Finance (No. 2) Bill

Session 2012 - 13
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Finance (No. 2) Bill

Finance (No. 2) Bill
Schedule 24 — Charge on certain high value disposals by companies etc
Part 1 — Taxation of Chargeable Gains Act 1992
347

2D
“The threshold amount”
(1)
This section applies to determine “the threshold amount” in relation
to a disposal which meets Conditions A to C in section 2C (“the
current disposal”).
(2)
If—
5
(a)
the current disposal is not a part disposal of an asset, and
(b)
P has not made any relevant related disposals,

the threshold amount is £2 million, subject to subsection (5) (joint
interests).
(3)
If paragraphs (a) and (b) of subsection (2) do not both apply, the
10
threshold amount is the relevant fraction of £2 million, subject to
subsection (5) (joint interests).
(4)
“The relevant fraction” is—

where—

“C” is the amount or value of the consideration for the current
15
disposal;

“TMV” is what would be the market value, at the time of the
current disposal, of a notional asset comprising—
(a)
the disposed of interest (see section 2C(2)),
(b)
if the current disposal is a part disposal, any part of
20
the chargeable interest held by P that remains
undisposed of immediately following that part
disposal,
(c)
any chargeable interest (or part of a chargeable
interest) which was the subject of a relevant related
25
disposal, and
(d)
any chargeable interest (or part of a chargeable
interest) held by P at the time of the current disposal
which, if P had disposed of it at that time, would have
been the subject of a relevant related disposal.
30
(5)
If the disposed of interest is a share of the whole of—
(a)
a chargeable interest, or
(b)
a part of a chargeable interest,

subsections (2) and (3) have effect as if the references to “£2 million”
were to the joint share fraction of that amount.
35
(6)
The joint share fraction is the fraction of the whole of the chargeable
interest or part represented by the disposed of interest.
(7)
“Relevant related disposal”, in relation to the current disposal,
means any disposal by P which—
(a)
meets Conditions A to C in section 2C in circumstances
40
where the single-dwelling interest referred to in Condition C
is—
(i)
the single-dwelling interest by virtue of which
Condition C is met in relation to the current disposal,
or
45

Finance (No. 2) Bill
Schedule 24 — Charge on certain high value disposals by companies etc
Part 1 — Taxation of Chargeable Gains Act 1992
348

(ii)
another single-dwelling interest in the same dwelling
as that interest, and
(b)
was made in the period of 6 years ending with the day on
which the current disposal occurs, but not before 6 April
2013.
5
2E
Restriction of losses
(1)
This section applies where (ignoring this section)—
(a)
a disposal would be a relevant high value disposal, but for a
failure to meet condition D in section 2C,
(b)
if it were a relevant high value disposal, an ATED-related
10
loss would accrue to a person (other than an excluded
person) in a tax year on the disposal, and
(c)
the total of the sums allowable as a deduction under section
38 in relation to the disposal exceeds the threshold amount in
relation to the disposal.
15
(2)
For the purposes of this Act—
(a)
the disposal is to be treated as a relevant high value disposal
(and section 57A and Schedule 4ZZA apply accordingly), and
(b)
the ATED-related loss which accrues on the disposal is to be
restricted to the amount which would have been that loss had
20
the consideration for the disposal been £1 greater than the
threshold amount in relation to the disposal.
(3)
In a case where paragraph 2 of Schedule 4ZZA applies (calculation
of gains or losses on disposals of assets held on 5 April 2013), the
reference in subsection (1)(c) to the disposal is to be read as a
25
reference to the notional disposal referred to in paragraph 3(2) of that
Schedule (disposal on which notional post-April 2013 gain or loss
accrues).
(4)
Nothing in subsection (2)(b) restricts any loss which is not ATED-
related, or affects any gain (whether or not ATED-related), accruing
30
on the relevant high value disposal.
(5)
In this section—
“excluded” has the meaning given by section 2B(2);
“the threshold amount” has the meaning given by section 2D.
2F
Tapering relief for gains
35
(1)
This section applies to an ATED-related gain which accrues on a
relevant high value disposal and is chargeable to capital gains tax by
virtue of section 2B.
(2)
There is excluded from the gain so much of it as exceeds five-thirds
of the difference between—
40
(a)
the amount or value of the consideration, and
(b)
the threshold amount (within the meaning of section 2D) in
relation to the disposal.
(3)
But where the relevant fraction is less than 1, subsection (2) has effect
as if the amount determined under that subsection were the relevant
45
fraction of that amount.

Finance (No. 2) Bill
Schedule 24 — Charge on certain high value disposals by companies etc
Part 1 — Taxation of Chargeable Gains Act 1992
349

(4)
“The relevant fraction”—
(a)
in a case where the ATED-related gain is determined in
accordance with paragraph 3 of Schedule 4ZZA, has the
meaning given by paragraph 3(4) of that Schedule, and
(b)
in a case where the ATED-related gain is determined in
5
accordance with paragraph 6 of that Schedule, has the same
meaning as in paragraph 6(5)(a) of that Schedule.
(5)
Nothing in this section restricts any gain which is not ATED-related,
or affects any loss (whether or not ATED-related), accruing on the
relevant high value disposal.”
10
5
In section 4 (rates of capital gains tax), after subsection (3) insert—
“(3A)
The rate of capital gains tax in respect of gains chargeable under
section 2B accruing to a person in a tax year is 28%.”
6
In section 8 (company’s total profits to include chargeable gains), after
subsection (4) insert—
15
“(4A)
Nothing in this section applies in relation to an ATED-related gain
chargeable to, or an ATED-related loss allowable for the purposes of,
capital gains tax by virtue of section 2B.”
7
In section 13 (attribution of gains to members of non-resident companies),
after subsection (1) insert—
20
“(1A)
But this section does not apply if the gain is an ATED-related gain
chargeable to capital gains tax by virtue of section 2B (capital gains
tax on ATED-related gains).”
8
In section 16 (computation of losses), in subsection (3) after “section” insert
“2B,”.
25
9
In Part 2, after Chapter 4 insert—
“Chapter 5
Computation of gains and losses: relevant high value disposals
57A
Gains and losses on relevant high value disposals
(1)
Schedule 4ZZA makes provision about the computation of gains and
30
losses on relevant high value disposals, including provision about
whether a gain or loss is ATED-related or not.
(2)
But if the effect of Schedule 4ZZA applying in relation to a disposal
would be that no ATED-related gain or loss accrues on the disposal,
for the purposes of this Act the gain or loss on the disposal is to be
35
computed ignoring that Schedule (and is not ATED-related).”
10
After section 100 insert—
“100A
Exemption for certain EEA UCITS
(1)
ATED-related gains accruing on relevant high value disposals made
by an EEA UCITS which is not an open-ended investment company
40
or a unit trust scheme are not chargeable gains under section 2B.
(2)
In this section—

Finance (No. 2) Bill
Schedule 24 — Charge on certain high value disposals by companies etc
Part 1 — Taxation of Chargeable Gains Act 1992
350

“EEA UCITS” has the same meaning as in Part 17 of the
Financial Services and Markets Act 2000 (see section 237 of
that Act);
“unit trust scheme” has same meaning as in that Part (see
section 237(1) of that Act);
5
“open-ended investment company” has the same meaning as in
that Part (see section 236(1) of that Act).”
11    (1)
Section 161 (appropriations to and from stock) is amended as follows.
      (2)
In subsection (1) for “subsection (3)” substitute “subsections (3) to (3ZB)”.
      (3)
After subsection (3) insert—
10
“(3ZA)
But if the person—
(a)
meets the requirement of paragraph (a) or (b) of subsection
(3), and
(b)
(ignoring any election under this section) would be treated
under subsection (1) as making a relevant high value disposal
15
on which an ATED-related gain chargeable to, or loss
allowable for the purposes of, capital gains tax under section
2B would accrue,

the person may not elect under subsection (3) but may elect for
subsection (3ZB) to apply.
20
(3ZB)
Subject to subsection (4), where an election is made for this
subsection to apply—
(a)
a gain or loss accruing on the disposal under subsection (1)
which is not ATED-related is not a chargeable gain or an
allowable loss,
25
(b)
the market value of the asset at the time of the appropriation
is, for the purposes of computing the profits of the trade for
the purposes of tax, to be treated as reduced by the amount of
any gain, or increased by the amount of any loss, which
would be a chargeable gain or allowable loss but for
30
paragraph (a), and
(c)
the chargeable gain or allowable loss which accrues on that
disposal and is ATED-related is unaffected by the election.”
      (4)
In subsection (3A), after “subsection (3)” insert “or (3ZA)”.
      (5)
In subsection (4), after “subsection (3)” insert “or (3ZA)”.
35
12
In section 171 (transfers within a group: general provisions), in subsection
(2), after paragraph (b) insert—
“(ba)
a relevant high value disposal on which (ignoring subsection
(1)) there accrues to company A an ATED-related gain
chargeable to, or an ATED-related loss allowable for the
40
purposes of, capital gains tax by virtue of section 2B; or”.
13
After section 187 insert—
“187A
Deemed disposal under section 185: ATED-related gains and losses
(1)
This section applies if—

Finance (No. 2) Bill
Schedule 24 — Charge on certain high value disposals by companies etc
Part 1 — Taxation of Chargeable Gains Act 1992
351

(a)
(ignoring subsections (2) and (3)) a gain or loss would accrue
to a company on a disposal of an asset deemed to have been
made by virtue of section 185(2), and
(b)
that gain or loss is an ATED-related gain chargeable to, or an
ATED-related loss allowable for the purposes of, capital
5
gains tax under section 2B.
(2)
That gain or loss does not accrue to the company on that disposal.
(3)
But, on a subsequent disposal of the whole or part of the asset, the
whole or a corresponding part of the gain or loss—
(a)
is deemed to accrue to the company (in addition to any gain
10
or loss that actually accrues on that subsequent disposal), and
(b)
(if that would not otherwise be the case) is to be treated as an
ATED-related gain or loss accruing on a relevant high value
disposal.
(4)
Nothing in this section affects the treatment, for the purposes of this
15
Act, of any gain or loss which is not ATED-related and accrues on the
disposal of the asset deemed to have been made by virtue of section
185(2).”
14
In section 271 (miscellaneous exemptions)—
(a)
in subsection (1A), after “registered pension scheme” insert “or an
20
overseas pension scheme”, and
(b)
in subsection (10), for the words after “above” substitute “—
“investments” includes futures contracts and options contracts;
“overseas pension scheme” has the same meaning as in Part 4 of
the Finance Act 2004 (see section 150(7) of that Act).”
25
15
In section 288 (interpretation), in subsection (1), at the appropriate places
insert—
““ATED-related”, in relation to a gain or loss, is to be construed
in accordance with section 57A and Schedule 4ZZA;”;
““relevant high value disposal” has the meaning given by
30
section 2C;”.
16
After Schedule 4 insert—
“Schedule 4ZZA
relevant high value disposals: gains and losses
Introductory
35
1
This Schedule applies for the purposes of determining in relation
to a relevant high value disposal made by a person (“P”)—
(a)
whether a gain or loss which is ATED-related accrues to P
on the disposal, and
(b)
whether a gain or loss which is not ATED-related accrues
40
to P on the disposal.
Assets held on 5 April 2013: no paragraph 5 election
2
If the interest disposed of was held by P on 5 April 2013—

Finance (No. 2) Bill
Schedule 24 — Charge on certain high value disposals by companies etc
Part 1 — Taxation of Chargeable Gains Act 1992
352

(a)
paragraph 3 applies for the purposes of computing the
gain or loss accruing to P which is ATED-related, and
(b)
paragraph 4 applies for the purposes of computing the
gain or loss accruing to P which is not ATED-related.
3     (1)
An amount equal to the relevant fraction of the notional post-April
5
2013 gain or loss is the ATED-related gain or loss (as the case may
be).
      (2)
“Notional post-April 2013 gain or loss” means the gain or loss
which (in the absence of section 2B and this Schedule) would have
accrued on the relevant high value disposal had P acquired the
10
interest on 5 April 2013 for a consideration equal to its market
value on that date.
      (3)
For the purposes of sub-paragraph (2), the amount of the gain or
loss accruing to P is to be computed (whether or not that would
otherwise be the case) as if P were within the charge to capital
15
gains tax (but not within the charge to corporation tax on
chargeable gains).
      (4)
“The relevant fraction” is—

where—

“CD” is the number of days in the relevant ownership period
20
which are ATED chargeable days;

“TD” is the total number of days in the relevant ownership period.
      (5)
“The relevant ownership period” means the period beginning
with 6 April 2013 and ending with the day before the day on which
the relevant high value disposal occurs.
25
      (6)
“ATED chargeable day” means any day by virtue of which
condition C in section 2C(4) is met in relation to the relevant high
value disposal.
4     (1)
The gain or loss accruing on the relevant high value disposal
which is not ATED-related is computed as follows.
30

Step 1

Determine the amount of the notional pre-April 2013 gain or loss.

Step 2

In a case where there is a notional post-April 2013 gain—
     (a)
determine the amount of that gain remaining after the
35
deduction of the ATED-related gain determined under
paragraph 3, and
     (b)
adjust that remaining gain by reducing it by the notional
indexation allowance.

Step 3
40

In a case where there is a notional post-April 2013 loss, determine
the amount of that loss remaining after deduction of the ATED-
related loss determined under paragraph 3.

Step 4

Add—
45

Finance (No. 2) Bill
Schedule 24 — Charge on certain high value disposals by companies etc
Part 1 — Taxation of Chargeable Gains Act 1992
353

      (a)
the amount of any gain or loss determined under Step 1,
and
      (b)
the amount of any adjusted gain determined under Step 2
or (as the case may be) any loss determined under Step 3,

(treating any amount which is a loss as a negative amount).
5



If the result is a positive amount, that amount is the gain on the
relevant high value disposal which is not ATED-related.

If the result is a negative amount, that amount (expressed as a
positive number) is the loss on the relevant high value disposal
10
which is not ATED-related.
      (2)
“The notional pre-April 2013 gain or loss” means the gain or loss
which would have accrued on 5 April 2013 had the interest been
disposed of for a consideration equal to its market value on that
date.
15
      (3)
For the purposes of sub-paragraph (2), the amount of the gain or
loss accruing to P is to be computed (whether or not that would
otherwise be the case) as if P were within the charge to corporation
tax on chargeable gains (but not within the charge to capital gains
tax).
20
      (4)
Paragraph 3(2) and (3) (meaning of “notional post-April 2013 gain
or loss”) also applies for the purposes of this paragraph.
      (5)
“Notional indexation allowance” means the relevant fraction of an
amount equal to the difference between—
(a)
the indexation allowance which (in the absence of section
25
2B and this Schedule) would be made under Chapter 4 of
Part 2 in determining the gain accruing on the relevant
high value disposal were that gain being computed for
corporation tax purposes, and
(b)
the indexation allowance which is made under Chapter 4
30
of Part 2 in determining the notional pre-April 2013 gain.
      (6)
“The relevant fraction” is—

where “CD” and “TD” have the same meaning as in paragraph
3(4).
Election for paragraph 2 to 4 not to apply to a chargeable interest
35
5     (1)
A person may make an election under this paragraph for
paragraphs 2 to 4 not to apply in relation to a chargeable interest
held by (or any part of which is held by) the person on 5 April
2013.
      (2)
An election is irrevocable.
40
      (3)
An election must be made by being included in a tax return under
the Management Act for the tax year in which the first relevant
high value disposal by the person of the chargeable interest (or
any part of it) on or after 6 April 2013 occurs.