225 Private residence occupied under terms of settlement.
(1) Sections 222 to 224 shall also apply in relation to a gain accruing to the trustees of a settlement on a disposal of settled property being an asset within section 222(1) where, during the period of ownership of the trustees, the dwelling-house or part of the dwelling-house mentioned in that subsection has been the only or main residence of a person (“B”) entitled to occupy it under the terms of the settlement, and in those sections as so applied—
(a) references to the individual shall be taken as references to the trustees except in relation to the matters dealt with in subsection (2),
(b) the notice which may be given to an officer of the Board under section 222(5)(a) shall be a joint notice by the trustees and B, and
(c) the notice which may be given by the trustees under section 222A is effective only if it is accompanied by written notification from B agreeing to the terms of the notice;
but section 223 (as so applied) shall apply only on the making of a claim by the trustees.
(2) In sections 222 to 224, as applied by subsection (1), references to the individual, in relation to—
(a) the occupation of the dwelling-house or part of the dwelling-house,
(b) residence in a territory, or
(c) meeting the day count test,
are to be taken as references to B.
225A Private residence held by personal representatives
(1) Sections 222 to 224 shall also apply in relation to a gain accruing to the personal representatives of a deceased person on a disposal of an asset within section 222 (1) if the following conditions are satisfied.
(2) The first condition is that, immediately before and immediately after the death of the deceased person, the dwelling-house or part of the dwelling-house mentioned in section 222 (1) was the only or main residence of one or more individuals.
(3) The second condition is that—
(a) that individual or one of those individuals has a relevant entitlement, or two or more of those individuals have relevant entitlements, and
(b) the relevant entitlement accounts for, or the relevant entitlements together account for, 75% or more of the net proceeds of disposal;
and for this purpose “relevant entitlement” means an entitlement as legatee of the deceased person to, or to an interest in possession in, the whole or any part of the net proceeds of disposal.
(4) In subsection (3) above “net proceeds of disposal” means—
(a) the proceeds of the disposal of the asset realised by the personal representatives, less
(b) any incidental costs allowable as a deduction in accordance with section 38(1)(c) in computing the gain accruing to the personal representatives on that disposal,
but on the assumption that none of the proceeds is required to meet the liabilities of the deceased person’s estate (including any liability to inheritance tax).
(5) In sections 222 to 224 as applied by this section—
(a) references to the individual shall be taken as references to the personal representatives except in relation to the matters dealt with in paragraph (aa),
(aa) in relation to the occupation of the dwelling-house or part of the dwelling-house, residence in a territory, or meeting the day count test, references to the individual are to be taken as references to a qualifying individual,
(b) the notice which may be given to an officer of the Board under section 222(5)(a) shall be a joint notice by the personal representatives and the individual or individuals entitled to occupy the dwelling-house or part of the dwelling-house and
(c) the notice which may be given by the personal representatives under section 222A is effective only if it is accompanied by written notification from the individual or individuals entitled to occupy the dwelling-house or part of the dwelling-house agreeing to the terms of the notice.
(6) But section 223 (as so applied) shall apply only on the making of a claim by the personal representatives.
(7) In subsection (5)(aa) “a qualifying individual” means an individual—
(a) who has a relevant entitlement, and
(b) by virtue of whom the first condition is met.
(1) Where an individual—
(a) ceases to live with his spouse or civil partner in a dwelling-house or part of a dwelling-house which is their only or main residence, and
(b) subsequently disposes of, or of an interest in, the dwelling-house or part to someone other than the spouse or civil partner,
then, if conditions A to C are met, sections 222 to 224 shall apply as if the dwelling-house or part continued to be the individual’s only or main residence until the disposal.
(2) Condition A is that the disposal mentioned in subsection (1)(b) is pursuant to—
(a) an agreement between the individual and his spouse or civil partner made in contemplation of or otherwise in connection with the dissolution or annulment of the marriage or civil partnership, their judicial separation or the making of a separation order in respect of them, or their separation in other circumstances such that the separation is likely to be permanent, or
(b) an order of a court—
(i) made on granting a divorce or nullity of marriage order, a decree of divorce or nullity of marriage, an order or decree for the dissolution or annulment of the civil partnership, or an order or decree for judicial separation,
(ii) made in connection with the dissolution or annulment of the marriage or civil partnership or the parties’ judicial separation and which is made at any time after the granting of such an order or decree,
(iii) made at any time under section 22A, 23, 23A, 24 or 24A of the Matrimonial Causes Act 1973,
(iv) made at any time under article 25 or 26 of the Matrimonial Causes (Northern Ireland) Order 1978,
(v) made under section 8 of the Family Law (Scotland) Act 1985, including incidental orders made by virtue of section 14 of that Act, or
(vi) made at any time under any provision of Schedule 5 to the Civil Partnership Act 2004 that corresponds to any of the provisions mentioned in paragraphs (iii) and (iv).
(3) Condition B is that in the period between the individual ceasing to reside in the dwelling-house or part of the dwelling-house and the disposal to someone other than the spouse or civil partner, the dwelling-house or part continues to be the only or main residence of the spouse or civil partner.
(4) Condition C is that the individual has not given notice under section 222(5) or 222A that another dwelling-house or part of a dwelling-house is to be treated as the individual’s main residence for any part of that period.
(5) Section 223 (as applied by this section) shall apply only on the making of a claim by the individual.
225BA Deferred payments on disposals in connection with divorce etc
(1) This section applies where—
(a) an individual (“A”) ceases to live with A’s spouse or civil partner (“B”) in a dwelling-house or part of a dwelling-house,
(b) immediately before A ceases to live with B, the dwelling-house or part is A’s only or main residence,
(c) A disposes of, or of an interest in, that dwelling-house or part to B (“the initial disposal”), and
(d) the initial disposal is in accordance with a deferred sale agreement or order.
(2) If—
(a) in accordance with the deferred sale agreement or order A receives a sum in respect of a share of any profit made by B upon B’s disposal of, or of an interest in, the dwelling-house or part, and
(b) the receipt of that sum would be treated (apart from this section) as a disposal falling with section 22 (disposal where capital sums derived from assets),
that receipt is to be treated for the purposes of this Act as a gain attributable to the initial disposal but accruing to A at the time the sum is received.
(3) In this section, a “deferred sale agreement or order” is an agreement or order of a court which—
(a) is within paragraph (a) or (b), as the case may be, of section 225B(2) (agreements and orders of the court in relation to divorce etc), and
(b) includes a term entitling A to receive a share of any profit made by B as mentioned in subsection (2)(a).
225C Sale of private residence under certain agreements with employer, etc
(1) This section applies where—
(a) an individual disposes of, or of an interest in, a dwelling-house or a part of a dwelling-house which is the individual’s only or main residence (“the initial disposal”),
(b) the individual does so as a consequence of a change to the situation of the individual’s place of work or that of a co-owner of the dwelling-house or the interest, being a change that is required by the employer of the individual or the co-owner, and
(c) the initial disposal is under a home purchase agreement.
(2) If—
(a) under the terms of the agreement the individual receives, within three years of the initial disposal, a share of any profit made by the purchaser upon the purchaser’s disposal of, or of an interest in, the dwelling-house or part of the dwelling-house, and
(b) the receipt of that sum would be treated (apart from this section) as a disposal falling within section 22 (disposal where capital sums derived from assets),
that receipt shall be treated for the purposes of this Act as a gain attributable to the initial disposal but accruing to the individual at the time the sum is received.
(3) In this section—
“home purchase agreement” means an agreement—
made with the employer or a person operating under an agreement with the employer (“the purchaser”),
which includes a term entitling the individual to receive a share of any such profit as is mentioned in subsection (2)(a);
“co-owner”, in relation to any individual (“A”), means another individual who holds an interest jointly or in common with A, whether or not the interests of the co-owners are equal.
(1) This section applies where a gain to which section 222 applies accrues to an individual (“A”) and, at any time during A's period of ownership, part of the dwelling-house was occupied by another person (“B”)—
(a) in England ... , pursuant to an adult placement scheme,
(aa) in Wales, pursuant to arrangements which constitute or form part of an adult placement service,
(b) in Scotland, pursuant to arrangements which constitute or form part of an adult placement service involving the provision of accommodation for B, or
(c) in Northern Ireland, pursuant to arrangements made with an adult placement agency for the provision of accommodation for B.
(2) For the purposes of this Part, in determining the periods during which the dwelling-house, or any part of the dwelling-house, was A's only or main residence, B's occupation of part of the dwelling-house pursuant to the scheme or arrangement is to be disregarded.
(3) For the purposes of section 224, the occupation of the part of the dwelling-house by B pursuant to the scheme or arrangement does not amount to the use of that part of the dwelling-house by A exclusively for the purpose of a trade, business, profession or vocation.
(4) In this section—
“adult placement agency” means an organisation or undertaking—
that arranges for the provision of care and support (including accommodation) for persons in need, and
in respect of which a requirement to register arises under Article 12 of the Health and Personal Social Services (Quality, Improvement and Regulation) (Northern Ireland) Order 2003,
“adult placement scheme” means a scheme—
under which an individual agrees with the person carrying on the scheme to provide care and support (including accommodation) to an adult who is in need of it, and
in respect of which a requirement to register arises under section 11 of the Care Standards Act 2000, and
“adult placement service”—
in relation to Scotland, has the meaning given by paragraph 11 of Schedule 12 to the Public Services Reform (Scotland) Act 2010, and
in relation to Wales, has the meaning given by paragraph 6 of Schedule 1 to the Regulation and Inspection of Social Care (Wales) Act 2016 (anaw 2).
225E Disposals by disabled persons or persons in care homes etc
(1) This section applies where a gain to which section 222 applies accrues to an individual and—
(a) the conditions in subsection (2) are met, or
(b) the conditions in subsection (3) are met.
(2) The conditions mentioned in subsection (1)(a) are that at the time of the disposal—
(a) the individual is a disabled person or a long-term resident in a care home, and
(b) the individual does not have any other relevant right in relation to a private residence.
(3) The conditions mentioned in subsection (1)(b) are that at the time of the disposal—
(a) the individual's spouse or civil partner is a disabled person or a long-term resident in a care home, and
(b) neither the individual nor the individual's spouse or civil partner has any other relevant right in relation to a private residence.
(4) Where this section applies, the references in section 223(1) and (2)(a) to 9 months are treated as references to 36 months.
(5) An individual is a “long-term resident” in a care home at the time of the disposal if at that time the individual —
(a) is resident there, and
(b) has been resident there, or can reasonably be expected to be resident there, for at least three months.
(6) An individual has “any other relevant right in relation to a private residence” at the time of the disposal if—
(a) at that time—
(i) the individual owns or holds an interest in a dwelling-house or part of a dwelling-house other than that in relation to which the gain accrued, or
(ii) the trustees of a settlement own or hold an interest in a dwelling-house or part of a dwelling-house other than that in relation to which the gain accrued, and the individual is entitled to occupy that dwelling-house or part under the terms of the settlement, and
(b) section 222 would have applied to any gain accruing to the individual or trustees on the disposal at that time of, or of that interest in, that dwelling house or part (or would have applied if a notice under subsection (5) of that section or under section 222A had been given).
(7) In the application of this section in relation to a gain to which section 222 applies by virtue of section 225 (private residence occupied under terms of settlement)—
(a) the reference in subsection (1) of this section to an individual is to the trustees of the settlement;
(b) the references in subsections (2) to (6) of this section to the individual are to the person entitled under the terms of the settlement, as mentioned in section 225.
(8) In this section—
“care home” means an establishment that provides accommodation together with nursing or personal care;
“disabled person” has the meaning given by Schedule 1A to FA 2005.
226 Private residence occupied by dependent relative before 6th April 1988.
(1) Subject to subsection (3) below, this section applies to a gain accruing to an individual so far as attributable to the disposal of, or of an interest in, a dwelling-house or part of a dwelling-house which, on 5th April 1988 or at any earlier time in his period of ownership, was the sole residence of a dependent relative of the individual, provided rent-free and without any other consideration.
(2) If the individual so claims, such relief shall be given in respect of it and its garden or grounds as would be given under sections 222 to 224 if the dwelling-house (or part of the dwelling-house) had been the individual’s only or main residence in the period of residence by the dependent relative, and shall be so given in addition to any relief available under those sections apart from this section.
(3) If in a case within subsection (1) above the dwelling-house or part ceases, whether before 6th April 1988 or later, to be the sole residence (provided as mentioned above) of the dependent relative, any subsequent period of residence beginning on or after that date by that or any other dependent relative shall be disregarded for the purposes of subsection (2) above.
(4) Not more than one dwelling-house (or part of a dwelling-house) may qualify for relief as being the residence of a dependent relative of the claimant at any one time nor, in the case of an individual and his spouse or civil partner living with him, as being the residence of a dependent relative of the claimant or of the claimant’s spouse or civil partner at any one time.
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6) In this section “dependent relative” means, in relation to an individual—
(a) any relative of his or of his wife who is incapacitated by old age or infirmity from maintaining himself, or
(b) his or his wife’s mother who, whether or not incapacitated, is either widowed, or living apart from her husband, or a single woman in consequence of dissolution or annulment of marriage.
(7) If the individual mentioned in subsection (6) above is a woman the references in that subsection to the individual’s wife shall be construed as references to the individual’s husband.
226A Private residence relief: cases where relief obtained under section 260
(1) This section applies where—
(a) section 223 applies, or would apart from this section apply, in relation to a gain or part of a gain accruing to an individual or the trustees of a settlement (“the transferor”) on a disposal (the “later disposal”),
(b) in computing the chargeable gain which would, apart from section 223, accrue to the transferor on the later disposal, the allowable expenditure would fall to be reduced, and
(c) that reduction would to any extent fall to be made in consequence, directly or indirectly, of a claim or claims under section 260 in respect of one or more earlier disposals (whether or not made to the transferor).
(2) If a claim for relief under section 260 in respect of—
(a) the earlier disposal, or
(b) if there were two or more such disposals, any of them,
is made on or before the making of the later disposal, section 223 shall not apply in relation to the gain or part of a gain accruing on the later disposal.
(3) If a claim for relief under section 260 in respect of—
(a) the earlier disposal, or
(b) if there were two or more such disposals, any of them,
is made after the making of the later disposal and subsection (2) above does not apply, it is to be assumed for the purposes of capital gains tax that section 223 never applied in relation to the gain or part of a gain accruing on the later disposal.
(4) 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 (3) above (notwithstanding any limitation on the time within which any adjustment may be made).
(5) Where the later disposal is made by the trustees of a settlement, the references in subsections (2) and (3) above to the making of the later disposal shall be read as references to the making of a claim for relief under section 223 in respect of the gain or part of a gain accruing on that disposal.
(6) If a claim for relief under section 260 in respect of an earlier disposal is revoked, this section shall apply as if the claim had never been made.
(7) This section is subject to section 226B (exception for maintenance funds for historic buildings).
(1) Section 226A shall not apply in relation to a later disposal made by the trustees of a settlement if the trustees 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 each year of assessment in which a relevant earlier disposal is made.
(2) In this section “relevant earlier disposal”, in relation to a later disposal, means an earlier disposal in respect of which a claim mentioned in section 226A(1)(c) is made.
(3) This section is to be construed as one with section 226A.
(1) Relief is available under section 229(1) where each of the 6 conditions set out in subsections (2) to (7) below is fulfilled.
(2) The first condition is that a person (“the claimant”) makes a disposal of shares, or his interest in shares, to the trustees of a settlement which—
(a) is a qualifying employee share ownership trust at the time of the disposal, and
(b) was established by a company (“the founding company”) which immediately after the disposal is a trading company or the holding company of a trading group.
(3) The second condition is that the shares—
(a) are shares in the founding company,
(b) form part of the ordinary share capital of the company,
(c) are fully paid up,
(d) are not redeemable, and
(e) are not subject to any restrictions other than restrictions which attach to all shares of the same class or a restriction authorised by paragraph 7(2) of Schedule 5 to the Finance Act 1989.
(4) The third condition is that, at any time in the entitlement period, the trustees—
(a) are beneficially entitled to not less than 10 per cent. of the ordinary share capital of the founding company,
(b) are beneficially entitled to not less than 10 per cent. of any profits available for distribution to equity holders of the founding company, and
(c) would be beneficially entitled to not less than 10 per cent. of any assets of the founding company available for distribution to its equity holders on a winding-up.
(5) The fourth condition is that the claimant obtains consideration for the disposal and, at any time in the acquisition period, all the amount or value of the consideration is applied by him in making an acquisition of assets or an interest in assets (“replacement assets”) which—
(a) are, immediately after the time of the acquisition, chargeable assets in relation to the claimant, and
(b) are not shares in, or debentures issued by, the founding company or a company which is (at the time of the acquisition) in the same group as the founding company;
but the preceding provisions of this subsection shall have effect without the words “, at any time in the acquisition period," if the acquisition is made pursuant to an unconditional contract entered into in the acquisition period.
(6) The fifth condition is that, at all times in the proscribed period, there are no unauthorised arrangements under which the claimant or a person connected with him may be entitled to acquire any of the shares, or an interest in or right deriving from any of the shares, which are the subject of the disposal by the claimant.
(7) The sixth condition is that no chargeable event occurs in relation to the trustees in—
(a) the chargeable period in which the claimant makes the disposal,
(b) the chargeable period in which the claimant makes the acquisition, or
(c) any chargeable period falling after that mentioned in paragraph (a) above and before that mentioned in paragraph (b) above.
(1) This section applies for the purposes of section 227.
(2) The entitlement period is the period beginning with the disposal and ending on the expiry of 12 months beginning with the date of the disposal.
(3) The acquisition period is the period beginning with the disposal and ending on the expiry of 6 months beginning with—
(a) the date of the disposal, or
(b) if later, the date on which the third condition (set out in section 227(4)) first becomes fulfilled.
(4) The proscribed period is the period beginning with the disposal, and ending on—
(a) the date of the acquisition, or
(b) if later, the date on which the third condition (set out in section 227(4)) first becomes fulfilled.
(5) All arrangements are unauthorised unless—
(a) they arise wholly from a restriction authorised by paragraph 7(2) of Schedule 5 to the Finance Act 1989, or
(b) they only allow one or both of the following as regards shares, interests or rights, namely, acquisition by a beneficiary under the settlement and appropriation under an approved profit sharing scheme.
(6) An asset is a chargeable asset in relation to the claimant at a particular time if, were the asset to be disposed of at that time, any gain accruing to him on the disposal would be a chargeable gain chargeable to capital gains tax or corporation tax on gains unless (were he to dispose of the asset at that time) the claimant would fall to be regarded for the purposes of any double taxation relief arrangements as not liable in the United Kingdom to tax on any gains accruing to him on the disposal.
(7) The question whether a settlement is at a particular time a qualifying employee share ownership trust shall be determined in accordance with Schedule 5 to the Finance Act 1989; and “chargeable event” in relation to trustees has the meaning given by section 69 of that Act.
(8) The expressions “holding company”, “trading company” and “trading group” have the same meaning as in section 165 (see section 165A); and “group" (except in the expression “trading group") shall be construed in accordance with section 170.
(9) “Ordinary share capital” in relation to the founding company means all the issued share capital (by whatever name called) of the company, other than capital the holders of which have a right to a dividend at a fixed rate but have no other right to share in the profits of the company.
(10) Chapter 6 of Part 5 of CTA 2010 (group relief: equity holders and profits or assets available for distribution) applies for the purposes of section 227(4) as if—
(a) the trustees were a company, and
(b) references to section 151(4)(a) and (b) of that Act were references to section 227(4) above.
(1) In a case where relief is available under this subsection the claimant shall, on making a claim in the period of 2 years beginning with the acquisition, be treated for the purposes of this Act—
(a) as if the consideration for the disposal were (if otherwise of a greater amount or value) of such amount as would secure that on the disposal neither a gain nor a loss accrues to him, and
(b) as if the amount or value of the consideration for the acquisition were reduced by the excess of the amount or value of the actual consideration for the disposal over the amount of the consideration which the claimant is treated as receiving under paragraph (a) above.
(2) Relief is available under subsection (3) below where—
(a) relief would be available under subsection (1) above but for the fact that part only of the amount or value mentioned in section 227(5) is applied as there mentioned, and
(b) all the amount or value so mentioned except for a part which is less than the amount of the gain (whether all chargeable gain or not) accruing on the disposal is so applied.
(3) In a case where relief is available under this subsection the claimant shall, on making a claim in the period of 2 years beginning with the acquisition, be treated for the purposes of this Act—
(a) as if the amount of the gain accruing on the disposal were reduced to the amount of the part mentioned in subsection (2)(b) above, and
(b) as if the amount or value of the consideration for the acquisition were reduced by the amount by which the gain is reduced under paragraph (a) above.
(4) Nothing in subsection (1) or (3) above shall affect the treatment for the purposes of this Act of the other party to the disposal or of the other party to the acquisition.
(5) The provisions of this Act fixing the amount of the consideration deemed to be given for a disposal or acquisition shall be applied before the preceding provisions of this section are applied.
(1) Subsection (2) below applies where—
(a) a claim is made under section 229,
(b) immediately after the time of the acquisition mentioned in section 227(5) and apart from this section, any replacement asset was a chargeable asset in relation to the claimant,
(c) the asset is a dwelling-house or part of a dwelling-house or land, and
(d) there was a time in the period beginning with the acquisition and ending with the time when section 229(1) or (3) falls to be applied such that, if the asset (or an interest in it) were disposed of at that time, it would be within section 222(1) and the individual there mentioned would be the claimant or the claimant’s spouse or civil partner.
(2) In such a case the asset shall be treated as if, immediately after the time of the acquisition mentioned in section 227(5), it was not a chargeable asset in relation to the claimant.
(3) Subsection (4) below applies where—
(a) the provisions of section 229(1) or (3) have been applied,
(b) any replacement asset which, immediately after the time of the acquisition mentioned in section 227(5) and apart from this section, was a chargeable asset in relation to the claimant consists of a dwelling-house or part of a dwelling-house or land, and
(c) there is a time after section 229(1) or (3) has been applied such that, if the asset (or an interest in it) were disposed of at that time, it would be within section 222(1) and the individual there mentioned would be the claimant or the claimant’s spouse or civil partner.
(4) In such a case—
(a) the asset shall be treated as if, immediately after the time of the acquisition mentioned in section 227(5), it was not a chargeable asset in relation to the claimant and adjustments shall be made accordingly, but
(b) any gain treated as accruing in consequence of the application of paragraph (a) above shall be treated as accruing at the time mentioned in subsection (3)(c) above or, if there is more than one such time, at the earliest of them.
(5) Subsection (6) below applies where—
(a) a claim is made under section 229,
(b) immediately after the time of the acquisition mentioned in section 227(5) and apart from this section, any replacement asset was a chargeable asset in relation to the claimant,
(c) the asset was an option to acquire (or to acquire an interest in) a dwelling-house or part of a dwelling-house or land,
(d) the option has been exercised, and
(e) there was a time in the period beginning with the exercise of the option and ending with the time when section 229(1) or (3) falls to be applied such that, if the asset acquired on exercise of the option were disposed of at that time, it would be within section 222(1) and the individual there mentioned would be the claimant or the claimant’s spouse or civil partner.
(6) In such a case the option shall be treated as if, immediately after the time of the acquisition mentioned in section 227(5), it was not a chargeable asset in relation to the claimant.
(7) Subsection (8) below applies where—
(a) the provisions of section 229(1) or (3) have been applied,
(b) any replacement asset which, immediately after the time of the acquisition mentioned in section 227(5) and apart from this section, was a chargeable asset in relation to the claimant consisted of an option to acquire (or to acquire an interest in) a dwelling-house or part of a dwelling-house or land,
(c) the option has been exercised, and
(d) there is a time after section 229(1) or (3) has been applied such that, if the asset acquired on exercise of the option were disposed of at that time, it would be within section 222(1) and the individual there mentioned would be the claimant or the claimant’s spouse or civil partner.
(8) In such a case—
(a) the option shall be treated as if, immediately after the time of the acquisition mentioned in section 227(5), it was not a chargeable asset in relation to the claimant and adjustments shall be made accordingly, but
(b) any gain treated as accruing in consequence of the application of paragraph (a) above shall be treated as accruing at the time mentioned in subsection (7)(d) above or, if there is more than one such time, at the earliest of them.
(9) References in this section to an individual include references to a person entitled to occupy under the terms of a settlement.
(1) Subsection (2) below applies where—
(a) a claim is made under section 229,
(b) immediately after the time of the acquisition mentioned in section 227(5) and apart from this section, any replacement asset was a chargeable asset in relation to the claimant,
(c) the asset consists of shares, and
(d) in the period beginning with the acquisition and ending when section 229(1) or (3) falls to be applied relief is claimed under Chapter III of Part VII of the Taxes Act or Part 5 of ITA 2007 ... in respect of the asset.
(2) In such a case the asset shall be treated as if, immediately after the time of the acquisition mentioned in section 227(5), it was not a chargeable asset in relation to the claimant.
(3) Subsection (4) below applies where—
(a) the provisions of section 229(1) or (3) have been applied,
(b) any replacement asset which, immediately after the time of the acquisition mentioned in section 227(5) and apart from this section, was a chargeable asset in relation to the claimant consists of shares, and
(c) after section 229(1) or (3) has been applied relief is claimed under Chapter III of Part VII of the Taxes Act or Part 5 of ITA 2007 in respect of the asset.
(4) In such a case the asset shall be treated as if, immediately after the time of the acquisition mentioned in section 227(5), it was not a chargeable asset in relation to the claimant and adjustments shall be made accordingly.
(5) Subsection (4) above shall also apply where section 33(1) or (3) of the Finance Act 1990 has applied and the claimant acquired the replacement asset in a chargeable period beginning before 6th April 1992.
232 Chargeable event when replacement assets owned.
(1) Subsection (3) below applies where—
(a) the provisions of section 229(1) or (3) are applied,
(b) a chargeable event occurs in relation to the trustees on or after the date on which the disposal is made (and whether the event occurs before or after the provisions are applied),
(c) the claimant was neither an individual who died before the chargeable event occurs nor trustees of a settlement which ceased to exist before the chargeable event occurs, and
(d) the condition set out below is fulfilled.
(2) The condition is that, at the time the chargeable event occurs, the claimant or a person then connected with him is beneficially entitled to all the replacement assets.
(3) In a case where this subsection applies, the claimant or connected person (as the case may be) shall be deemed for all purposes of this Act—
(a) to have disposed of all the replacement assets immediately before the time when the chargeable event occurs, and
(b) immediately to have reacquired them,
at the relevant value.
(4) The relevant value is such value as secures on the deemed disposal a chargeable gain equal to—
(a) the amount by which the amount or value of the consideration mentioned in section 229(1)(b) was treated as reduced by virtue of that provision (where it applied), or
(b) the amount by which the amount or value of the consideration mentioned in section 229(3)(b) was treated as reduced by virtue of that provision (where it applied).
(5) In a case where subsection (3) above would apply if “all" read “any of" in subsection (2) above, subsection (3) shall nevertheless apply, but as if—
(a) in subsection (3)(a) “all the replacement assets" read “ the replacement assets concerned ”, and
(b) the relevant value were reduced to whatever value is just and reasonable.
(6) Subsection (7) below applies where—
(a) subsection (3) above applies (whether or not by virtue of subsection (5) above), and
(b) before the time when the chargeable event occurs anything has happened as regards any of the replacement assets such that it can be said that a charge has accrued in respect of any of the gain carried forward by virtue of section 229(1) or (3).
(7) If in such a case it is just and reasonable for subsection (3) above to apply as follows, it shall apply as if—
(a) the relevant value were reduced (or further reduced) to whatever value is just and reasonable, or
(b) the relevant value were such value as secures that on the deemed disposal neither a gain nor a loss accrues (if that is just and reasonable);
but paragraph (a) above shall not apply so as to reduce the relevant value below that mentioned in paragraph (b) above.
(8) For the purposes of subsection (6)(b) above the gain carried forward by virtue of section 229(1) or (3) is the gain represented by the amount which by virtue of either of those provisions falls to be deducted from the expenditure allowable in computing a gain accruing on the disposal of replacement assets (that is, the amount found under subsection (4)(a) or (b) above, as the case may be).
(9) In this section “chargeable event” in relation to trustees has the meaning given by section 69 of the Finance Act 1989.
233 Chargeable event when replacement property owned.
(1) Subsection (3) below applies where—
(a) paragraphs (a) to (c) of section 232(1) are fulfilled, and
(b) the condition set out below is fulfilled.
(2) The condition is that—
(a) before the time when the chargeable event occurs, all the gain carried forward by virtue of section 229(1) or (3) was in turn carried forward from all the replacement assets to other property on a replacement of business assets, and
(b) at the time the chargeable event occurs, the claimant or a person then connected with him is beneficially entitled to all the property.
(3) In a case where this subsection applies, the claimant or connected person (as the case may be) shall be deemed for all purposes of this Act—
(a) to have disposed of all the property immediately before the time when the chargeable event occurs, and
(b) immediately to have reacquired it,
at the relevant value.
(4) The relevant value is such value as secures on the deemed disposal a chargeable gain equal to—
(a) the amount by which the amount or value of the consideration mentioned in section 229(1)(b) was treated as reduced by virtue of that provision (where it applied), or
(b) the amount by which the amount or value of the consideration mentioned in section 229(3)(b) was treated as reduced by virtue of that provision (where it applied).
(5) In a case where subsection (3) above would apply if “all the" in subsection (2) above (in one or more places) read “any of the", subsection (3) shall nevertheless apply, but as if—
(a) in subsection (3)(a) “all the property" read “ the property concerned ”, and
(b) the relevant value were reduced to whatever value is just and reasonable.
(6) Subsection (7) below applies where—
(a) subsection (3) above applies (whether or not by virtue of subsection (5) above), and
(b) before the time when the chargeable event occurs anything has happened as regards any of the replacement assets, or any other property, such that it can be said that a charge has accrued in respect of any of the gain carried forward by virtue of section 229(1) or (3).
(7) If in such a case it is just and reasonable for subsection (3) above to apply as follows, it shall apply as if—
(a) the relevant value were reduced (or further reduced) to whatever value is just and reasonable, or
(b) the relevant value were such value as secures that on the deemed disposal neither a gain nor a loss accrues (if that is just and reasonable);
but paragraph (a) above shall not apply so as to reduce the relevant value below that mentioned in paragraph (b) above.
(8) For the purposes of subsections (2) and (6)(b) above the gain carried forward by virtue of section 229(1) or (3) is the gain represented by the amount which by virtue of either of those provisions falls to be deducted from the expenditure allowable in computing a gain accruing on the disposal of replacement assets (that is, the amount found under subsection (4)(a) or (b) above, as the case may be).
(9) For the purposes of subsection (2) above a gain is carried forward from assets to other property on a replacement of business assets if, by one or more claims under sections 152 to 158, the chargeable gain accruing on a disposal of the assets is reduced, and as a result an amount falls to be deducted from the expenditure allowable in computing a gain accruing on the disposal of the other property.
(1) Subsection (3) below applies where—
(a) paragraphs (a) to (c) of section 232(1) are fulfilled, and
(b) the condition set out below is fulfilled.
(2) The condition is that—
(a) all the replacement assets were shares (new shares) in a company or companies,
(b) there has been a transaction to which section 116(10) applies and as regards which all the new shares constitute the old asset and qualifying corporate bonds constitute the new asset, and
(c) at the time the chargeable event occurs, the claimant or a person then connected with him is beneficially entitled to all the bonds.
(3) In a case where this subsection applies, a chargeable gain shall be deemed to have accrued to the claimant or connected person (as the case may be); and the gain shall be deemed to have accrued immediately before the time when the chargeable event occurs and to be of an amount equal to the relevant amount.
(4) The relevant amount is an amount equal to the lesser of—
(a) the first amount, and
(b) the second amount.
(5) The first amount is—
(a) the amount of the chargeable gain that would be deemed to accrue under 116(10)(b) if there were a disposal of all the bonds at the time the chargeable event occurs, or
(b) nil, if an allowable loss would be so deemed to accrue if there were such a disposal.
(6) The second amount is an amount equal to—
(a) the amount by which the amount or value of the consideration mentioned in section 229(1)(b) was treated as reduced by virtue of that provision (where it applied), or
(b) the amount by which the amount or value of the consideration mentioned in section 229(3)(b) was treated as reduced by virtue of that provision (where it applied).
(7) In a case where subsection (3) above would apply if “all the" in subsection (2) above (in one or more places) read “ any of the ”, subsection (3) shall nevertheless apply, but as if—
(a) in subsection (5) above “all the bonds" read “ the bonds concerned ”,
(b) the second amount were reduced to whatever amount is just and reasonable, and
(c) the relevant amount were reduced accordingly.
(8) Subsection (9) below applies where—
(a) subsection (3) above applies (whether or not by virtue of subsection (7) above), and
(b) before the time when the chargeable event occurs anything has happened as regards any of the new shares, or any of the bonds, such that it can be said that a charge has accrued in respect of any of the gain carried forward by virtue of section 229(1) or (3).
(9) If in such a case it is just and reasonable for subsection (3) above to apply as follows, it shall apply as if—
(a) the second amount were reduced (or further reduced) to whatever amount is just and reasonable, and
(b) the relevant amount were reduced (or further reduced) accordingly (if the second amount is less than the first amount),
but nothing in this subsection shall have the effect of reducing the second amount below nil.
(10) For the purposes of subsection (8)(b) above the gain carried forward by virtue of section 229(1) or (3) is the gain represented by the amount which by virtue of either of those provisions falls to be deducted from the expenditure allowable in computing a gain accruing on the disposal of replacement assets (that is, the amount found under subsection (6)(a) or (b) above, as the case may be).
(1) Where a charge can be said to accrue by virtue of section 232 or 233 in respect of any of the gain carried forward by virtue of section 229(1) or (3), so much of the gain charged shall not be capable of being carried forward (from assets to other property or from property to other property) under sections 152 to 158 on a replacement of business assets.
(2) For the purpose of construing subsection (1) above—
(a) what of the gain has been charged shall be found in accordance with what is just and reasonable;
(b) section 233(8) and (9) shall apply.
(3) In a case where—
(a) section 234 applies in the case of bonds,
(b) subsequently a disposal of the bonds occurs as mentioned in section 116(10)(b), and
(c) a chargeable gain is deemed to accrue under section 116(10)(b),
the chargeable gain shall be reduced by the relevant amount found under section 234 or (if the amount exceeds the gain) shall be reduced to nil.
(4) The relevant amount shall be apportioned where the subsequent disposal is of some of the bonds mentioned in subsection (3)(a) above; and subsection (3) shall apply accordingly.
236G Relinquishment of employment rights is not disposal of an asset
(1) This section applies where an individual has acquired shares in consideration of entering into an agreement by virtue of which the individual is an employee shareholder (see section 205A(1)(a) to (d) of the Employment Rights Act 1996).
(2) The individual is not to be regarded as disposing of an asset by reason of the individual ceasing to have, or not acquiring, the rights mentioned in section 205A of the Employment Rights Act 1996 (rights which an employee shareholder does not have) in consequence of entering into the agreement.
(1) This section applies where—
(a) a person other than a company (“P”) disposes of any ordinary share capital of a company (“C”) to the trustees of a settlement,
(b) the relief requirements are met, and
(c) P makes a claim under this section.
(2) Where this section applies, section 17(1) (disposals and acquisitions treated as made at market value) does not apply to the disposal and, taking account of that disapplication—
(a) if a gain accrues, subsection (2A) applies, or
(b) if no gain accrues, subsection (3) applies.
(2A) Where this subsection applies—
(a) only 50% of the gain is a chargeable gain,
(b) the disposal is not to be regarded as a qualifying business disposal for the purposes of Chapter 3 of Part 5 (business asset disposal relief),
(c) the ordinary share capital disposed of is to be regarded, immediately before the disposal, as comprised wholly of excluded shares for the purposes of Chapter 5 of that Part (investors’ relief), and
(d) the acquisition by the trustees is to be treated for the purposes of this Act as made for the consideration for the disposal less an amount equal to so much of the gain as is not a chargeable gain as a result of paragraph (a).
(3) Where this subsection applies, the disposal, and the acquisition by the trustees, are to be treated for the purposes of this Act as being made for such consideration as to secure that neither a gain nor a loss accrues on the disposal.
(4) “The relief requirements” are—
(za) that the trustees of the settlement are resident in the United Kingdom at the time of the disposal and continue to be UK resident for the remainder of the tax year in which that time falls,
(a) that C meets the trading requirement (see section 236I) at the time of the disposal and continues to meet that requirement for the remainder of the tax year in which that time falls,
(b) that the settlement meets the all-employee benefit requirement at the time of the disposal and continues to meet that requirement for the remainder of the tax year in which that time falls (see sections 236J to 236L and subsection (5) of this section),
(ba) that the settlement meets the trustee independence requirement (see section 236LA) at the time of the disposal and continues to meet that requirement for the remainder of the tax year in which that time falls,
(c) that the settlement does not meet the controlling interest requirement (see section 236M) immediately before the beginning of the tax year in which the disposal occurs, but—
(i) it meets that requirement at the end of that tax year, and
(ii) if it met the requirement at an earlier time in that tax year (whether before or after the time of the disposal) it continued to meet it throughout the remainder of that tax year,
(ca) that the trustees have taken all reasonable steps to secure that—
(i) the consideration for the disposal does not exceed the market value of the ordinary share capital at the time of the disposal, and
(ii) where some or all of the consideration for the disposal is deferred, that the rate of any interest payable in relation to the deferral does not exceed a reasonable commercial rate,
(d) that the limited participation requirement is met (see section 236N), and
(e) that this section does not apply in relation to any related disposal by P or a person connected with P which occurs in an earlier tax year.
(5) For the purposes of subsection (4)(b)—
(a) unless the settlement met the all-employee benefit requirement by virtue of section 236L (cases in which all-employee benefit requirement treated as met) at the time of the disposal, that section does not apply for the purposes of determining whether the settlement continues to meet that requirement after the disposal, and
(b) if, at the time of the disposal, the settlement met that requirement by virtue of section 236L and later continues to meet it otherwise than by virtue of that section, it may not again meet the requirement by virtue of that section.
(6) A disposal in an earlier tax year is “related” to the disposal in question if—
(a) both disposals are of ordinary share capital of the same company, or
(b) the disposal in the earlier tax year is of ordinary share capital of a company which is, or at the time of that disposal was, a member of the same group as the company whose ordinary share capital is the subject of the disposal in question.
(7) A claim under this section must include—
(a) information to identify the settlement,
(b) C’s name and the address of its registered office, ...
(ba) the number of persons who at the time of the disposal are employees of—
(i) C, or
(ii) if C is the principal company of a trading group (within the meaning of section 236I(3)), any member of that group,
(c) the date of the disposal and the number of shares disposed of , and
(d) the consideration for the disposal (including amounts of consideration due after the disposal).
(7A) But where the person making the claim is unable to include the number of employees in the claim as required by subsection (7)(ba) because they have been unable to ascertain that number, that requirement is to be taken to be met if—
(a) the person has taken all reasonable steps to ascertain that number, and—
(b) the claim contains a statement that the person has taken such steps.
(8) Section 236O makes provision about events which prevent a claim being made under this section and circumstances in which a claim is revoked.
(1) C meets the trading requirement if C is—
(a) a trading company which is not a member of a group, or
(b) the principal company of a trading group.
(2) “Trading company” means a company carrying on trading activities whose activities do not include to a substantial extent activities other than trading activities.
(3) “Trading group” means a group—
(a) one or more of whose members carry on trading group activities, and
(b) the activities of whose members, taken together, do not include to a substantial extent activities other than trading group activities.
(4) In this section—
“trading activities” means activities carried on by the company in the course of, or for the purposes of, a trade being carried on by it;
“trading group activities” means activities carried on by a member of the group in the course of, or for the purposes of, a trade being carried on by any member of the group.
(5) For the purposes of determining whether C is a trading company or the principal company of a trading group—
(a) the activities of the members of a group are to be treated as one business (with the result that activities are disregarded to the extent that they are intra-group activities), and
(b) a business carried on by a company in partnership with one or more other persons is to be treated as not being a trading activity or a trading group activity.
(1) A settlement meets the all-employee benefit requirement if the trusts of the settlement—
(a) do not permit any of the settled property to be applied, at any time, otherwise than for the benefit of all the eligible employees on the same terms,
(b) do not permit the trustees at any time to apply any of the settled property—
(i) by creating a trust, or
(ii) by transferring property to the trustees of any settlement other than by an authorised transfer,
(c) do not permit the trustees at any time to make loans to beneficiaries of the trusts, and
(d) do not permit the trustees or any other person at any time to amend the trusts in a way such that the amended trusts would not comply with one or more of paragraphs (a) to (c).
(2) Section 236K makes provision about the requirement in subsection (1)(a).
(3) “Eligible employee” means—
(a) if C meets the trading requirement by virtue of section 236I(1)(a), any individual who is employed by, or is an office-holder of, C, and
(b) if C meets the trading requirement by virtue of section 236I(1)(b), any individual who is employed by, or is an office-holder of, a relevant group company,
but does not include an excluded participator.
(4) But where—
(a) C has ceased to meet the trading requirement or the trustees have ceased to hold any shares in C (or both), and
(b) a person was an eligible employee at any time during the period of two years ending immediately before that event (or, where both have occurred, the earlier of them),
that person continues to be an “eligible employee”.
(5) “Excluded participator” means—
(a) a person who is a participator in C, or, where C meets the trading requirement by virtue of section 236I(1)(b), in any relevant group company,
(b) any other person who is a participator in any close company that has made a disposition whereby property became comprised in the same settlement, being a disposition which but for section 13 or 13A of the Inheritance Tax Act 1984 (dispositions by close companies for benefit of employees or to employee-ownership trusts) would have been a transfer of value for the purposes of inheritance tax,
(c) any other person who has been a participator in any company mentioned in paragraph (a) or (b) at any time on or after the look-back date, or
(d) any person who is connected with any person within paragraph (a), (b) or (c).
(6) The participators in a company who are referred to in subsection (5) do not include any participator who—
(a) is not beneficially entitled to, or to rights entitling the participator to acquire, 5% or more of, or of any class of the shares comprised in, the company’s share capital, and
(b) on a winding-up of the company would not be entitled to 5% or more of its assets.
(7) In this section—
“authorised transfer” means a transfer of property consisting of or including any ordinary share capital of a company (“the transferred company”) where—
the transferred company meets the trading requirement, and
the transfer is made to the trustees of a settlement which—
meets the controlling interest requirement with respect to the transferred company immediately after the transfer, and
meets the all-employee benefit requirement with respect to the transferred company (ignoring section 236L),
and for this purpose references to “C” in sections 236I, 236M and 236T and this section are to be read as references to the transferred company,
“close company” and “participator” have the same meaning as in Part 4 of the Inheritance Tax Act 1984 (see section 102 of that Act), and references to a participator in a company are, in the case of a company which is not a close company, to be construed as references to a person who would be a participator in the company if it were a close company,
“the look-back date” means the first day of the period of 10 years ending with whichever is later of—
10 December 2013, and
the day on which any property first became comprised in the settlement, and
“relevant group company” means C or any other company which is a member of the group of which C is the principal company.
(8) In this section references to the settled property include references to any income arising from it.
(9) See section 236L for cases where the all-employee benefit requirement is treated as met.
236K Further provision about the equality requirement
(1) The requirement in section 236J(1)(a) (“the equality requirement”) is not infringed by the trusts by reason only that they—
(a) permit the settled property to be applied, where an eligible employee has died, as if a surviving spouse, civil partner or dependant of the deceased person were the eligible employee (and continued to be employed) for a period of 12 months, or such shorter period as the trusts may provide, starting with the time of death,
(b) prevent the settled property being applied for the benefit of persons who have not been eligible employees for a continuous period of 12 months or such shorter period as the trusts may provide,
(c) permit the trustees to comply with a written request from a person that the trustees do not apply any of the settled property for the benefit of that person, or
(d) prevent the settled property being applied for the benefit of all persons who are eligible employees by reason only that they are office-holders.
(2) The equality requirement is not infringed by the trusts by reason only that, in addition to requiring the settled property to be applied for the benefit of all the eligible employees on the same terms, they also permit the settled property to be applied for charitable purposes.
(3) Subject to subsections (1) and (2), the equality requirement is infringed by the trusts if they permit the settled property to be applied by reference to factors other than those mentioned in subsection (4).
(4) The equality requirement is not infringed by the trusts by reason only that they permit the settled property to be applied for the benefit of all the eligible employees by reference to—
(a) an eligible employee’s remuneration,
(b) an eligible employee’s length of service, or
(c) hours worked by an eligible employee;
but this is subject to subsections (5) and (6).
(5) The equality requirement is infringed by the trusts if they permit any of the settled property to be applied on terms such that some (but not all) eligible employees receive no benefits (other than by virtue of subsection (1)(b), (c) and (d)).
(6) If any of the settled property is applied by reference to more than one of the factors mentioned in subsection (4), the equality requirement is infringed unless—
(a) each factor gives rise to a separate entitlement related to the level of remuneration, length of service or (as the case may be) hours worked, and
(b) the total entitlement is the sum of those separate entitlements.
(7) “Eligible employee” has the same meaning as in section 236J.
(8) In this section, references to the settled property include references to any income arising from it.
236L Cases in which all-employee benefit requirement treated as met
(1) A settlement which would not otherwise meet the all-employee benefit requirement at any time is treated as meeting that requirement at that time if—
(a) the settlement was created before 10 December 2013,
(b) on that date—
(i) section 86 of the Inheritance Tax Act 1984 (trusts for the benefit of employees) applied to the settled property,
(ii) the trustees held a significant interest in C, and
(iii) the settlement did not meet the all-employee benefit requirement (ignoring this section), and
(c) the trustees of the settlement do not, during the period of 12 months ending with the time in question, do any of the following—
(i) apply any of the settled property otherwise than for the benefit of all eligible employees on the same terms,
(ii) apply any of the settled property by creating a trust,
(iii) apply any of the settled property by transferring property to the trustees of any settlement other than by an authorised transfer, or
(iv) make loans to beneficiaries of the trusts of the settlement.
(2) The trustees held a significant interest in C on 10 December 2013 if on that date—
(a) they—
(i) held 10% or more of the ordinary share capital of C, and
(ii) had powers of voting on all questions affecting C as a whole which, if exercised, would have yielded 10% or more of the votes capable of being exercised on them,
(b) they were entitled to 10% or more of the profits available for distribution to the equity holders of C,
(c) they would have been entitled, on a winding up of C, to 10% or more of the assets of C available for distribution to equity holders, and
(d) there were no provisions in any agreement or instrument affecting C’s constitution or management or its shares or securities whereby the condition in paragraph (a), (b) or (c) could cease to be satisfied without the consent of the trustees.
See section 236T for further provision relating to the holding of a significant interest.
(3) Subsections (3) to (8) of section 236J apply for the purposes of this section.
(4) The requirement in subsection (1)(c)(i) (“the behaviour requirement”) is not infringed by reason only that the trustees of the settlement—
(a) apply any of the settled property, where an eligible employee has died, as if a surviving spouse, civil partner or dependant of the deceased person were the eligible employee (and continued to be employed) for a period of 12 months, or such shorter period as the trustees may determine, starting with the time of death,
(b) only apply the settled property for the benefit of persons who have been eligible employees for a continuous period of 12 months or such shorter period as the trustees may determine,
(c) comply with a written request from a person that the trustees do not apply any of the settled property for the benefit of that person, or
(d) have complied with the terms of the trusts of the settlement which prevent the settled property being applied for the benefit of some or all of the persons who are eligible employees by reason only that they are office-holders.
(5) The behaviour requirement is not infringed by reason only that, in addition to applying any of the settled property for the benefit of all the eligible employees on the same terms, the trustees also apply any of it for charitable purposes.
(6) Subject to subsections (4) and (5), the behaviour requirement is infringed by the trustees if they apply the settled property by reference to factors other than those mentioned in subsection (7).
(7) The behaviour requirement is not infringed by the trustees applying the settled property for the benefit of all the eligible employees by reference to—
(a) an eligible employee’s remuneration,
(b) an eligible employee’s length of service, or
(c) hours worked by an eligible employee;
but this is subject to subsections (8) and (9).
(8) The behaviour requirement is infringed if any of the settled property is applied by the trustees on terms such that some (but not all) eligible employees receive no benefits (other than as mentioned in subsection (4)(b), (c) and (d)).
(9) If the trustees apply any of the settled property by reference to more than one of the factors mentioned in subsection (7), the behaviour requirement is infringed unless—
(a) each factor gives rise to a separate entitlement related to the level of remuneration, length of service or (as the case may be) hours worked, and
(b) the total entitlement is the sum of those separate entitlements.
(1) A settlement meets the trustee independence requirement if—
(a) less than 50% of the trustees are persons who are excluded participators, and
(b) excluded participators do not have control of the settlement.
(2) In this section “excluded participator” means—
(a) a person that is an excluded participator within the meaning given by section 236J, other than a person who is an excluded participator only as a result of a connection falling within section 286(3) (trustees regarded as connected with settlors etc), or
(b) a company not falling within paragraph (a), if 50% or more of its directors are persons falling within that paragraph.
(3) Excluded participators have control of the settlement if one or more excluded participators, acting alone or together without the trustees who are not excluded participators, have power under the trust instrument or by law to—
(a) dispose of, advance, lend, invest, pay or apply settlement property;
(b) vary or terminate the settlement;
(c) add or remove a person as a beneficiary or to or from a class of beneficiaries;
(d) appoint or remove trustees or give another individual control over the settlement;
(e) direct the exercise of a power mentioned in sub-paragraphs (a) to (d).
(1) A settlement meets the controlling interest requirement if—
(a) the trustees—
(i) hold more than 50% of the ordinary share capital of C, and
(ii) have powers of voting on all questions affecting C as a whole which, if exercised, would yield a majority of the votes capable of being exercised on them,
(b) the trustees are entitled to more than 50% of the profits available for distribution to the equity holders of C,
(c) the trustees would be entitled, on a winding up of C, to more than 50% of the assets of C available for distribution to equity holders, and
(d) there are no provisions in any agreement or instrument affecting C’s constitution or management or its shares or securities whereby the condition in paragraph (a), (b) or (c) can cease to be satisfied without the consent of the trustees.
(2) See section 236T for further provision relating to the controlling interest requirement.
(1) The limited participation requirement is met if Conditions A and B are met.
(2) Condition A is that there was no time in the period of 12 months ending immediately after the disposal mentioned in section 236H(1) when—
(a) P was a participator in C, and
(b) the participator fraction exceeded 2/5.
(3) Condition B is that the participator fraction does not exceed 2/5 at any time in the period beginning with that disposal and ending at the end of the tax year in which it occurs.
(4) But a time which falls in a period during which the participator fraction exceeded 2/5 is to be disregarded for the purposes of subsection (2)(b) and (3) if—
(a) that period lasts no more than 6 months, and
(b) the fraction exceeded 2/5 during that period by reason of events outside the reasonable control of the trustees.
(5) “The participator fraction” means—
NPNE
where—
NP is the sum of—
the number of persons who at the time in question are both—
participators in C, and
employees of, or office-holders in, C, and
the number of other persons who at that time are both—
employees of, or office-holders in, C or, if C is the principal company of a trading group, any member of the group, and
connected with persons within paragraph (a);
NE is the number of persons who at that time are employees of C or, if C is the principal company of a trading group, any member of the group.
(6) The participators in C who are referred to in subsections (2) and (5) do not include any participator who—
(a) is not beneficially entitled to, or to rights entitling the participator to acquire, 5% or more of, or of any class of the shares comprised in, C’s share capital, and
(b) on a winding-up of C would not be entitled to 5% or more of its assets.
(7) In this section—
(a) “participator” has the meaning given by section 454 of CTA 2010, and
(b) references to a participator in a company are, in the case of a company which is not a close company (within the meaning of Chapter 2 of Part 10 of that Act), to be construed as references to a person who would be a participator in the company if it were a close company.
236O No section 236H relief if disqualifying event in next four tax years
(1) This section applies where—
(a) a disposal is made in circumstances where paragraphs (a) and (b) of section 236H(1) are satisfied, and
(b) one or more disqualifying events occur in relation to the disposal in any of the first four tax years following the tax year in which the disposal occurs.
(2) A “disqualifying event” occurs in relation to the disposal if and when—
(za) the trustees of the settlement cease to be resident in the United Kingdom,
(a) C ceases to meet the trading requirement,
(b) the settlement ceases to meet the all-employee benefit requirement,
(ba) the settlement ceases to meet the trustee independence requirement,
(c) the settlement ceases to meet the controlling interest requirement,
(d) the participator fraction exceeds 2/5, or
(e) the trustees act in a way which the trusts, as required by the all-employee benefit requirement, do not permit.
(2A) Where—
(a) a disqualifying event falling within subsection (2)(za) occurs (trustees cease to be resident in the United Kingdom),
(b) the event only occurs as a result of the death of a trustee of the settlement, and
(c) within the period of 6 months beginning with the death of the trustee, the trustees become resident in the United Kingdom,
the disqualifying event is to be ignored.
(2B) Where—
(a) a disqualifying event falling within subsection (2)(ba) occurs (trustee independence requirement ceases to be met),
(b) the event only occurs as a result of—
(i) the death of a trustee of the settlement, or
(ii) the death of a director of a company that is a trustee of the settlement, and
(c) within the period of 6 months beginning with that death, the settlement meets the trustee independence requirement,
the disqualifying event is to be ignored.
(3) No claim for relief under section 236H may be made in respect of the disposal on or after the day on which the disqualifying event (or, if more than one, the first of them) occurs.
(4) Any claim for relief under section 236H made in respect of the disposal before that day is revoked, and the chargeable gains and allowable losses of any person for any chargeable period are to be calculated as if that claim had never been made.
(5) Such adjustments must be made in relation to any person, whether by the making of assessments or otherwise, as are required to give effect to subsection (4) (regardless of any limitation on the time within which any adjustment may be made).
(6) Section 236H(5) (restrictions on application of section 236L) applies for the purposes of subsection (2)(b).
(7) Section 236N(4) applies for the purposes of subsection (2)(d) as it applies in relation to section 236N(2)(b) and (3).
236P Events which trigger deemed disposal and reacquisition by trustees
(1) Where the trustees of a settlement acquire any ordinary share capital in a tax year in circumstances where section 236H applies, subsection (3) applies on the first occasion, after the end of the fourth tax year following the tax year in which the acquisition occurs, when a disqualifying event occurs in relation to the acquisition.
(2) A “disqualifying event” occurs in relation to the acquisition if and when—
(a) C ceases to meet the trading requirement,
(b) the settlement ceases to meet the all-employee benefit requirement,
(ba) the settlement ceases to meet the trustee independence requirement,
(c) the settlement ceases to meet the controlling interest requirement,
(d) the participator fraction exceeds 2/5, or
(e) the trustees act in a way which the trusts, as required by the all-employee benefit requirement, do not permit.
(2A) Where—
(a) a disqualifying event falling within subsection (2)(ba) occurs (trustee independence requirement ceases to be met),
(b) the event only occurs as a result of—
(i) the death of a trustee of the settlement, or
(ii) the death of a director of a company that is a trustee of the settlement, and
(c) within the period of 6 months beginning with that death, the settlement meets the trustee independence requirement,
the disqualifying event is to be ignored.
(3) The trustees are treated as having, immediately before the disqualifying event—
(a) disposed of any ordinary share capital of C held by the trustees which comprises shares acquired in circumstances where section 236H applied (and not subsequently disposed of and reacquired), and
(b) immediately reacquired that ordinary share capital,
at its market value at that time.
(3A) See also section 80 (trustees ceasing to be resident in U.K.), which provides for similar consequences in circumstances where the trustees of the settlement cease to be resident in the United Kingdom.
(4) For the purposes of subsection (2)(b)—
(a) unless the settlement met the all-employee benefit requirement at the time of the acquisition by virtue of section 236L, that section does not apply for the purposes of determining whether the settlement continues to meet that requirement after the acquisition, and
(b) if, at the time of the acquisition, the settlement met that requirement by virtue of section 236L and later continues to meet it otherwise than by virtue of that section, it may not again meet the requirement by virtue of that section.
(5) Section 236N(4) applies for the purposes of subsection (2)(d) as it applies in relation to section 236N(2)(b) and (3).
(1) This section applies where—
(a) a deemed disposal arises under section 71(1) by reason of the trustees of a settlement (“the acquiring settlement”) becoming absolutely entitled to settled property as against the trustee of that settled property (“the transferring trustee”),
(b) that settled property consists of ordinary share capital of a company,
(c) the relief requirements in section 236H(4)(za) to (c) and (d) are met, and
(d) the transferring trustee makes a claim under this section.
(2) Section 17(1) (disposals and acquisitions treated as made at market value) does not apply to the disposal.
(3) The deemed disposal and acquisition by the transferring trustee under section 71(1) are to be treated for the purposes of this Act as being made for such consideration as to secure that neither a gain nor a loss accrues on the disposal.
(4) For the purposes of section 236P the trustees of the acquiring settlement are treated as acquiring the ordinary share capital from the transferring trustee, at the time of the deemed disposal, in circumstances where section 236H applies.
(5) In applying sections 236H(4), 236I to 236P and 236T for the purposes of this section—
(a) references in those provisions to the settlement are to be read as references to the acquiring settlement, and
(b) references in those provisions to C are to be read as references to the company mentioned in subsection (1)(b).
(6) A claim under this section must include—
(a) information to identify the acquiring settlement,
(b) the name of the company mentioned in subsection (1)(b) and the address of its registered office, ...
(ba) the number of persons who at the time of the disposal are employees of—
(i) C, or
(ii) if C is the principal company of a trading group (within the meaning of section 236I(3)), any member of that group,
(c) the date of the deemed disposal and the number of shares deemed to have been disposed of.
(6A) But where the person making the claim is unable to include the number of employees in the claim as required by subsection (6)(ba) because they have been unable to ascertain that number, that requirement is to be taken to be met if—
(a) the person has taken all reasonable steps to ascertain that number, and—
(b) the claim contains a statement that the person has taken such steps.
(7) Section 236R makes provision about events which prevent a claim being made under this section and circumstances in which a claim is revoked.
236R No section 236Q relief if disqualifying event in next four tax years
(1) This section applies where—
(a) a deemed disposal arises in circumstances where paragraphs (a) to (c) of section 236Q(1) are satisfied, and
(b) one or more disqualifying events occur in relation to the disposal in any of the first four tax years following the tax year in which the deemed disposal arises.
(2) No claim for relief under section 236Q may be made in respect of the deemed disposal on or after the day on which the disqualifying event (or, if more than one, the first of them) occurs.
(3) Any claim for relief under section 236Q made in respect of the deemed disposal before that day is revoked, and the chargeable gains and allowable losses of any person for any chargeable period are to be calculated as if that claim had never been made.
(4) Such adjustments must be made in relation to any person, whether by the making of assessments or otherwise, as are required to give effect to subsection (3) (regardless of any limitation on the time within which any adjustment may be made).
(5) “Disqualifying event” is to be construed in accordance with subsections (2), (6) and (7) of section 236O except that—
(a) references in those subsections to the disposal are to be read as references to the deemed disposal, and
(b) in applying sections 236I to 236P and 236T for this purpose—
(i) references in those provisions to the settlement are to be read as references to the acquiring settlement (within the meaning of section 236Q(1)), and
(ii) references in those provisions to C are to be read as references to the company mentioned in section 236Q(1)(b).
236S Identification of shares where section 236H or 236Q applies
(1) This section applies where the trustees of a settlement hold—
(a) shares which were—
(i) acquired in circumstances where section 236H applied, or
(ii) the subject of a deemed acquisition under section 71(1) in circumstances where section 236Q applied,
and not subsequently disposed of and reacquired (“EOT exempt shares”), and
(b) other shares which, but for section 104(4A), would be shares of the same class as those shares.
(2) If the trustees dispose of some, but not all, of the shares so held, they may determine what proportion of the shares disposed of are EOT exempt shares (up to the number of such shares held).
(3) For the purposes of this section shares in a company are not to be treated as being of the same class unless they are so treated by the practice of a recognised stock exchange or would be so treated if dealt with on a recognised stock exchange.
(4) Nothing in subsection (2) applies in relation to a disposal by virtue of section 236P(3).