part; and (b) either the original shares would consist of or include a qualifying corporate bond and the new holding would not, or the original shares would not and the new holding would consist of or include such a bond; and in paragraph (b) above “the original shares” and “the new holding” have the same meaning as they have for the purposes of sections 127 to 130. (2) In this section references to a transaction include references to any conversion of securities (whether or not effected by a transaction) within the meaning of section 132 and “relevant transaction” means a reorganisation, conversion of securities or other transaction such as is mentioned in subsection (1) above, and, in addition to its application where the transaction takes place after the coming into force of this section, subsection (10) below applies where the relevant transaction took place before the coming into force of this section so far as may be necessary to enable any gain or loss deferred under paragraph 10 of Schedule 13 to the Finance Act 1984 to be taken into account on a subsequent disposal. (3) Where the qualifying corporate bond referred to in subsection (1)(b) above would constitute the original shares for the purposes of sections 127 to 130, it is in this section referred to as “the old asset” and the shares or securities which would constitute the new holding for those purposes are referred to as “the new asset”. (4) Where the qualifying corporate bond referred to in subsection (1)(b) above would constitute the new holding for the purposes of sections 127 to 130, it is in this section referred to as “the new asset” and the shares or securities which would constitute the original shares for those purposes are referred to as “the old asset”. (4A) In determining for the purposes of subsections (1) to (4) above, as they apply for the purposes of corporation tax— (a) whether sections 127 to 130 would apply in any case, and (b) what, in a case where they would apply, would constitute the original shares and the new holding, it shall be assumed that every asset representing a loan relationship of a company is a security within the meaning of section 132. (5) So far as the relevant transaction relates to the old asset and the new asset, sections 127 to 130 shall not apply in relation to it. (6) In accordance with subsection (5) above, the new asset shall not be treated as having been acquired on any date other than the date of the relevant transaction or, subject to subsections (7) and (8) below, for any consideration other than the market value of the old asset as determined immediately before that transaction. (7) If, on the relevant transaction, the person concerned receives, or becomes entitled to receive, any sum of money which, in addition to the new asset, is by way of consideration for the old asset, that sum shall be deducted from the consideration referred to in subsection (6) above. (8) If, on the relevant transaction, the person concerned gives any sum of money which, in addition to the old asset, is by way of consideration for the new asset, that sum shall be added to the consideration referred to in subsection (6) above. (8A) Where subsection (6) above applies for the purposes of corporation tax in a case where the old asset consists of a qualifying corporate bond, Part 5 of CTA 2009 (loan relationships) shall have effect, subject to subsection (8B) below, so as to require such debits and credits to be brought into account for the purposes of that Part in relation to the relevant transaction as would have been brought into account if the transaction had been a disposal of the old asset at the market value mentioned in subsection (6) above. This subsection does not apply in relation to a relevant loan relationship transaction. (8AA) In subsection (8A) “relevant loan relationship transaction” means a transaction to which any of the following provisions applies— section 342 of CTA 2009 (continuity of treatment on transfers within groups or reorganisations: issues of new securities on reorganisations: disposal at notional carrying value), section 343 of that Act (continuity of treatment on transfers within groups or reorganisations: receiving company using fair value accounting), section 424 of that Act (European cross-border transfers of business: reorganisations involving loan relationships), section 425 of that Act (European cross-border transfers of business: original holder using fair value accounting), section 435 of that Act (European cross-border mergers: reorganisations involving loan relationships), section 436 of that Act (European cross-border mergers: original holder using fair value accounting). (8B) Subsection (8A) above does not apply where the relevant transaction is a conversion of securities occurring in consequence of the operation of the terms of any security or of any debenture which is not a security. Expressions used in this subsection have the same meaning as they have for the purposes of section 132. (9) In any case where the old asset consists of a qualifying corporate bond, then, so far as it relates to the old asset and the new asset, the relevant transaction shall be treated for the purposes of this Act as a disposal of the old asset and an acquisition of the new asset. (10) Except in a case falling within subsection (9) above, so far as it relates to the old asset and the new asset, the relevant transaction shall be treated for the purposes of this Act as not involving any disposal of the old asset but— (a) there shall be calculated the chargeable gain or allowable loss that would have accrued if, at the time of the relevant transaction, the old asset had been disposed of for a consideration equal to its market value immediately before that transaction; and (b) subject to subsections (12) to (14) below, the whole or a corresponding part of the chargeable gain or allowable loss mentioned in paragraph (a) above shall be deemed to accrue on a subsequent disposal of the whole or part of the new asset (in addition to any gain or loss that actually accrues on that disposal); and (c) on that subsequent disposal, section 115 shall have effect only in relation to any gain or loss that actually accrues and not in relation to any gain or loss which is deemed to accrue by virtue of paragraph (b) above. (11) Subsection (10)(b) and (c) above shall not apply to any disposal falling within section 58(1), 62(4), 139, 140A, 140E, or 171(1), but a person who has acquired the new asset on a disposal falling within any of those sections (and without there having been a previous disposal not falling within any of those sections or a devolution on death) shall be treated for the purposes of subsection (10)(b) and (c) above as if the new asset had been acquired by him at the same time and for the same consideration as, having regard to subsections (5) to (8) above, it was acquired by the person making the disposal. (12) In any case where— (a) on the calculation under subsection (10)(a) above, a chargeable gain would have accrued, and (b) the consideration for the old asset includes such a sum of money as is referred to in subsection (7) above, then, subject to subsection (13) below, the proportion of that chargeable gain which that sum of money bears to the market value of the old asset immediately before the relevant transaction shall be deemed to accrue at the time of that transaction. (13) If ... the sum of money referred to in subsection (12)(b) above is small, as compared with the market value of the old asset immediately before the relevant transaction, ... subsection (12) above shall not apply. (14) In a case where subsection (12) above applies, the chargeable gain which, apart from that subsection, would by virtue of subsection (10)(b) above be deemed to accrue on a subsequent disposal of the whole or part of the new asset shall be reduced or, as the case may be, extinguished by deducting therefrom the amount of the chargeable gain which, by virtue of subsection (12) above, is deemed to accrue at the time of the relevant transaction. (15) In any case where— (a) the new asset mentioned in subsections (10) and (11) above is a qualifying corporate bond in respect of which an allowable loss is treated as accruing under section 254(2), and (b) the loss is treated as accruing at a time falling after the relevant transaction but before any actual disposal of the new asset subsequent to the relevant transaction, then for the purposes of subsections (10) and (11) above a subsequent disposal of the new asset shall be treated as occurring at (and only at) the time the loss is treated as accruing. (16) This section has effect for the purposes of corporation tax notwithstanding anything in section 464(1) of CTA 2009 (matters to be brought into account in the case of loan relationships only under Part 5 of that Act).

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116A Holding beginning or ceasing to fall within section 490 of CTA 2009

(1) Section 116 applies in accordance with the following assumptions if— (a) a holding that is a relevant holding for the purposes of section 490 of CTA 2009 (holdings in OEICs, unit trusts and offshore funds treated as creditor relationship rights) is held by a company both at the end of one accounting period and at the beginning of the next, and (b) that section applies to the holding for one of those periods but not for the other. (2) The assumptions in subsections (3) and (4) apply for the purposes of this Act if the accounting period for which section 490 of CTA 2009 applies to the relevant holding is the first of those periods. (3) The relevant holding is assumed to have ceased to be a relevant holding for the second of those periods as a result of a transaction such as is mentioned in section 116(1) (“the reorganisation transaction”) occurring at the beginning of that period. (4) In relation to the reorganisation transaction within subsection (3), for the purposes of section 116— (a) the relevant holding immediately before the beginning of the second of those periods is assumed to be the old asset, and (b) the relevant holding immediately after the beginning of that period is assumed to be the new asset. (5) The assumptions in subsections (6) and (8) apply for the purposes of this Act if the accounting period for which section 490 of CTA 2009 applies to the relevant holding is the second of those periods. (6) The holding is assumed to have become a relevant holding for the second of those periods as a result of the occurrence at the end of first period of a transaction such as is mentioned in section 116(1). (7) But subsection (6) does not apply if the first of those periods is a period at the end of which a disposal of the relevant holding is treated as having occurred under section 212 (annual deemed disposal of holdings of unit trusts etc by insurance companies). (8) In relation to the reorganisation transaction within subsection (6), for the purposes of section 116— (a) the relevant holding immediately before the beginning of the second of those periods is assumed to be the old asset, and (b) the relevant holding immediately after the beginning of that period is assumed to be the new asset.

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116B Shares beginning or ceasing to be shares to which section 521B of CTA 2009 applies

(1) If at any time section 521B of CTA 2009 (application of Part 5 of that Act to certain shares as rights under a creditor relationship) begins or ceases to apply in the case of a share held by the investing company it is treated for the purposes of this Act— (a) as having disposed of the share immediately before that time for consideration of an amount equal to the notional carrying value of the share at that time, and (b) as having immediately reacquired it for consideration of the same amount. (2) In this section— “notional carrying value” has the same meaning as in subsection (2) of section 521F of CTA 2009 (see subsection (3) of that section), “investing company” has the same meaning as it has for the purposes of Chapter 6A of Part 6 of that Act (shares accounted for as liabilities) (see section 521A(3) of that Act).

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117 Meaning of “qualifying corporate bond".

(A1) For the purposes of corporation tax “qualifying corporate bond” means ... any asset representing a loan relationship of a company; and for purposes other than those of corporation tax references to a qualifying corporate bond shall be construed in accordance with the following provisions of this section. (1) For the purposes of this section, a “corporate bond” is a security, as defined in section 132(3)(b)— (a) the debt on which represents and has at all times represented a normal commercial loan; and (b) which is expressed in sterling and in respect of which no provision is made for conversion into, or redemption in, a currency other than sterling, and in paragraph (a) above “normal commercial loan” has the meaning which would be given by section 162 of CTA 2010 if for paragraphs (a) to (c) of subsection (2) of that section there were substituted the words “corporate bonds (within the meaning of section 117 of TCGA 1992)”. (2) For the purposes of subsection (1)(b) above— (a) a security shall not be regarded as expressed in sterling if the amount of sterling falls to be determined by reference to the value at any time of any other currency or asset; and (b) a provision for redemption in a currency other than sterling but at the rate of exchange prevailing at redemption shall be disregarded. (2AA) For the purposes of this section “corporate bond” also includes any asset which is not included in the definition in subsection (1) above and which is a deeply discounted security for the purposes of Chapter 8 of Part 4 of ITTOIA 2005 (see section 430). (2A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) For the purposes of this section “corporate bond” also includes a share in a building society— (a) which is a qualifying share, (b) which is expressed in sterling, and (c) in respect of which no provision is made for conversion into, or redemption in, a currency other than sterling. (5) For the purposes of subsection (4) above, a share in a building society is a qualifying share if— (a) it is a permanent interest bearing share, or (b) it is of a description specified in regulations made by the Treasury for the purposes of this paragraph. (6) Subsection (2) above applies for the purposes of subsection (4) above as it applies for the purposes of subsection (1)(b) above, treating the reference to a security as a reference to a share. (6A) For the purposes of this section “corporate bond” also includes, except in relation to a person who acquires it on or after a disposal in relation to which section 115 has or has had effect in accordance with section 116(10)(c), any debenture issued on or after 16th March 1993 which is not a security (as defined in section 132) but— (a) is issued in circumstances such that it would fall by virtue of section 251(6) to be treated for the purposes of section 251 as such a security; and (b) would be a corporate bond if it were a security as so defined. (6B) An excluded indexed security issued on or after 6th April 1996 is not a corporate bond for the purposes of this section; and an excluded indexed security issued before that date shall be taken to be such a bond for the purposes of this section only if— (a) it would be so taken apart from this subsection; and (b) the question whether it should be so taken arises for the purposes of section 116(10). (6C) In subsection (6B) above “excluded indexed security” has the same meaning as in Chapter 8 of Part 4 of ITTOIA 2005 (profits from deeply discounted securities) (see section 433). (6D) Section 151T provides for arrangements to which section 151N (alternative finance arrangements: investment bond arrangements) applies also to be a corporate bond for the purposes of this section. (7) Subject to subsections (9) and (10) below, for the purposes of this Act, a corporate bond— (a) is a “qualifying” corporate bond if it is issued after 13th March 1984; and (b) becomes a “qualifying” corporate bond if, having been issued on or before that date, it is acquired by any person after that date and that acquisition is not as a result of a disposal which is excluded for the purposes of this subsection, or which was excluded for the purposes of section 64(4) of the Finance Act 1984. (8) Where a person disposes of a corporate bond which was issued on or before 13th March 1984 and, before the disposal, the bond had not become a qualifying corporate bond, the disposal is excluded for the purposes of subsection (7) above if, by virtue of any enactment— (a) the disposal is treated for the purposes of this Act as one on which neither a gain nor a loss accrues to the person making the disposal; or (b) the consideration for the disposal is treated for the purposes of this Act as reduced by an amount equal to the held-over gain on that disposal, as defined for the purposes of section 165 or 260. (8A) A corporate bond falling within subsection (2AA) above is a qualifying corporate bond whatever its date of issue. (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11) For the purposes of this section— (a) where a security is comprised in a letter of allotment or similar instrument and the right to the security thereby conferred remains provisional until accepted, the security shall not be treated as issued until there has been acceptance; and (b) “permanent interest bearing share” means a share which is a permanent interest bearing share for the purposes of the PRA Handbook made by the Prudential Regulation Authority under the Financial Services and Markets Act 2000 as that Handbook applies in relation to shares issued on the date that the share is issued, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12) The Treasury may by regulations provide that for the definition of the expression “permanent interest bearing share” in subsection (11) above (as it has effect for the time being) there shall be substituted a different definition of that expression, and regulations under this subsection or subsection (5)(b) above may contain such supplementary, incidental, consequential or transitional provision as the Treasury thinks fit. (13) This section shall have effect for the purposes of section 254 with the omission of subsections (4) to (6), (11) and (12).

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117A Assets that are not qualifying corporate bonds for corporation tax purposes.

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117B Holdings in unit trusts and offshore funds excluded from treatment as qualifying corporate bonds.

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118 Amount to be treated as consideration on disposal of deep discount securities etc.

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119 Transfers of securities subject to the accrued income scheme.

(1) Where there is a transfer of securities within the meaning of Chapter 2 of Part 12 of ITA 2007 (accrued income profits)— (a) if a payment is treated as made to the transferor under section 632 of that Act or by the transferor under section 633 of that Act, section 37 shall be disregarded in computing the gain accruing on the disposal concerned; (b) if a payment is treated as made by the transferee under section 632 of that Act or to the transferee under section 633 of that Act, section 39 shall be disregarded in computing the gain accruing to the transferee if he disposes of the securities; but subsections (2) and (3) below shall apply. (2) Where the securities are transferred with accrued interest (within the meaning of that Chapter)— (a) if a payment is treated as made to the transferor under section 632 of ITA 2007, an amount equal to the amount of that payment shall be excluded from the consideration mentioned in subsection (8) below; (b) if a payment is treated as made by the transferee under that section, an amount equal to the amount of that payment shall be excluded from the sums mentioned in subsection (9) below. (3) Where the securities are transferred without accrued interest (within the meaning of that Chapter)— (a) if a payment is treated as made by the transferor under section 633 of ITA 2007, an amount equal to the amount of that payment shall be added to the consideration mentioned in subsection (8) below; (b) if a payment is treated as made to the transferee under that section, an amount equal to the amount of that payment shall be added to the sums mentioned in subsection (9) below. (3A) Subsections (3B) and (3C) below apply where there is a transfer of variable rate securities (within the meaning of that Chapter) and— (a) the transferor is treated as making accrued income profits under section 630(2) of ITA 2007, or (b) a payment is treated as made to the transferor under section 635 of that Act. (3B) Section 37 shall be disregarded in computing the gain accruing on the disposal concerned. (3C) An amount equal to the amount of the profits or payment shall be excluded from the consideration mentioned in subsection (8) below. (4) Where there is a transfer of securities with unrealised interest (within the meaning of Chapter 2 of Part 12 of ITA 2007)— (a) if section 630 of that Act applies or a payment is treated as made to the transferor under section 634 of that Act, section 37 shall be disregarded in computing the gain accruing on the disposal concerned, but the relevant amount shall be excluded from the consideration mentioned in subsection (8) below; (b) if section 681 of that Act applies, section 39 shall be disregarded in computing the gain accruing on the disposal concerned, but the relevant amount shall be excluded from the sums mentioned in subsection (9) below. (5) In subsection (4) above “the relevant amount” means an amount equal to— (a) if paragraph (b) below does not apply, the amount of the unrealised interest in question (within the meaning of Chapter 2 of Part 12 of ITA 2007); (b) if section 660 of that Act applies— (i) in a case falling within subsection (4)(a) above, the amount taken, by virtue of section 660 or 661 of that Act (as the case may be), to be the unrealised interest value for the purposes of section 660(2) or (3) of that Act; (ii) in a case falling within subsection (4)(b) above, the amount of income that is exempt from liability to income tax under section 681 of that Act. (6) In relation to any securities which by virtue of subsection (7) below are treated for the purposes of this subsection as having been transferred, subsections (2) and (3) above shall have effect as if for “is treated as made”, in each place where it occurs, there were substituted “would, if the disposal were a transfer, be treated as made”. (7) Where there is a disposal of securities for the purposes of this Act which is not a transfer (within the meaning of Chapter 2 of Part 12 of ITA 2007) but, if it were such a transfer, a payment would be treated as made under section 632 or 633 of that Act, the securities shall be treated— (a) for the purposes of subsection (6) above, as transferred on the day of the disposal, and (b) for the purposes of subsections (2) and (3) above, as transferred with accrued interest if, had the disposal been a transfer within the meaning of that Chapter, it would have been a transfer with accrued interest and as transferred without accrued interest if, had the disposal been such a transfer, it would have been a transfer without accrued interest. (7A) In relation to any securities which by virtue of subsection (7B) below are treated for the purposes of this subsection as having been transferred, subsection (3A) above shall have effect as if— (a) for “is treated as making” there were substituted “ would, if the disposal were a transfer, be treated as making ”, and (b) for “is treated as made” there were substituted “ would, if the disposal were a transfer, be treated as made ”. (7B) Where there is a disposal of securities for the purposes of this Act which is not a transfer (within the meaning of Chapter 2 of Part 12 of ITA 2007) but, if it were such a transfer, the transferor would be treated as making accrued income profits under section 630(2) of that Act in respect of a transfer of variable rate securities or a payment would be treated as made under section 635 of that Act— (a) the securities shall be treated, for the purposes of subsection (7A) above, as transferred on the day of the disposal, and (b) the transfer shall be treated, for the purposes of subsection (3A) above, as a transfer of variable rate securities. (8) The consideration is the consideration for the disposal of the securities transferred which is taken into account in the computation of the gain accruing on the disposal. (9) The sums are the sums allowable to the transferee as a deduction from the consideration in the computation of the gain accruing to him if he disposes of the securities. (10) Where on a conversion or exchange of securities a payment is treated as made to a person under section 632 or 635 of ITA 2007, or a person is treated as making accrued income profits under section 630(2) of that Act in respect of a transfer of variable rate securities, an amount equal to the amount of the payment or profits shall, for the purposes of this Act, be treated as follows— (a) to the extent that it does not exceed the amount of any consideration which the person receives (or is deemed to receive) or becomes entitled to receive on the conversion or exchange (other than his new holding), it shall be treated as reducing that consideration; and (b) to the extent that it does exceed that amount, it shall be treated as consideration which the person gives on the conversion or exchange; and where on a conversion or exchange of securities a payment is treated as made by a person under section 633 of that Act an amount equal to the amount of the payment shall, for the purposes of the computation of the gain, be treated as consideration which the person receives on the conversion or exchange. (11) In subsection (10) above “conversion” means conversion within the meaning of section 132 and “exchange” means an exchange which by virtue of Chapter II of this Part does not involve a disposal.

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119A Increase in expenditure by reference to tax charged in relation to employment-related securities

(1) This section applies to a disposal of an asset consisting of employment-related securities if the disposal— (a) is an event giving rise to a relevant income tax charge, or (b) is the first disposal after an event, other than a disposal, giving rise to a relevant income tax charge. (2) Section 38(1)(a) applies as if the relevant amount had formed part of the consideration given by the person making the disposal for his acquisition of the employment-related securities. (3) For the purposes of this section an event gives rise to a relevant income tax charge if it results in an amount counting as employment income in respect of the employment-related securities— (a) under section 426 of ITEPA 2003 (restricted securities), (b) under section 438 of ITEPA 2003 by virtue of section 439(3)(a) of that Act (conversion of convertible securities), (c) under section 446U of ITEPA 2003 (securities acquired for less than market value: discharge of notional loan), (ca) under section 447 of ITEPA 2003 (receipt of benefit) in a case where the benefit is an increase in the market value of the employment-related securities, (d) under section 476 of ITEPA 2003 by virtue of section 477(3)(a) of that Act (acquisition of securities pursuant to employment-related securities option), or— (e) under subsection (3) of section 21 of the Finance Act 2005 (transitional charge in relation to shares in spin-out companies) by virtue of subsection (4)(b) of that section (election by employee). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) For the purposes of this section “the relevant amount” is the aggregate of the amounts counting as employment income as mentioned in subsection (3) above by reason of events occurring— (a) not later than the disposal, and (b) where this section has applied to an earlier disposal of the employment-related securities, after the last disposal to which this section applied. (5) In determining for the purposes of subsection (4) the amount counting as employment income— (a) in the case of an amount counting as employment income under section 476 of ITEPA 2003 any amounts deducted under section 480(5)(a), (b) or (d) of that Act shall be added back, and (b) no account shall be taken of any relief under section 428A, 442A, 481 or 482 of that Act (relief for secondary Class 1 contributions or special contribution met by employee). (5A) See also section 119B (unchargeable, and unremitted chargeable, foreign securities income) and section 119C (unremitted Part 7A income). (6) Where securities or interests in securities cease to be employment-related securities— (a) by reason of subsection (6) of section 421B of ITEPA 2003 in circumstances in which, immediately before the employee’s death, the employment-related securities are held otherwise than by the employee, or (b) by reason of subsection (7) of that section, they are to be regarded for the purposes of this section as remaining employment-related securities until the next occasion on which they are disposed of. (7) In this section— “employment-related securities”, and “employee”, in relation to employment-related securities, have the same meaning as in Chapters 1 to 4 of Part 7 of ITEPA 2003. (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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119B Section 119A: unchargeable, and unremitted chargeable, foreign securities income

(1) For the purposes of section 119A reduce the amount that counts as employment income by so much of that amount (if any) as is— (a) unchargeable foreign securities income, or (b) unremitted chargeable foreign securities income. (1A) In this section “unchargeable foreign securities income” means unchargeable foreign securities income for the purposes of section 41F of ITEPA 2003 (taxable specific income: internationally mobile employees etc) (see sections 41H to 41L of that Act). (2) In this section “unremitted chargeable foreign securities income” means income that— (a) is chargeable foreign securities income for the purposes of section 41F of ITEPA 2003, and (b) has not been remitted to the United Kingdom by the end of the tax year in which the disposal mentioned in section 119A(1) occurs. (3) The following provisions apply if any of the unremitted chargeable foreign securities income is remitted to the United Kingdom after the end of the tax year referred to in subsection (2)(b). (4) The person liable for the capital gains tax on any chargeable gains arising on the disposal may make a claim for section 119A(2) to have effect as if the remitted income had been remitted before the end of that tax year. (5) All adjustments (by way of repayment of tax, assessment or otherwise) are to be made which are necessary to give effect to a claim under subsection (4). (6) Those adjustments may be made at any time, despite anything to the contrary in any enactment relating to capital gains tax.

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119C Section 119A: unremitted Part 7A income

(1) This section applies for the purposes of section 119A if an amount deducted under section 480(5)(d) of ITEPA 2003, which (apart from this section) would by virtue of section 119A(5)(a) be added back to an amount counting as employment income, is or includes unremitted Part 7A income. (2) So much of the amount deducted as is unremitted Part 7A income is not to be added back. (3) In this section “unremitted Part 7A income” means an amount counting as employment income under Chapter 2 of Part 7A of ITEPA 2003— (a) to which section 554Z9(2) or 554Z10(2) of that Act applies, and (b) which has not been remitted to the United Kingdom by the end of the tax year in which the disposal mentioned in section 119A(1) occurs. (4) Section 119B(4) to (6) applies if any of the unremitted Part 7A income is remitted to the United Kingdom after the end of the tax year referred to in subsection (3)(b).

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120 Increase in expenditure by reference to tax charged in relation to shares etc.

(1) Subsection (1A) applies where— (a) a person (“the employee”) has acquired shares or an interest in shares as mentioned in section 447(1) of ITEPA 2003, and (b) an amount counts as employment income of the employee under Chapter 4 of Part 7 of that Act in respect of the shares. (1A) On the first disposal of the shares after the acquisition occurs, the employment income amount shall be treated for the purposes of section 38(1)(a) as consideration given by the person making the disposal for the acquisition of the shares. (1B) For the purposes of subsections (1) and (1A)— (a) the “employment income amount” means the amount counting as employment income of the employee under that Chapter in respect of the shares, and (b) it is immaterial whether the disposal of the shares mentioned in subsection (1A) is made by the employee or another person. (2) Section 38(1)(a) applies as if the relevant amount as defined in the following provisions of this section in the cases there specified had formed part of the consideration given by the person making the disposal for his acquisition of the assets in question. (3) Where an amount is treated as earnings under section 195(2) of ITEPA 2003 in respect of shares or an interest in shares, then— (a) on a disposal of the shares or interest, where that is the event giving rise to the charge; or (b) in any case, on the first disposal of the shares or interest after the event, the relevant amount is a sum equal to the amount so treated as earnings. (4) If a gain counting as employment income under section 476 or 477 of ITEPA 2003 is realised by the exercise of a right to acquire shares, the relevant amount is a sum equal to the amount of the gain so counting as employment income. (5) Where an amount is chargeable to tax under section 138 of the Taxes Act on a person acquiring any shares or interest in shares, then on the first disposal (whether by him or another person) of the shares after his acquisition, the relevant amount is an amount equal to the amount so chargeable. (5A) Where an amount counts as employment income under Chapter 2 of Part 7 of ITEPA 2003 in respect of— (a) the acquisition or disposal of any interest in shares, or (b) any interest in shares ceasing to be only conditional, the relevant amount is a sum equal to the amount so counting as employment income. (5B) Where an amount counts as employment income under Chapter 3 of Part 7 of ITEPA 2003 in respect of the conversion of shares, the relevant amount is a sum equal to the amount so counting as employment income. (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7) Each of the provisions of this section mentioned in the first column of the following table is to be construed as if it were contained in the Chapter of ITEPA 2003 specified in the corresponding entry in the second column— Provision of this section | Chapter of ITEPA 2003 subsections (1), (1A) and (1B) | Chapter 4 of Part 7 subsection (3) | Chapter 8 of Part 3 subsection (4) | Chapter 5 of Part 7 subsection (5A) | Chapter 2 of Part 7 subsection (5B) | Chapter 3 of Part 7; and subsection (5) of this section is to be construed as one with section 138 of the Taxes Act. (7A) In relation to events that gave rise to amounts chargeable to income tax before 6th April 2003, this section is to be read as if any reference to an amount mentioned in the first column of the following table included a reference to an amount mentioned in the corresponding entry in the second column— Amount mentioned in this section | Amount chargeable before 6th April 2003 an amount counting as employment income under Chapter 4 of Part 7 of ITEPA 2003 | an amount chargeable to tax under Chapter 2 of Part 3 of the Finance Act 1988 an amount treated as earnings under section 195(2) of ITEPA 2003 | an amount chargeable to tax under section 162(5) of the Taxes Act an amount counting as employment income under section 476 or 477 of ITEPA 2003 | an amount chargeable to tax under section 135(1) or (6) of the Taxes Act an amount which counts as employment income under Chapter 2 of Part 7 of ITEPA 2003 | an amount chargeable to tax under section 140A of the Taxes Act an amount which counts as employment income under Chapter 3 of Part 7 of ITEPA 2003 | an amount chargeable to tax under section 140D of the Taxes Act. (8) For the purposes of subsection (5A) above this section shall have effect as if references in this section to shares included anything referred to as shares in Chapter 2 of Part 7 of ITEPA 2003. (9) References in this section to ITEPA 2003 are to that Act as originally enacted.

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121 Exemption for government non-marketable securities.

(1) Savings certificates and non-marketable securities issued under the National Loans Act 1968 or the National Loans Act 1939, or any corresponding enactment forming part of the law of Northern Ireland, shall not be chargeable assets, and accordingly no chargeable gain shall accrue on their disposal. (2) In this section— (a) “savings certificates” means savings certificates issued under section 12 of the National Loans Act 1968, or section 7 of the National Debt Act 1958, or section 59 of the Finance Act 1920, and any war savings certificates as defined in section 9(3) of the National Debt Act 1972, together with any savings certificates issued under any enactment forming part of the law of Northern Ireland and corresponding to the said enactments, and (b) “non-marketable securities” means securities which are not transferable, or which are transferable only with the consent of some Minister of the Crown, or the consent of a department of the Government of Northern Ireland, or only with the consent of the National Debt Commissioners.

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122 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 126) he shall be treated as if he had in consideration of that capital distribution disposed of an interest in the shares. (1A) Subsection (1) is subject to the provisions of section 140A(1D) and section 140E(7). (2) If ... the amount distributed is small, as compared with the value of the shares in respect of which it is distributed, ...— (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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) Where the allowable expenditure is less than the amount distributed (or is nil)— (a) subsection (2) 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 38(1). (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. (5A) The reference in subsection (5)(b) to a distribution in the course of dissolving a company includes a reference to a distribution to which section 1030A(3) of CTA 2010 (distributions prior to dissolution of company) applies. (6) The reference in subsection (5)(b) to a distribution which in the hands of the recipient constitutes income for the purposes of income tax includes, where the recipient is a company, a distribution to which the charge to corporation tax on income under Part 9A of CTA 2009 (company distributions) would apply were the distribution not exempt for the purposes of that Part.

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123 Disposal of right to acquire shares or debentures.

(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 122 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) 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.

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124 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 (consequences for income tax of apportionment of income etc. of close company) a person is assessed to income tax, then, in the computation 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 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.

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125 Shares in close company transferring assets at an undervalue.

(1) If a company which is a close company transfers, or has after 31st March 1982 transferred, 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 of the 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 38(1)(a) from the consideration for the disposal. (3) If the person owning any of the 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 does not apply in the following cases. Case 1 Case 1 is where the transfer of the asset is a disposal to which section 171(1) applies (transfers within a group: general provisions). Case 2 Case 2 is where the transferee is a participator, or an associate of a participator, in the company and an amount equal to the undervalue amount is treated as— a distribution within section 209(2)(b) or (4) of the Taxes Act (meaning of “distribution”), or a capital distribution within section 122 of this Act (distribution which is not a new holding within Chapter 2). Case 3 Case 3 is where the transferee is an employee of the company and— an amount equal to the undervalue amount is treated as the employee’s employment income, and no part of that amount is treated as exempt income. (5) In relation to a disposal to which section 35(2) does not apply, subsection (1) above shall have effect with the substitution of “ 6th April 1965 ” for “31st March 1982". (6) In this section— “associate” has the meaning given by section 448 of CTA 2010; “employee” has the meaning given by section 4 of ITEPA 2003 (as read with section 5(2) of that Act); “employment income” has the meaning given by section 7(2) of ITEPA 2003; “exempt income” has the meaning given by section 8 of ITEPA 2003; “participator” has the meaning given by section 454 of CTA 2010; “undervalue amount” means the amount by which the amount or value of the consideration for the transfer is less than the market value of the asset transferred.

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125A Effect of share loss relief

(1) If loss relief under ... Chapter 6 of Part 4 of ITA 2007 or Chapter 5 of Part 4 of CTA 2010 (“share loss relief”) is obtained in respect of a loss or any part of a loss, no deduction is to be made in respect of the loss or (as the case may be) the part under this Act. (2) If a claim is made for share loss relief in respect of a loss accruing on the disposal of shares, section 30 has effect in relation to the disposal as if for the references in subsections (1)(b) and (5) to a tax-free benefit there were substituted references to any benefit whether tax-free or not. (3) All such adjustments of corporation tax on chargeable gains or capital gains tax are to be made, whether by way of assessment or by way of discharge or repayment of tax, as may be required in consequence of— (a) share loss relief being obtained in respect of an allowable loss, or (b) such relief not being obtained in respect of the whole or part of such a loss in respect of which a claim is made.

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126 Application of sections 127 to 131.

(1) For the purposes of this section and sections 127 to 131 “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.

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127 Equation of original shares and new holding.

Subject to sections 128 to 130, 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.

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128 Consideration given or received by holder.

(1) Subject to subsection (2) below, 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. (2) There shall not be treated as consideration given for the new holding or any part of it— (a) any surrender, cancellation or other alteration of the original shares or of the rights attached thereto, or (b) 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, and, 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. (3) 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 122 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 127 as the same asset). (4) Where for the purpose of subsection (3) above it is necessary in computing the gain or loss accruing on the disposal of the interest in the original shares mentioned in that subsection 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 129.

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