(1) If— (a) an individual (“the transferor”) makes a disposal otherwise than under a bargain at arm’s length of an asset within subsection (2) below, and (b) a claim for relief under this section is made by the transferor and the person who acquires the asset (“the transferee”) or, where the trustees of a settlement are the transferee, by the transferor alone, then, subject to subsection (3) and sections 166, 167, 167A, 169, 169B and 169C, subsection (4) below shall apply in relation to the disposal. (2) An asset is within this subsection if— (a) it is, or is an interest in, an asset used for the purposes of a trade, profession or vocation carried on by— (i) the transferor, or (ii) his personal company, or (iii) a member of a trading group of which the holding company is his personal company, or (b) it consists of shares or securities of a trading company, or of the holding company of a trading group, where— (i) the shares or securities are not listed on a recognised stock exchange, or (ii) the trading company or holding company is the transferor’s personal company. (3) Subsection (4) below does not apply in relation to a disposal if— (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (ba) in the case of a disposal of shares or securities, the transferee is a company, (c) in the case of a disposal of qualifying corporate bonds, a gain is deemed to accrue by virtue of section 116(10)(b), or (d) subsection (3) of section 260 applies in relation to the disposal (or would apply if a claim for relief were duly made under that section). (4) Where a claim for relief is made under this section in respect of a disposal— (a) the amount of any chargeable gain which, apart from this section, would accrue to the transferor on the disposal, and (b) the amount of the consideration for which, apart from this section, the transferee would be regarded for the purposes of capital gains tax as having acquired the asset or, as the case may be, the shares or securities, shall each be reduced by an amount equal to the held-over gain on the disposal. (5) Part I of Schedule 7 shall have effect for extending the relief provided for by virtue of subsections (1) to (4) above in the case of agricultural property and for applying it in relation to settled property. (6) Subject to Part II of Schedule 7 and subsection (7) below, the reference in subsection (4) above to the held-over gain on a disposal is a reference to the chargeable gain which would have accrued on that disposal apart from subsection (4) above ..., and in subsection (7) below that chargeable gain is referred to as the unrelieved gain on the disposal. (7) In any case where— (a) there is actual consideration (as opposed to the consideration equal to the market value which is deemed to be given by virtue of section 17(1)) for a disposal in respect of which a claim for relief is made under this section, and (b) that actual consideration exceeds the sums allowable as a deduction under section 38, the held-over gain on the disposal shall be the amount by which the unrelieved gain on the disposal exceeds the excess referred to in paragraph (b) above. (7A) Subsections (7B) and (7C) apply in any case where— (a) the disposal is a direct or indirect disposal of UK land which meets the non-residence condition, and (b) the transferee is resident in the United Kingdom. (7B) Subsections (4) and (6) have effect in relation to the disposal as if the references to “chargeable gain” were references to “so much of any gain accruing on the disposal as falls to be dealt with as mentioned in subsection (7D)(a) or (b)”. (7C) Subsection (7) has effect in relation to the disposal as if the reference to “the excess referred to in paragraph (b) above” were a reference to “so much of the gain mentioned in subsection (7B) which, ignoring this section and section 17(1), would accrue to the transferor on the disposal”. (7D) For the purposes of subsections (7A) to (7C) a disposal is a “direct or indirect disposal of UK land which meets the non-residence condition” if it is— (a) a disposal on which a gain accrues that falls to be dealt with by section 1A(3) because the asset disposed of is within paragraph (b) or (c) of that subsection, or (b) a disposal on which a gain accrues that falls to be dealt with by section 1A(1) in accordance with section 1G(2) because the asset disposed of is within section 1A(3)(b) or (c). (8) Subject to subsection (9) below, in this section and Schedule 7— (a) “personal company”, in relation to an individual, means a company the voting rights in which are exercisable, as to not less than 5 per cent., by that individual; (aa) “holding company”, “trading company” and “trading group” have the meaning given by section 165A; and (b) “trade”, “profession” and “vocation” have the same meaning as in the Income Tax Acts. (9) In this section and Schedule 7 and in determining whether a company is a trading company for the purposes of this section and that Schedule, the expression “trade” shall be taken to include the occupation of woodlands where the woodlands are managed by the occupier on a commercial basis and with a view to the realisation of profits. (10) Where a disposal in relation to which subsection (4) above applies is (or proves to be) a chargeable transfer for inheritance tax purposes, there shall be allowed as a deduction in computing (for capital gains tax purposes) the chargeable gain accruing to the transferee on the disposal of the asset in question an amount equal to whichever is the lesser of— (a) the inheritance tax attributable to the value of the asset, and (b) the amount of the chargeable gain as computed apart from this subsection, and, in the case of a disposal which, being a potentially exempt transfer, proves to be a chargeable transfer, all necessary adjustments shall be made, whether by the discharge or repayment of capital gains tax or otherwise. (11) Where an amount of inheritance tax— (a) falls to be redetermined in consequence of the transferor’s death within 7 years of making the chargeable transfer in question, or (b) is otherwise varied, after it has been taken into account under subsection (10) above, all necessary adjustments shall be made, whether by the making of an assessment to capital gains tax or by the discharge or repayment of such tax.

Propose a change

165A Meaning of “holding company”, “trading company” and “trading group”

(1) This section has effect for the interpretation of section 165 (and this section). (2) “Holding company” means a company that has one or more 51% subsidiaries. (3) “Trading company” means a company carrying on trading activities whose activities do not include to a substantial extent activities other than trading activities. (4) For the purposes of subsection (3) above “trading activities” means activities carried on by the company— (a) in the course of, or for the purposes of, a trade being carried on by it, (b) for the purposes of a trade that it is preparing to carry on, (c) with a view to its acquiring or starting to carry on a trade, or (d) with a view to its acquiring a significant interest in the share capital of another company that— (i) is a trading company or the holding company of a trading group, and (ii) if the acquiring company is a member of a group of companies, is not a member of that group. (5) Activities do not qualify as trading activities under subsection (4)(c) or (d) above unless the acquisition is made, or the company starts to carry on the trade, as soon as is reasonably practicable in the circumstances. (6) The reference in subsection (4)(d) above to the acquisition of a significant interest in the share capital of another company is to an acquisition of ordinary share capital in the other company— (a) such as would make that company a 51% subsidiary of the acquiring company, or (b) such as would give the acquiring company a qualifying shareholding in a joint venture company without making the two companies members of the same group of companies. (7) For the purpose of determining whether a company which has a qualifying shareholding in a joint venture company is a trading company— (a) any holding by it of shares in the joint venture company is to be disregarded, and (b) it is to be treated as carrying on an appropriate proportion of the activities of the joint venture company or, where the joint venture company is the holding company of a trading group, of the activities of that group; and in paragraph (b) above “appropriate proportion” means a proportion corresponding to the percentage of the ordinary share capital of the joint venture company held by the company. (8) “Trading group” means a group of companies— (a) one or more of whose members carry on trading activities, and (b) the activities of whose members, taken together, do not include to a substantial extent activities other than trading activities. (9) For the purposes of subsection (8) above “trading activities” means activities carried on by a member of the group— (a) in the course of, or for the purposes of, a trade being carried on by any member of the group, (b) for the purposes of a trade that any member of the group is preparing to carry on, (c) with a view to any member of the group acquiring or starting to carry on a trade, or (d) with a view to any member of the group acquiring a significant interest in the share capital of another company that— (i) is a trading company or the holding company of a trading group, and (ii) is not a member of the same group of companies as the acquiring company. (10) Activities do not qualify as trading activities under subsection (9)(c) or (d) above unless the acquisition is made, or the group member in question starts to carry on the trade, as soon as is reasonably practicable in the circumstances. (11) The reference in subsection (9)(d) above to the acquisition of a significant interest in the share capital of another company is to an acquisition of ordinary share capital in the other company— (a) such as would make that company a member of the same group of companies as the acquiring company, or (b) such as would give the acquiring company a qualifying shareholding in a joint venture company without making the joint venture company a member of the same group of companies as the acquiring company. (12) For the purpose of determining whether a group of companies is a trading group in a case where any one or more members of the group has a qualifying shareholding in a joint venture company which is not a member of the group— (a) every holding of shares in the joint venture company by a member of the group having a qualifying shareholding in it is to be disregarded, and (b) each member of the group having such a qualifying shareholding is to be treated as carrying on an appropriate proportion of the activities of the joint venture company or, where the joint venture company is a holding company of a trading group, of the activities of that group; and in paragraph (b) above “appropriate proportion” means a proportion corresponding to the percentage of the ordinary share capital of the joint venture company held by the member of the group. (13) For the purposes of this section the activities of the members of a group of companies are to be treated as one business (with the result that activities are disregarded to the extent that they are intra-group activities). (14) In this section— “51% subsidiary” has the meaning given by Chapter 3 of Part 24 of CTA 2010, “group of companies” means a company which has one or more 51% subsidiaries together with those subsidiaries, “joint venture company” means a company— which is a trading company or the holding company of a trading group, and 75% or more of the ordinary share capital of which (in aggregate) is held by not more than 5 persons (the shareholdings of members of a group of companies being regarded for the purposes of this paragraph as held by a single company), “ordinary share capital” has the meaning given by section 989 of ITA 2007, “qualifying shareholding”, in relation to a company and a joint venture company, means— the holding by the company of 10% or more of the ordinary share capital of the joint venture company, or (where the company is a member of a group of companies) the holding by the company and the other members of the group (between them) of 10% or more of that ordinary share capital, and “trade” means ... anything which— is a trade, profession or vocation, within the meaning of the Income Tax Acts, and is conducted on a commercial basis and with a view to the realisation of profits.

Propose a change

166 Gifts to non-residents.

(1) Subject to section 167A, section 165(4) shall not apply where the transferee is not resident in the United Kingdom. (2) Section 165(4) shall not apply where the transferee is an individual ... if that individual ... — (a) though resident ... in the United Kingdom, is regarded for the purposes of any double taxation relief arrangements as resident in a territory outside the United Kingdom, and (b) by virtue of the arrangements would not be liable in the United Kingdom to tax on a gain arising on a disposal of the asset occurring immediately after its acquisition.

Propose a change

167 Gifts to foreign-controlled companies.

(1) Subject to section 167A, section 165(4) shall not apply where the transferee is a company which is within subsection (2) below. (2) A company is within this subsection if it is controlled by a person who, or by persons each of whom— (a) is not resident in the United Kingdom, and (b) is or is connected with the person making the disposal. (3) For the purposes of subsection (2) above, a person who (either alone or with others) controls a company by virtue of holding assets relating to that or any other company and who is resident in the United Kingdom is to be regarded as not resident there if— (a) he is regarded for the purposes of any double taxation relief arrangements as resident in a territory outside the United Kingdom, and (b) by virtue of the arrangements he would not be liable in the United Kingdom to tax on a gain arising on a disposal of the assets.

Propose a change

167A Gifts of direct or indirect interests in UK land to non-residents

(1) This section applies where the disposal in relation to which a claim could be made under section 165 is a disposal of an asset within section 1A(3)(b) or (c) to a transferee who is not resident in the United Kingdom and, ignoring section 165— (a) a gain would accrue to the transferor on the disposal, and (b) on the assumption that the disposal is a direct or indirect disposal of UK land which meets the non-residence condition (whether or not that is the case), that gain would be a relevant gain (see subsections (6) and (7)). (2) Section 165(4) has effect in relation to the disposal as if it read— (4) Where a claim for relief is made under this section in respect of the disposal, the amount of any chargeable gain which, apart from this section, would accrue to the transferor on the disposal, shall be reduced by an amount equal to the held-over gain on the disposal. (3) Where the disposal is a direct or indirect disposal of UK land which meets the non-residence condition— (a) section 165(4), as modified by subsection (2) of this section, has effect in relation to the disposal as if the reference to “chargeable gain” were a reference to “relevant gain”, (b) section 165(6) has effect in relation to the disposal as if the references to “chargeable gain” were references to “relevant gain”, and (c) section 165(7) has effect in relation to the disposal as if the reference to “the excess referred to in paragraph (b) above” were a reference to “the relevant gain which, ignoring this section and section 17(1), would accrue to the transferor on the disposal”. (4) Where a claim for relief is made under section 165 in relation to the disposal mentioned in subsection (1), on a subsequent disposal by the transferee of the whole or part of the asset within section 1A(3)(b) or (c) which is the subject of the disposal mentioned in subsection (1), the whole or a corresponding part of the held-over gain (see section 165(6))— (a) is deemed to accrue to the transferee (in addition to any gain or loss that actually accrues on that subsequent disposal), and (b) (if that would not otherwise be the case) is to be treated as a relevant gain. (5) Where the subsequent disposal mentioned in subsection (4) is (or proves to be) a chargeable transfer for inheritance tax purposes, section 165(10) has effect in relation to the disposal as if— (a) the reference to “the chargeable gain accruing to the transferee on the disposal of the asset” were a reference to the chargeable gain accruing on the disposal as computed apart from subsection (4), and (b) the reference in section 165(10)(b) to “the chargeable gain” were a reference to— (i) the chargeable gain chargeable to capital gains tax by virtue of any provision of this Act accruing on the disposal, and (ii) the held-over gain deemed to accrue under subsection (4). (6) For the purposes of this section, a disposal is a “direct or indirect disposal of UK land which meets the non-residence condition” if it is— (a) a disposal on which a gain accrues that falls to be dealt with by section 1A(3) because the asset disposed of is within paragraph (b) or (c) of that subsection, or (b) a disposal on which a gain accrues that falls to be dealt with by section 1A(1) in accordance with section 1G(2) because the asset disposed of is within section 1A(3)(b) or (c). (7) For the purposes of this section, a “relevant gain” means so much of any chargeable gain accruing on a disposal as falls to be dealt with as mentioned in subsection (6)(a) or (b).

Propose a change

168 Emigration of donee.

(1) If— (a) relief is given under section 165 in respect of a disposal to an individual or under section 260 in respect of a disposal to an individual (“the relevant disposal”); and (aa) the transferee is resident in the United Kingdom at the time of that disposal; and (b) at a time when he has not disposed of the asset in question, the transferee ceases to be resident in the United Kingdom, then, subject to the following provisions of this section, a chargeable gain shall be deemed to have accrued to the transferee immediately before that time, and its amount shall be equal to the held-over gain (within the meaning of section 165 or 260) on the relevant disposal. (2) For the purposes of subsection (1) above the transferee shall be taken to have disposed of an asset before the time there referred to only if he has made a disposal or disposals in connection with which the whole of the held-over gain on the relevant disposal was represented by reductions made in accordance with section 165(4)(b) or 260(3)(b) and where he has made a disposal in connection with which part of that gain was so represented, the amount of the chargeable gain deemed by virtue of this section to accrue to him shall be correspondingly reduced. (3) The disposals by the transferee that are to be taken into account under subsection (2) above shall not include any disposal to which section 58 applies; but where any such disposal is made by the transferee, disposals by his spouse or civil partner shall be taken into account under subsection (2) above as if they had been made by him. (4) Subsection (1) above shall not apply by reason of a person ceasing to be resident more than 6 years after the end of the year of assessment in which the relevant disposal was made. (5) Subsection (1) above shall not apply in relation to a disposal made to an individual if— (a) the reason for his ceasing to be resident in the United Kingdom is that he works in an employment or office all the duties of which are performed outside the United Kingdom, and (b) he again becomes resident ... in the United Kingdom within the period of 3 years from the time when he ceases to be so, without having meanwhile disposed of the asset in question; and accordingly no assessment shall be made by virtue of subsection (1) above before the end of that period in any case where the condition in paragraph (a) above is, and the condition in paragraph (b) above may be, satisfied. (6) For the purposes of subsection (5) above a person shall be taken to have disposed of an asset if he has made a disposal in connection with which the whole or part of the held-over gain on the relevant disposal would, had he been resident in the United Kingdom, have been represented by a reduction made in accordance with section 165(4)(b) or 260(3)(b) and subsection (3) above shall have effect for the purposes of this subsection as it has effect for the purposes of subsection (2) above. (7) Where an amount of tax assessed on a transferee by virtue of subsection (1) above is not paid within the period of 12 months beginning with the date when the tax becomes payable then, subject to subsection (8) below, the transferor may be assessed and charged (in the name of the transferee) to all or any part of that tax. (8) No assessment shall be made under subsection (7) above more than 6 years after the end of the year of assessment in which the relevant disposal was made. (9) Where the transferor pays an amount of tax in pursuance of subsection (7) above, he shall be entitled to recover a corresponding sum from the transferee. (10) Gains on disposals made after a chargeable gain has under this section been deemed to accrue by reference to a held-over gain shall be computed without any reduction under section 165(4)(b) or 260(3)(b) in respect of that held-over gain.

Propose a change

168A Postponing held-over gain: interests in UK land

(1) This section applies if— (a) an interest in UK land is deemed to have been disposed of under section 168(1) by a transferee at any time, and (b) the transferee makes an election under this subsection. (2) The held-over gain (within the meaning of section 165 or 260) that, but for this subsection, would have accrued to the transferee at that time is not to accrue at that time. (3) But, on a subsequent disposal by the transferee of the whole or part of the interest in UK land, the whole or a corresponding part of the held-over gain is treated as accruing on the subsequent disposal. (4) This gain is in addition to any gain or loss that actually accrues on the subsequent disposal. (5) In this section “interest in UK land” has the meaning given by section 1C.

Propose a change

169 Gifts into dual resident trusts.

(1) This section applies where there is or has been a disposal of an asset to the trustees of a settlement in such circumstances that, on a claim for relief, section 165 or 260 applies, or would but for this section apply, so as to reduce the amounts of the chargeable gain and the consideration referred to in section 165(4) or 260(3). (2) In this section “a relevant disposal” means such a disposal as is referred to in subsection (1) above. (3) Relief under section 165 or 260 shall not be available on a relevant disposal if— (a) at the material time the trustees to whom the disposal is made are resident ... in the United Kingdom ... ; and (b) on a notional disposal of the asset concerned occurring immediately after the material time, the trustees would be regarded for the purposes of any double taxation relief arrangements— (i) as resident in a territory outside the United Kingdom; and (ii) as not liable in the United Kingdom to tax on a gain accruing on that disposal. (4) In subsection (3) above— (a) “the material time” means the time of the relevant disposal; and (b) a “notional disposal” means a disposal by the trustees of the asset which was the subject of the relevant disposal.

Propose a change

169A Cessation of trade by limited liability partnership

(1) This section applies where section 59A(1) ceases to apply to a limited liability partnership. (2) A member of the partnership who immediately before the time at which section 59A(1) ceases to apply holds an asset, or an interest in an asset, acquired by him— (a) on a disposal to members of a partnership, and (b) for a consideration which is treated as reduced under section 165(4)(b) or 260(3)(b), shall be treated as if a chargeable gain equal to the amount of the reduction accrued to him immediately before that time.

Propose a change

169B Gifts to settlor-interested settlements etc

(1) Neither section 165(4) nor section 260(3) shall apply in relation to a disposal (“the relevant disposal”)— (a) made by a person (“the transferor”) to the trustees of a settlement, and (b) in respect of which Condition 1 or Condition 2 below is satisfied. (2) Condition 1 is that, immediately after the making of the relevant disposal,— (a) there is a settlor (see section 169E) who has an interest in the settlement (see section 169F), or (b) an arrangement (see section 169G) subsists under which such an interest will or may be acquired by a settlor. (3) Condition 2 is that— (a) a chargeable gain would (assuming that neither section 165(4) nor section 260(3) applied in relation to the relevant disposal) accrue to the transferor on that disposal, (b) in computing the gain, the allowable expenditure would to any extent fall to be reduced in consequence, directly or indirectly, of a claim under section 165 or 260 in respect of an earlier disposal made by an individual (whether or not to the transferor), and (c) immediately after the making of the relevant disposal,— (i) that individual has an interest in the settlement, or (ii) an arrangement subsists under which such an interest will or may be acquired by him. (4) This section is subject to section 169D (exception for maintenance funds for historic buildings and certain settlements for disabled persons).

Propose a change

169C Clawback of relief if settlement becomes settlor-interested etc

(1) This section applies in relation to a disposal (“the relevant disposal”)— (a) made by a person (“the transferor”) to the trustees of a settlement, (b) in relation to which section 165(4) or 260(3) applies, or would apart from this section apply, and (c) in respect of which Condition 1 or Condition 2 below is satisfied. (2) Condition 1 is that, at any time during the clawback period,— (a) there is a settlor who has an interest in the settlement, or (b) an arrangement subsists under which such an interest will or may be acquired by a settlor. (3) Condition 2 is that— (a) in computing the chargeable gain which would (assuming that neither section 165(4) nor section 260(3) applied in relation to the relevant disposal) accrue to the transferor on that disposal, the allowable expenditure would fall to be reduced, (b) that reduction would to any extent fall to be made in consequence, directly or indirectly, of a claim under section 165 or 260 in respect of an earlier disposal made by an individual (whether or not to the transferor), and (c) at any time during the clawback period,— (i) that individual has an interest in the settlement, or (ii) an arrangement subsists under which such an interest will or may be acquired by him. (4) If no claim for relief under section 165 or 260 in respect of the relevant disposal is made before the material time, neither section 165(4) nor section 260(3) shall apply in relation to that disposal. (5) Subsections (7) to (9) below apply if a claim for relief under section 165 or 260 in respect of the relevant disposal is made before the material time. (6) But those subsections do not apply if— (a) the transferor is an individual, and (b) he dies before the material time. (7) A chargeable gain, of an amount equal to the amount of the held-over gain (within the meaning of section 165 or 260) on the relevant disposal, shall be treated for the purposes of tax in respect of chargeable gains as accruing to the transferor at the material time. (8) For any chargeable period ending after the making of the relevant disposal, the chargeable gains and allowable losses of— (a) the trustees of the settlement, or (b) any person whose title to any property to any extent derives, directly or indirectly, from them, shall be determined on the assumption that neither section 165(4)(b) nor section 260(3)(b) ever applied in relation to that disposal. (9) All such adjustments shall be made, whether by discharge or repayment of tax, the making of assessments or otherwise, as are required to give effect to subsection (8) above (notwithstanding any limitation on the time within which any adjustment may be made). (10) If a claim for relief under section 165 or 260 in respect of the relevant disposal is revoked, this section shall apply as if the claim had never been made. (11) In this section “the clawback period” means the period— (a) beginning immediately after the making of the relevant disposal, and (b) ending six years after the end of the year of assessment in which that disposal was made. (12) In this section “the material time” means the time at which subsection (1)(c) above first becomes satisfied. (13) This section is subject to section 169D.

Propose a change

169D Exceptions to sections 169B and 169C

(1) Sections 169B and 169C shall not apply in relation to a disposal to the trustees of a settlement in a year of assessment if the trustees have elected, or could have elected, that section 508 of ITA 2007 (trustees’ election in respect of income arising from heritage maintenance property) shall have effect in the case of— (a) the settlement, or (b) any part of the settlement, in relation to that year of assessment. (2) Sections 169B and 169C shall not apply in relation to a disposal to the trustees of a settlement if the following conditions are satisfied. (3) The first condition is that, immediately after the making of the disposal, the settled property is held on trusts which secure that, during the lifetime of a disabled person— (a) if any of the property is applied for the benefit of a beneficiary, it is applied for the disabled person's benefit, and (b) either— (i) the disabled person is entitled to all of the income (if there is any) arising from any of the property, or (ii) if any such income is applied for the benefit of a beneficiary, it is applied for the disabled person's benefit. (4) The second condition is that if, immediately after the making of the disposal, one or more settlors is an interested settlor, each such settlor must at that time be a disabled beneficiary. (4A) Where the income arising from the settled property is held on trusts of the kind described in section 33 of the Trustee Act 1925 (protective trusts), subsection (3) has effect as if the reference to the lifetime of a disabled person were a reference to the period during which the income is held on trust for the disabled person. (4B) The trusts on which the settled property is held are not to be treated as falling outside subsection (3) by reason only of— (a) the trustees' having powers that enable them to apply in any tax year otherwise than for the benefit of the disabled person amounts (whether consisting of income or capital, or both) not exceeding the annual limit, (b) the trustees' having the powers conferred by section 32 of the Trustee Act 1925 (powers of advancement), (c) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by proviso (a) of subsection (1) of that section, (d) the trustees' having the powers conferred by section 33 of the Trustee Act (Northern Ireland) 1958 (corresponding provision for Northern Ireland), (e) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by subsection (1)(a) of that section, or (f) the trustees' having powers to the like effect as the powers mentioned in any of paragraphs (b) to (e). (4C) For the purposes of this section, the “annual limit” for a tax year is whichever is the lower of the following amounts— (a) £3,000, and (b) 3% of the amount that is the maximum value of the settled property during the tax year in question. (4D) The Treasury may by order— (a) specify circumstances in which subsection (4B)(a) is, or is not, to apply in relation to a trust, and (b) amend the definition of “the annual limit” in subsection (4C). (4E) An order under subsection (4D) may— (a) make different provision for different cases, and (b) contain transitional and saving provision. (4F) A statutory instrument containing an order under subsection (4D) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons. (5) For the purposes of subsection (4) above a settlor is an “interested settlor” in relation to a settlement if— (a) he has an interest in the settlement, or (b) an arrangement subsists under which such an interest will or may be acquired by him; and for this purpose, the references to an individual’s spouse or civil partner in section 169F(2) and (3) and to an individual's dependent child in section 169F(2A) shall be disregarded. (6) In subsection (4) above “disabled beneficiary”, in relation to a settlement, means a disabled person who— (a) is a beneficiary under the settlement, or (b) would be such a beneficiary if he had the interest in the settlement by virtue of which subsection (5)(b) above applies in relation to him. (7) In this section “disabled person” has the meaning given by Schedule 1A to the Finance Act 2005. (10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11) The references in subsection (3) above to the lifetime of a person shall, where the income from the settled property is held for his benefit on trusts of the kind described in section 33 of the Trustee Act 1925 (protective trusts), be construed as references to the period during which the income is held on trust for him.

Propose a change

169E Meaning of “settlor” in sections 169B to 169D and 169G

(1) For the purposes of this section and, sections 169B to 169D ... , a person is a settlor in relation to a settlement if— (a) he is an individual, and (b) the settled property consists of, or includes, property originating from him. (2) In subsection (1) above, the reference to property originating from a settlor is a reference to— (a) property which that settlor has provided directly or indirectly for the purposes of the settlement, and (b) property which wholly or partly represents that property or any part of it. (3) In subsection (2) above, the references to property which a settlor has provided directly or indirectly— (a) include references to property which has been provided directly or indirectly by another person in pursuance of reciprocal arrangements with that settlor, but (b) do not include references to property which that settlor has provided directly or indirectly in pursuance of reciprocal arrangements with another person. (4) In subsection (2) above, the reference to property which represents other property includes a reference to property which represents accumulated income from that other property.

Propose a change

169F Meaning of “interest in a settlement” in sections 169B to 169D

(1) For the purposes of this section and sections 169B to 169D, an individual is to be regarded as having an interest in a settlement if subsection (2), (3) or (3A) below applies. (2) This subsection applies if— (a) any property which is or may at any time be comprised in the settlement, or (b) any derived property, is, or will or may become, payable to or applicable for the benefit of the individual or his spouse or civil partner in any circumstances whatsoever. (3) This subsection applies if the individual or his spouse or civil partner enjoys a benefit deriving directly or indirectly from— (a) any property which is comprised in the settlement, or (b) any derived property. (3A) This subsection applies if— (a) any property which is or may at any time be comprised in the settlement, or any derived property, is, or will or may become, payable to or applicable for the benefit of a child of the individual, at a time when that child is a dependent child of his, in any circumstances whatsoever, or (b) a dependent child of the individual enjoys a benefit deriving directly or indirectly from any property which is comprised in the settlement or any derived property. (4) The references in subsections (2) and (3) above to the spouse or civil partner of the individual do not include— (a) a spouse or civil partner from whom the individual is separated— (i) under an order of a court, (ii) under a separation agreement, or (iii) in such circumstances that the separation is likely to be permanent, or (b) the widow or widower or surviving civil partner of the individual. (4A) In this section— (a) “dependent child” means a child who— (i) is under the age of 18 years, (ii) is unmarried, and (iii) does not have a civil partner, and (b) “child” includes a stepchild. (4B) For the purposes of subsection (3A) above no account shall be taken of a term of a settlement relating to dependent children of an individual in respect of any time at which he has no dependent child. (5) An individual is not to be regarded as having an interest in a settlement by virtue of subsection (2) above if and so long as none of the property which may at any time be comprised in the settlement, and no derived property, can become payable or applicable as mentioned in that provision except in the event of— (a) in the case of a marriage settlement or civil partnership settlement, the death of both parties to the marriage or civil partnership and of all or any of the children of the family of the parties to the marriage or civil partnership, or (b) the death of a child of the individual where the child had become beneficially entitled to the property or any derived property at an age not exceeding 25. (5A) In subsection (5) “child of the family”, in relation to parties to a marriage or civil partnership, means a child of one or both of them. (6) In this section “derived property”, in relation to any property, means— (a) income from that property, (b) property directly or indirectly representing— (i) proceeds of that property, or (ii) proceeds of income from that property, or (c) income from property which is derived property by virtue of paragraph (b) above.

Propose a change

169G Meaning of “arrangement” in sections 169B to 169E and information power

(1) In sections 169B to 169E “arrangement” or “arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable. (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Propose a change

169H Introduction

(1) This Chapter provides for a lower rate of capital gains tax in respect of qualifying business disposals (to be known as “business asset disposal relief”). (2) The following are qualifying business disposals— (a) a material disposal of business assets: see section 169I, (b) a disposal of trust business assets: see section 169J, and (c) a disposal associated with a relevant material disposal: see section 169K. (3) But in the case of certain qualifying business disposals, business asset disposal relief is given only in respect of disposals of relevant business assets comprised in the qualifying business disposal: see sections 169L and 169LA. (4) Section 169M makes provision requiring the making of a claim for business asset disposal relief. (5) Sections 169N to 169P make provision as to the amount of business asset disposal relief. (6) Sections 169Q and 169R make provision about reorganisations. (7) Sections 169S and 169SA contain interpretative provisions for the purposes of this Chapter.

Propose a change

169I Material disposal of business assets

(1) There is a material disposal of business assets where— (a) an individual makes a disposal of business assets (see subsection (2)), and (b) the disposal of business assets is a material disposal (see subsections (3) to (7)). (2) For the purposes of this Chapter a disposal of business assets is— (a) a disposal of the whole or part of a business, (b) a disposal of (or of interests in) one or more assets in use, at the time at which a business ceases to be carried on, for the purposes of the business, or (c) a disposal of one or more assets consisting of (or of interests in) shares in or securities of a company. (3) A disposal within paragraph (a) of subsection (2) is a material disposal if the business is owned by the individual throughout the period of 2 years ending with the date of the disposal. (4) A disposal within paragraph (b) of that subsection is a material disposal if— (a) the business is owned by the individual throughout the period of 2 years ending with the date on which the business ceases to be carried on, and (b) that date is within the period of 3 years ending with the date of the disposal. (5) A disposal within paragraph (c) of subsection (2) is a material disposal if condition A, B, C or D is met. (6) Condition A is that, throughout the period of 2 years ending with the date of the disposal— (a) the company is the individual's personal company and is either a trading company or the holding company of a trading group, and (b) the individual is an officer or employee of the company or (if the company is a member of a trading group) of one or more companies which are members of the trading group. (7) Condition B is that the conditions in paragraphs (a) and (b) of subsection (6) are met throughout the period of 2 years ending with the date on which the company— (a) ceases to be a trading company without continuing to be or becoming a member of a trading group, or (b) ceases to be a member of a trading group without continuing to be or becoming a trading company, and that date is within the period of 3 years ending with the date of the disposal. (7ZA) If, in any case where an individual disposes of any shares in a company— (a) there has been an issue of shares in the company to the individual following a relevant business transfer, and (b) any of the issued shares constitute, or otherwise form part of, the shares disposed of, the conditions in subsection (6)(a) and (b) are to be treated as met in any period ending immediately before the transfer throughout which the individual owned the business. (7ZB) For the purposes of subsection (7ZA), shares have been issued “following a relevant business transfer” if they have been issued wholly or partly in exchange for the transfer of a business as a going concern, together with the whole assets of the business or the whole of those assets other than cash. (7A) Condition C is that— (a) the assets disposed of are relevant EMI shares, (b) the option grant date is, or is before, the first date of the period of 2 years ending with the date of the disposal, and (c) throughout that period of 2 years— (i) the company is either a trading company or the holding company of a trading group, and (ii) the individual is an officer or employee of the company or (if the company is a member of a trading group) of one or more companies which are members of the trading group. (7B) Condition D is that— (a) the assets disposed of are relevant EMI shares acquired by the individual before the cessation date, (b) the option grant date is, or is before, the first date of the period of 2 years ending with the cessation date, (c) the conditions in paragraph (c) of subsection (7A) are met throughout that period of 2 years, and (d) the cessation date is within the period of 3 years ending with the date of the disposal. (7C) In this section “relevant EMI shares” means— (a) shares of a company acquired by an individual to which subsection (7D) applies, or (b) shares of a company to which subsection (7F) applies. (7D) This subsection applies to shares of a company acquired by an individual if the individual— (a) acquires them on or after 6 April 2013, and (b) acquires them as a result of the exercise of a qualifying option within the meaning given by section 527(4) of ITEPA 2003 (enterprise management incentives) where the option is exercised on or before the specified anniversary of the date mentioned in section 529(2) of that Act (with “specified anniversary” having the meaning given in section 529(2A) of that Act). (7E) Subsection (7D) does not apply to shares acquired as a result of the exercise of a qualifying option if— (a) a disqualifying event (see section 533 of ITEPA 2003) occurs in relation to the option before its exercise, and (b) it is exercised later than the period mentioned in section 532(1)(b) of ITEPA 2003. (7F) This subsection applies to shares of a company if— (a) the shares are the new holding in a case in which section 127 applies in relation to an individual, (b) the original shares in that case are relevant EMI shares (whether by virtue of subsection (7D) or this subsection), and (c) that case is one in which section 127 applies by virtue only of— (i) section 126, or (ii) subject to subsection (7G), section 135(3). (7G) Subsection (7F)(c)(ii) applies only if— (a) the exchange of shares in question is a qualifying exchange of shares as defined in paragraph 40 of Schedule 5 to ITEPA 2003, and (b) when the exchange occurs, the independence requirement (see paragraph 9 of Schedule 5 to ITEPA 2003) and the trading activities requirement (see paragraphs 13 and 14 of that Schedule) are met in relation to the new company (see paragraph 40(1)(a) of that Schedule). (7H) In this section “the original relevant EMI shares”, in relation to shares which are relevant EMI shares by virtue of subsection (7F), means the shares originally acquired by the individual to which subsection (7D) applied. (7I) If the shares disposed of are relevant EMI shares by virtue of subsection (7F), in relation to times before the reorganisation mentioned in section 127, in subsection (7A)(c) references to the company are to be read as references to (if different)— (a) the company whose shares are the original relevant EMI shares, or (b) if there has been more than one reorganisation since the original relevant EMI shares were acquired— (i) the company whose shares are the original relevant EMI shares, or (ii) if at the time in question the individual is holding relevant EMI shares which are shares of another company, that other company. This subsection is subject to subsection (7N). (7J) If the shares disposed of are relevant EMI shares by virtue of subsection (7F), the question of whether the requirement of subsection (7B)(a) is met is to be determined by reference to the date of the acquisition of the original relevant EMI shares. (7K) Subject to what follows, in subsections (7A)(b) and (7B)(b) “the option grant date” means the date on which the qualifying option in question was granted. (7L) Subsections (7M) and (7N) apply if the qualifying option is a replacement option for the purposes of the EMI code (see paragraph 41 of Schedule 5 to ITEPA 2003). (7M) In subsections (7A)(b) and (7B)(b) “the option grant date” means— (a) the date on which the old option was granted, or (b) if the old option was also a replacement option, the date on which the earlier old option was granted, and so on. (7N) In relation to any time during the currency of an old option taken into account under subsection (7M), in subsection (7A)(c) references to the company are to be read as references to the company whose shares were the subject of the old option. (7O) In subsection (7B) “the cessation date” means the date on which the company— (a) ceases to be a trading company without continuing to be or becoming a member of a trading group, or (b) ceases to be a member of a trading group without continuing to be or becoming a trading company. (7P) Subsections (7Q) and (7R) apply in relation to a disposal of relevant EMI shares if— (a) the shares were acquired as a result of the exercise of a qualifying option where— (i) a disqualifying event (see section 533 of ITEPA 2003) occurs in relation to the option before its exercise, but (ii) it is exercised within the period mentioned in section 532(1)(b) of ITEPA 2003, or (b) if the shares are relevant EMI shares by virtue of subsection (7F), the original relevant EMI shares were acquired as mentioned in paragraph (a). (7Q) Subsection (7A)(b) has effect as if the reference to the date of the disposal were a reference to the date of the disqualifying event. (7R) If the disqualifying event is within section 534(1)(c) of ITEPA 2003, subsection (7B)(a) has effect as if the reference to the cessation date were a reference to the first day after the period mentioned in section 532(1)(b) of that Act if that day is later than the cessation date. (8) For the purposes of this section— (a) an individual who disposes of (or of interests in) assets used for the purposes of a business carried on by the individual on entering into a partnership which is to carry on the business is to be treated as disposing of a part of the business, (b) the disposal by an individual of the whole or part of the individual's interest in the assets of a partnership is to be treated as a disposal by the individual of the whole or part of the business carried on by the partnership, and (c) at any time when a business is carried on by a partnership, the business is to be treated as owned by each individual who is at that time a member of the partnership.

Propose a change

169J Disposal of trust business assets

(1) There is a disposal of trust business assets where— (a) the trustees of a settlement make a disposal of settlement business assets (see subsection (2)), (b) there is an individual who is a qualifying beneficiary (see subsection (3)), and (c) the relevant condition is met (see subsections (4) and (5)). (2) In this Chapter “settlement business assets” means— (a) assets consisting of (or of interests in) shares in or securities of a company, or (b) assets (or interests in assets) used or previously used for the purposes of a business, which are part of the settled property. (3) An individual is a qualifying beneficiary if the individual has, under the settlement, an interest in possession (otherwise than for a fixed term) in— (a) the whole of the settled property, or (b) a part of it which consists of or includes the settlement business assets disposed of. (4) In relation to a disposal of settlement business assets within paragraph (a) of subsection (2) the relevant condition is that, throughout a period of 2 years ending not earlier than 3 years before the date of the disposal— (a) the company is the qualifying beneficiary's personal company and is either a trading company or the holding company of a trading group, and (b) the qualifying beneficiary is an officer or employee of the company or (if the company is a member of a group of companies) of one or more companies which are members of the trading group. (5) In relation to a disposal of settlement business assets within paragraph (b) of that subsection, the relevant condition is that— (a) the settlement business assets are used for the purposes of the business carried on by the qualifying beneficiary throughout the period of 2 years ending not earlier than 3 years before the date of the disposal, and (b) the qualifying beneficiary ceases to carry on the business on the date of the disposal or within the period of three years before that date. (6) In subsection (5)— (a) the reference to a business carried on by the qualifying beneficiary includes a business carried on by a partnership of which the qualifying beneficiary is a member, and (b) the reference to the qualifying beneficiary ceasing to carry on the business includes the qualifying beneficiary ceasing to be a member of the partnership or the partnership ceasing to carry on the business.

Propose a change

169K Disposal associated with relevant material disposal

(1) There is a disposal associated with a relevant material disposal if— (a) condition A1, A1A, A2 or A3 is met, and (b) conditions B, C and D are met. (1A) Condition A1 is that an individual (“P”) makes a material disposal of business assets which consists of the disposal of the whole or part of P's interest in the assets of a partnership, and— (a) P's disposed of interest is at least a 5% interest in the partnership's assets, and (b) at the date of the disposal, no partnership purchase arrangements exist. (1AA) Condition A1A is that P makes a material disposal of business assets which consists of the disposal of the whole of P's interest in the assets of a partnership, and— (a) that interest is an interest of less than 5%, (b) P holds at least a 5% interest in the partnership's assets throughout a continuous period of at least 3 years in the 8 years ending with the date of the disposal, and (c) at the date of the disposal, no partnership purchase arrangements exist. (1AB) Subject to subsection (6A), for the purposes of conditions A1 and A1A, in relation to the disposal of an interest in the assets of a partnership, “partnership purchase arrangements” means arrangements (other than the material disposal itself) under which P or a person connected with P is entitled to acquire any interest in, or increase that person's interest in, the partnership (including a share of the profits or assets of the partnership or an interest in such a share). (1B) Condition A2 is that P makes a material disposal of business assets which consists of the disposal of shares in a company, all or some of which are ordinary shares, and at the date of the disposal— (a) the ordinary shares disposed of constitute at least 5% of the company's ordinary share capital and are shares in the individual's personal company (and section 169S(3A)(a) to (c) apply here but as if the reference to the final day of the period mentioned in section 169S(3A)(a) were to the date of the disposal), and (b) no share purchase arrangements exist. (1C) But condition A2 is not met if the disposal of shares is a disposal by virtue of section 122, other than such a disposal treated as made in consideration of a capital distribution from a company which is made in the course of dissolving or winding up the company. (1D) Condition A3 is that P makes a material disposal of business assets which consists of the disposal of securities of a company, and at the date of the disposal— (a) the securities disposed of constitute at least 5% of the value of the securities of the company, and (b) no share purchase arrangements exist. (1E) Subject to subsection (6A), For the purposes of conditions A2 and A3, in relation to the disposal of shares in or securities of a company (“company A”), “share purchase arrangements” means arrangements (other than the material disposal itself) under which P or a person connected with P is entitled to acquire shares in or securities of— (a) company A, or (b) a company which is a member of a trading group of which company A is a member. (2) For the purposes of subsection (1E)(b), a company is treated as a member of a trading group of which company A is a member if, at the date of the disposal mentioned in condition A2 or A3, arrangements exist which it is reasonable to assume will result in the company and company A becoming members of the same trading group. (3) Condition B is that P makes the disposal as part of P's withdrawal from participation in the business carried on by the partnership or by the company or (if the company is a member of a trading group) a company which is a member of the trading group. (3A) The disposal mentioned in condition B is not treated as part of P's withdrawal from participation in the business carried on by a partnership if at the date of that disposal there exist any partnership purchase arrangements. (3AA) Subject to subsection (6A), for the purposes of condition B, in relation to a disposal mentioned in that condition and a partnership, “partnership purchase arrangements” means arrangements under which P or a person connected with P is entitled to acquire any interest in, or increase that person's interest in, the partnership (including a share of the profits or assets of the partnership or an interest in such a share), but does not include any arrangements in connection with a material disposal in relation to which condition A1 or A1A is met. (3B) The disposal mentioned in condition B is not treated as part of P's withdrawal from participation in the business carried on by a company (“company A”) if at the date of that disposal there exist any share purchase arrangements. (3BA) Subject to subsection (6A), for the purposes of condition B, in relation to a disposal mentioned in that condition and company A, “share purchase arrangements” means arrangements under which P or a person connected with P is entitled to acquire shares in or securities of— (a) company A, or (b) a company which is a member of a trading group of which company A is a member, but does not include any arrangements in connection with a material disposal in relation to which condition A2 or A3 is met. (3C) For the purposes of subsection (3BA)(b), a company is treated as a member of a trading group of which company A is a member if, at the date of the disposal mentioned in condition B, arrangements exist which it is reasonable to assume will result in the company and company A becoming members of the same trading group. (4) Condition C is that, throughout the period of 2 years ending with the earlier of— (a) the date of the material disposal of business assets, and (b) the cessation of the business of the partnership or company, the assets which (or interests in which) are disposed of are in use for the purposes of the business. (4A) Condition D is that the disposal mentioned in condition B is of an asset which P owns throughout the period of 3 years ending with the date of that disposal. (5) For the purposes of this Chapter the disposal mentioned in Condition B is the disposal associated with a relevant material disposal. (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6A) For the purposes of this section, in relation to a material disposal of business assets and a disposal mentioned in condition B, arrangements are not partnership purchase arrangements or share purchase arrangements if they were made before both disposals and without regard to either of them. (7) In this section— “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable); “securities” includes an interest in securities, and an “interest in securities” includes (in particular) an option to acquire securities; “shares” includes an interest in shares, and an “interest in shares” includes (in particular) an option to acquire shares. (8) For the purposes of this section, a person is treated as entitled to acquire anything which the person— (a) is entitled to acquire at a future date, or (b) will at a future date be entitled to acquire. (9) For the purposes of this section the assets of— (a) a Scottish partnership, or (b) a partnership under the law of any other country or territory under which assets of a partnership are regarded as held by or on behalf of the partnership as such, are to be treated as held by the members of the partnership in the proportions in which they are entitled to share in the capital profits of the partnership. References in this section to an individual's interest in the partnership's assets are to be construed accordingly.

Propose a change

169L Relevant business assets

(1) If a qualifying business disposal is one which does not consist of the disposal of (or of interests in) shares in or securities of a company, business asset disposal relief is given only in respect of the disposal of relevant business assets comprised in the qualifying business disposal. (2) In this Chapter “relevant business assets” means assets (including, subject to section 169LA, goodwill) which are, or are interests in, assets to which subsection (3) applies, other than excluded assets (see subsection (4) below). (3) This subsection applies to assets which— (a) in the case of a material disposal of business assets, are assets used for the purposes of a business carried on by the individual or a partnership of which the individual is a member, (b) in the case of a disposal of trust business assets, are assets used for the purposes of a business carried on by the qualifying beneficiary or a partnership of which the qualifying beneficiary is a member, or (c) in the case of a disposal associated with a relevant material disposal, are assets used for the purposes of a business carried on by the partnership or company. (4) The following are excluded assets— (a) shares and securities, and (b) assets, other than shares or securities, which are held as investments.

Propose a change

169LA Relevant business assets: goodwill transferred to a close company

(1) Subject to subsection (1A), subsection (4) applies if— (a) as part of a qualifying business disposal, a person (“P”) disposes of goodwill directly or indirectly to a close company (“C”), and (b) immediately after the disposal, P meets any of the personal company conditions in the case of C or any company which is a member of a group of companies of which C is a member. (1ZA) For the purposes of subsection (1)(b)— (a) the reference to the personal company conditions is a reference to any of the conditions in 169S(3)(a), (b), (c)(i) or (ii), and (b) P is taken to have all the rights and interests of any relevant connected person. (1ZB) For the purposes of subsection (1ZA)— (a) section 169S(3) is treated as having effect with the omission of the references to “by virtue of that holding”, (b) section 169S(3A)(a) and (b) are to apply for the purposes of section 169S(3)(c)(ii) but as if the reference to the final day of the period mentioned in section 169S(3A)(a) were to the time immediately after the disposal, and (c) the condition in section 169S(3)(c)(i) is to be read as containing two separate conditions (one relating to profits and the other relating to assets). (1A) Where— (a) subsection (1)(b) applies by virtue of P's ownership, or any relevant connected person's ownership, of C's ordinary share capital, and (b) the conditions mentioned in subsection (1B) are met, subsection (4) does not apply. (1B) The conditions referred to in subsection (1A)(b) are— (a) P and any relevant connected person dispose of C's ordinary share capital to another company (“A”) such that, immediately before the end of the relevant period, neither P nor any relevant connected person own any of C's ordinary share capital, and (b) where A is a close company, immediately before the end of the relevant period— (i) P and any relevant connected person together own less than 5% of the ordinary share capital of A or of any company which is a member of a group of companies of which A is a member, and (ii) P and any relevant connected person together hold less than 5% of the voting rights in A or in any company which is a member of a group of companies of which A is a member. (1C) In subsection (1B) “the relevant period” means the period of 28 days beginning with the date of the qualifying business disposal, or such longer period as the Commissioners for Her Majesty's Revenue and Customs may by notice allow. (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) For the purposes of this Chapter, the goodwill is not one of the relevant business assets comprised in the qualifying business disposal. (5) If a company— (a) is not resident in the United Kingdom, but (b) would be a close company if it were resident in the United Kingdom, the company is to be treated as being a close company for the purposes of this section ... . (6) If a person— (a) disposes of goodwill as part of a qualifying business disposal, and (b) is party to relevant avoidance arrangements, subsection (4) applies (if it would not otherwise do so). (7) In subsection (6) “relevant avoidance arrangements” means arrangements the main purpose, or one of the main purposes, of which is to secure— (a) that subsection (4) does not apply in relation to the goodwill, ... (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8) In this section— “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable); “group” is to be construed in accordance with section 170; “relevant connected person” means— a company connected with P, and trustees connected with P.

Propose a change

169M Relief to be claimed

(1) Business asset disposal relief is to be given only on the making of a claim. (2) A claim for business asset disposal relief in respect of a qualifying business disposal must be made— (a) in the case of a disposal of trust business assets, jointly by the trustees and the qualifying beneficiary, and (b) otherwise, by the individual. (3) A claim for business asset disposal relief in respect of a qualifying business disposal must be made on or before the first anniversary of the 31 January following the tax year in which the qualifying business disposal is made. (4) A claim for business asset disposal relief in respect of a qualifying business disposal may only be made if the amount resulting under section 169N(1) is a positive amount.

Propose a change

169N Amount of relief: general

(1) Where a claim is made in respect of a qualifying business disposal— (a) the relevant gains (see subsection (5)) are to be aggregated, and (b) any relevant losses (see subsection (6)) are to be aggregated and deducted from the aggregate arrived at under paragraph (a). (2) The resulting amount is to be treated for the purposes of this Act as a chargeable gain accruing at the time of the disposal to the individual or trustees by whom the claim is made. (3) The rate of capital gains tax in respect of that gain is 18%, but this is subject to subsections (4) to (4B). (4) Subsections (4A) and (4B) apply if the aggregate of— (a) the gain mentioned in subsection (2), and (b) the total of so much of each amount resulting under subsection (1) by virtue of its operation in relation to earlier relevant qualifying business disposals (if any) as was— (i) charged at the rate in subsection (3), or (ii) subject to reduction under subsection (2) of this section as originally enacted, exceeds £1 million.. (4A) The rate in subsection (3) is to apply only to so much (if any) of the gain mentioned in subsection (2) as (when added to the total mentioned in subsection (4)(b)) does not exceed £1 million. (4B) Section 1H (rates of capital gains tax) is to apply to so much of the gain mentioned in subsection (2) as is not subject to the rate in subsection (3). (5) In subsection (1)(a) “relevant gains” means— (a) if the qualifying business disposal is of (or of interests in) shares in or securities of a company (or both), the gains accruing on the disposal (computed in accordance with the provisions of this Act fixing the amount of chargeable gains), and (b) otherwise, the gains accruing on the disposal of any relevant business assets comprised in the qualifying business disposal (so computed). (6) In subsection (1)(b) “relevant losses” means— (a) if the qualifying business disposal is of (or of interests in) shares in or securities of a company (or both), any losses accruing on the disposal (computed in accordance with the provisions of this Act fixing the amount of allowable losses, on the assumption that notice has been given under section 16(2A) in respect of them), and (b) otherwise, any losses accruing on the disposal of any relevant business assets comprised in the qualifying business disposal (so computed, on that assumption). (7) In subsection (4) “earlier relevant qualifying business disposals” means— (a) where the qualifying business disposal is made by an individual, earlier qualifying business disposals made by the individual and earlier disposals of trust business assets in respect of which the individual is the qualifying beneficiary, and (b) where the qualifying business disposal is a disposal of trust business assets in respect of which an individual is the qualifying beneficiary, earlier disposals of trust business assets in respect of which that individual is the qualifying beneficiary and earlier qualifying business disposals made by that individual. (8) If, on the same day, there is both a disposal of trust business assets in respect of which an individual is the qualifying beneficiary and a qualifying business disposal by the individual, this section applies as if the disposal of trust business assets were later. (9) Any gain or loss taken into account under subsection (1) is not to be taken into account under this Act as a chargeable gain or an allowable loss.

Propose a change

169O Amount of relief: special provisions for certain trust disposals

(1) This section applies where, on a disposal of trust business assets, there is (in addition to the qualifying beneficiary) at least one other beneficiary who, at the material time, has an interest in possession in— (a) the whole of the settled property, or (b) a part of it which consists of or includes the shares or securities (or interests in shares or securities) or assets (or interests in assets) disposed of. (2) Only the relevant proportion of the amount which would otherwise result under subsection (1) of section 169N is to be treated as so resulting. (3) And the balance of that amount, ... , is accordingly a chargeable gain for the purposes of this Act. (4) For the purposes of this section “the relevant proportion” of an amount is the same proportion of the amount as that which, at the material time— (a) the qualifying beneficiary's interest in the income of the part of the settled property comprising the shares or securities (or interests in shares or securities) or assets (or interests in assets) disposed of, bears to (b) the interests in that income of all the beneficiaries (including the qualifying beneficiary) who then have interests in possession in that part of the settled property. (5) In subsection (4) “the qualifying beneficiary's interest” means the interest by virtue of which he is the qualifying beneficiary (and not any other interest the qualifying beneficiary may have). (6) In this section “the material time” means the end of the latest period of 2 years which ends not earlier than 3 years before the date of the disposal and— (a) in the case of a disposal of settlement business assets within paragraph (a) of subsection (2) of section 169J, throughout which the conditions in paragraphs (a) and (b) of subsection (4) of that section are met, and (b) in the case of a disposal of settlement business assets within paragraph (b) of subsection (2) of that section, throughout which the business is carried on by the qualifying beneficiary.

Propose a change

169P Amount of relief: special provision for certain associated disposals

(1) This section applies where, on a disposal associated with a relevant material disposal, any of the conditions in subsection (4) is met. (2) Only such part of the amount which would otherwise result under subsection (1) of section 169N as is just and reasonable is to be treated as so resulting. (3) And the balance of that amount, ... , is accordingly a chargeable gain for the purposes of this Act. (4) The conditions referred to in subsection (1) are— (a) that the assets which (or interests in which) are disposed of are in use for the purposes of the business for only part of the period in which they are in the ownership of the individual, (b) that only part of the assets which (or interests in which) are disposed of are in use for the purposes of the business for that period, (c) that the individual is concerned in the carrying on of the business (whether personally, as a member of a partnership or as an officer or employee of a company which is the individual's personal company) for only part of the period in which the assets which (or interests in which) are disposed of are in use for the purposes of the business, and (d) that, for the whole or any part of the period for which the assets which (or interests in which) are disposed of are in use for the purposes of the business, their availability is dependent on the payment of rent. (5) In determining how much of an amount it is just and reasonable to bring into account under subsection (2) regard is to be had to— (a) in a case within paragraph (a) of subsection (4), the length of the period for which the assets are in use as mentioned in that paragraph, (b) in a case within paragraph (b) of that subsection, the part of the assets that are in use as mentioned in that paragraph, (c) in a case within paragraph (c) of that subsection, the length of the period for which the individual is concerned in the carrying on of the business as mentioned in that paragraph, and (d) in a case within paragraph (d) of that subsection, the extent to which any rent paid is less than the amount which would be payable in the open market for the use of the assets.

Propose a change

169Q Reorganisations: disapplication of section 127

(1) This section applies where— (a) there is a reorganisation (within the meaning of section 126), and (b) the original shares and the new holding (within the meaning of that section) would fall to be treated by virtue of section 127 as the same asset. (2) If an election is made under this section, a claim for business asset disposal relief may be made as if the reorganisation involved a disposal of the original shares; and if such a claim is made section 127 does not apply. (3) An election under this section must be made— (a) if the reorganisation would (apart from section 127) involve a disposal of trust business assets, jointly by the trustees and the qualifying beneficiary, and (b) otherwise, by the individual. (4) An election under this section must be made on or before the first anniversary of the 31 January following the tax year in which the reorganisation takes place. (5) The references in this section to a reorganisation (within the meaning of section 126) includes an exchange of shares or securities which is treated as such a reorganisation by virtue of section 135 or 136.

Propose a change

169R Reorganisations involving acquisition of qualifying corporate bonds

(1) This section applies where the calculation under section 116(10)(a) would (apart from this section) have effect to produce a chargeable gain for an individual by reason of a relevant transaction. (2) If an election is made under this section, a claim for business asset disposal relief may be made as if the relevant transaction involved a disposal of the old asset; and if such a claim is made section 116(10) does not apply. (3) An election under this section must be made— (a) if the relevant transaction, so far as it relates to the old asset, would (apart from section 116(10)) involve a disposal of trust business assets, jointly by the trustees and the qualifying beneficiary, and (b) otherwise, by the individual. (4) An election under this section must be made on or before the first anniversary of the 31 January following the tax year in which the relevant transaction takes place. (5) In this section, “old asset” and “relevant transaction” have the meaning given by section 116.

Propose a change

169S Interpretation of Chapter

(1) For the purposes of this Chapter “a business” means anything which— (a) is a trade, profession or vocation, and (b) is conducted on a commercial basis and with a view to the realisation of profits. (2) References in this Chapter to a disposal of an interest in shares in a company include a disposal of an interest in shares treated as made by virtue of section 122. (3) For the purposes of this Chapter a company is a “personal company” in relation to an individual if— (a) the individual holds at least 5% of the ordinary share capital of the company, (b) by virtue of that holding, at least 5% of the voting rights in the company are exercisable by the individual, and (c) either or both of the following conditions are met— (i) by virtue of that holding, the individual is beneficially entitled to at least 5% of the profits available for distribution to equity holders and, on a winding up, would be beneficially entitled to at least 5% of assets so available, or (ii) in the event of a disposal of the whole of the ordinary share capital of the company, the individual would be beneficially entitled to at least 5% of the proceeds. (3A) In determining whether subsection (3)(c)(ii) applies for the purposes of any provision of this Chapter under which a question arises as to whether or not a company is the individual's personal company at any time in a particular period — (a) it is to be assumed that (so far as this is not otherwise the case) the whole of the ordinary share capital is disposed of at that time for a consideration equal to its market value on the final day of the period, (b) it is to be assumed that the amount of the proceeds to which the individual would be beneficially entitled at that time is the amount of the proceeds to which, having regard to all the circumstances as they existed at that time, it would be reasonable to expect the person to be beneficially entitled, and (c) the effect of any avoidance arrangements is to be ignored. (3B) For the purposes of subsection (3A)(c)— (a) arrangements are “avoidance arrangements” if the main purpose of, or one of the main purposes of, the arrangements is to secure that any provision of this Chapter applies or does not apply, and (b) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable). (3C) For the purposes of subsection (3) if the individual holds any shares in the company jointly with one or more other persons, the individual is to be treated as the sole holder of so many of them as is proportionate to the value of the individual's share (and references in subsection (3) to the exercise of voting rights or beneficial entitlement are to be read accordingly). (3D) A modified version of Chapter 6 of Part 5 of CTA 2010 (group relief: equity holders and profits or assets available for distribution) applies for the purposes of subsection (3) reading references to company A as references to the individual. (3E) The reference here to a modified version of Chapter 6 of Part 5 of CTA 2010 is to the provisions of that Chapter having effect as if— (a) for the purposes of section 158(1)(b), a person carrying on a business of banking were not a loan creditor of a company in respect of any loan capital or debt issued or incurred by the company for money lent by the person to the company in the ordinary course of that business, (b) sections 171(1)(b) and (3), 173, 174 and 176 to 181 were omitted, and (c) any modifications were made as are necessary for the purpose of applying that Chapter as if the individual were company A. (5) In this Chapter— “disposal associated with a relevant material disposal” has the meaning given by section 169K, “disposal of business assets” has the meaning given by section 169I(2), “disposal of trust business assets” has the meaning given by section 169J, “employment” has the meaning given by section 4 of ITEPA 2003, “business asset disposal relief” has the meaning given by section 169H(1), “holding company” has the same meaning as in section 165 (see section 165A), “material disposal of business assets” has the meaning given by section 169I, “office” has the meaning given by section 5(3) of ITEPA 2003, “ordinary share capital” has the same meaning as in the Income Tax Acts (see section 989 of ITA 2007), “qualifying business disposal” has the meaning given by section 169H(2), “relevant business asset” has the meaning given by section 169L, “rent”, in relation to an asset, includes any form of consideration given for the use of the asset, “securities”, in relation to a company, includes any debentures of the company which are deemed by subsection (6) of section 251 to be securities for the purposes of that section, “settlement business assets” has the meaning given by section 169J(2), “trade” has the same meaning as in the Income Tax Acts (see section 989 of ITA 2007), ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Propose a change

169SA Meaning of “trading company” and “trading group”

Schedule 7ZA gives the meaning in this Chapter of “trading company” and “trading group”.

Propose a change

← Find another law