Finance (No. 2) Bill (HC Bill 190)

(i) to which SI relief is attributable, or

(ii) have not been held by the investor until the end of the
third anniversary of the date on which they were
made.

(3) 5No assessment for withdrawing or reducing SI relief in respect of
those investments may be made because of any subsequent event
unless the event occurs at a time when the requirements of sections
257LF, 257LG and 257LH are not met in relation to the investor by
reference to any of those investments.

10Interest

257SD Date from which interest is chargeable

(1) In its application to an assessment made by virtue of section 257S in
the case of relief withdrawn or reduced by virtue of a provision listed
in subsection (2), section 86 of TMA 1970 (interest on overdue income
15tax) has effect as if the relevant date were 31 January next following
the tax year for which the assessment is made.

(2) The provisions are—

• section 257LD,

• any of sections 257LF to 257LH,

• 20any of sections 257MA to 257MJ,

• section 257MN,

• section 257Q,

• section 257QJ,

• section 257QQ,

• 25section 257QR

• section 257R, and

• section 257RC.

Information

257SE Information to be provided by the investor

(1) 30This section applies if the investor has obtained SI relief in respect of
the investment, and an event occurs as a result of which—

(a) the SI relief falls to be withdrawn or reduced by virtue of any
of sections 257LD, 257LF, 257LG and 257LH,

(b) the SI relief falls to be withdrawn or reduced under section
35257Q (receipt of value), or would fall to be so withdrawn or
reduced but for section 257QH (receipt of replacement
value), or

(c) the SI relief falls to be withdrawn or reduced under any of
sections 257R, 257RB and 257RC (disposals and options).

(2) 40The investor must within 60 days of coming to know of the event
give a notice to an officer of Revenue and Customs containing
particulars of the event.

(3) If the investor—

(a) is required under this section to give notice of a receipt of
value which is within section 257Q, or would be within that
section but for section 257QH, and

(b) has knowledge of any replacement value received (or
5expected to be received) because of a qualifying receipt,

the notice must include particulars of that receipt (or expected
receipt).

(4) In subsection (3) “qualifying receipt” and “replacement value” are to
be read in accordance with section 257QH.

257SF 10 Information to be provided by the social enterprise etc

(1) This section applies if the social enterprise has provided an officer of
Revenue and Customs with a compliance statement in respect of the
investment and an event occurs as a result of which—

(a) any of the requirements in sections 257MC to 257MK,
15257MM(1) and 257MN is not met in respect of the investment,
or

(b) any of sections 257Q, 257QJ, 257QQ and 257QR has effect to
cause any SI relief attributable to the investment to be
withdrawn or reduced, or—

(i) 20would have such an effect if SI relief had been
obtained in respect of the investment, or

(ii) in the case of section 257Q, would have such an effect
but for section 257QH (receipt of replacement value).

(2) If this section applies—

(a) 25the social enterprise, and

(b) any person connected with the social enterprise who has
knowledge of the matters mentioned in subsection (1),

must give a notice to an officer of Revenue and Customs containing
particulars of the event.

(3) 30Any notice required to be given by the social enterprise under
subsection (2)(a) must be given—

(a) within 60 days of the event, or

(b) if the event is a receipt of value within section 257QE(2) from
a person connected with the social enterprise (see section
35257QG), within 60 days of the social enterprise coming to
know of the event.

(4) Any notice required to be given by a person under subsection (2)(b)
must be given within 60 days of the person coming to know of the
event.

(5) 40If a person—

(a) is required under this section to give notice of a receipt of
value which is within section 257Q, or would be within that
section but for section 257QH, and

(b) has knowledge of any replacement value received (or
45expected to be received) because of a qualifying receipt,

the notice must include particulars of that receipt of replacement
value (or expected receipt).

(6) In subsection (5) “qualifying receipt” and “replacement value” are to
be read in accordance with section 257QH.

257SG Power to require information in section 257SE or 257SF cases

(1) This section applies if an officer of Revenue and Customs has reason
5to believe that a person—

(a) has not given a notice which the person is required to give
under section 257SE or 257SF in respect of any event,

(b) has given or received value within the meaning of section
257QE(2) or (6) which, but for the fact that the amount given
10or received was an insignificant receipt, would have
triggered a requirement to give such a notice, or

(c) has made or received any repayment within the meaning
given by section 257QJ(8) which, but for the fact that it falls to
be ignored for the purposes of section 257QJ by virtue of
15section 257QK(1), would have triggered a requirement to
give a notice under section 257SF.

(2) The officer may by notice require the person concerned to supply the
officer, within such time as the officer may specify in the notice, with
such information relating to the event as the officer may reasonably
20require for the purposes of this Part.

(3) The period specified in a notice under subsection (2) must be at least
60 days.

(4) In subsection (1)(b) the reference to an insignificant receipt is to be
read in accordance with section 257QA(1).

257SH 25 Power to require information in other cases

(1) Subsection (2) applies if SI relief is claimed in respect of the
investment, and an officer of Revenue and Customs has reason to
believe that it may not be due because of any such arrangements as
are mentioned in section 257LB(1), 257LC, 257LE, 257LH, 257ME(3),
30257MK(2) or (4), 257MM(5) or (6), 257MN(5), 257MU or 257MV(1),
(5), (6) or (7).

(2) The officer may by notice require any person concerned to supply
the officer within such time as may be specified in the notice with—

(a) a declaration in writing stating whether or not, according to
35the information which that person has or can reasonably
obtain, any such arrangements exist or have existed, and

(b) such other information as the officer may reasonably require
for the purposes of the provision in question and as that
person has or can reasonably obtain.

(3) 40The period specified in a notice under subsection (2) must be at least
60 days.

(4) For the purposes of subsection (2), in the case of a provision listed in
column 1 of the following table, the person concerned is given by the
corresponding entry in column 2 of the table.

30References in the table to the investor include references to any
person to whom the investor appears to have made such a transfer as
is mentioned in section 257T (spouses or civil partners) of the whole
or part of the investment.

(5) If SI relief has been obtained in respect of the investment—

(a) 35any person who receives from the social enterprise any
payment or asset which may constitute value received (by the
person or another) for the purposes of section 257Q, and

(b) any person on whose behalf such a payment or asset is
received,

40must, if so required by an officer of Revenue and Customs, state
whether the payment or asset so received is received on behalf of any
other person and, if so, the name and address of that other person.

(6) If SI relief has been claimed in respect of the investment—

(a) any person who holds or has held investments in the social
45enterprise, and

(b) any person on whose behalf any such investments are or
were held,

must, if so required by an officer of Revenue and Customs, state
whether the investments so held are or were held on behalf of any
50other person and, if so, the name and address of that other person.

257SI Confidentiality

(1) Section 18(1) of the Commissioners for Revenue and Customs Act
2005 does not prevent an officer of Revenue and Customs from
disclosing to the social enterprise that SI relief has been obtained or
55claimed in respect of a particular number or proportion of any
investments in it.

(2) Section 18(1) of the Commissioners for Revenue and Customs Act
2005 does not prevent disclosure to the Regulator of Community
Interest Companies for the purposes of the Regulator’s functions.

(3) Information disclosed in reliance on subsection (2) may not be
5further disclosed except—

(a) with the consent of the Commissioners for Her Majesty’s
Revenue and Customs, or

(b) if the disclosure is required by an enactment.

(4) Information may be disclosed in reliance on subsection (3)(a) only for
10the purposes of the Regulator’s functions.

CHAPTER 9 Miscellaneous and supplementary provisions

257T Transfers between spouses or civil partners

(1) This section applies if—

(a) the investor transfers the whole or part of the investment to
15another individual (“B”) during their lives,

(b) the investor was married to, or was the civil partner of, B at
the time of the transfer, and

(c) section 257R does not apply to the transfer.

(2) This Part (including subsection (1)) has effect, in relation to any
20subsequent disposal or other event, as if—

(a) B were the investor as respects the transferred stake,

(b) B’s liability to income tax had been reduced in respect of the
transferred stake for the same tax year as that for which the
investor’s was so reduced,

(c) 25the amount by which B’s liability to income tax had been
reduced in respect of the transferred stake were the same as
that by which the investor’s liability had been so reduced,
and

(d) the same amount of SI relief had continued to be attributable
30to the transferred stake despite the transfer.

(3) If the amount of SI relief attributable to the transferred stake had
been reduced before the relief was obtained by the investor—

(a) this Part has effect, in relation to any subsequent disposal or
other event, as if the amount of SI relief attributable to the
35transferred stake had been correspondingly reduced before
the relief was obtained by B, and

(b) section 257QD(2), 257QO(3) and 257RA(4) apply in relation
to B as they would have applied in relation to the investor.

(4) If, because of any such disposal or other event, an assessment for
40reducing or withdrawing SI relief is to be made, the assessment is to
be made on B.

257TA Identification of investments on a disposal

(1) The rules in subsections (2) and (3) are for determining which
investments of any class are treated as disposed of for the purposes
of—

(a) 5section 257R (disposal of the investment), or

(b) section 257T (spouses or civil partners),

if the investor disposes of some but not all of the investments of that
class which the investor holds in the social enterprise.

(2) Investments made on an earlier day are treated as disposed of before
10investments made on a later day.

(3) Investments made on the same day are treated as disposed of in the
following order—

(a) first, any to which neither SI relief nor hold-over relief is
attributable,

(b) 15next, any to which hold-over relief, but not SI relief, is
attributable,

(c) next, any to which SI relief, but not hold-over relief, is
attributable, and

(d) finally, any to which both SI relief and hold-over relief are
20attributable.

(4) Any investments within paragraph (c) or (d) of subsection (3) which
are treated by section 257N(7) as issued on an earlier day are treated
as disposed of before any other investments falling within that
paragraph of subsection (3).

(5) 25The following—

(a) any investments to which SI relief is attributable and which
were transferred to an individual as mentioned in section
257T, and

(b) any investments to which hold-over relief, but not SI relief, is
30attributable and which were acquired by an individual on a
disposal to which section 58 of TCGA 1992 applies,

are treated for the purposes of subsections (2) and (3) as acquired by
the individual on the day on which they were made.

(6) In a case to which section 127 of TCGA 1992 applies (including the
35case where that section applies by virtue of an enactment relating to
chargeable gains), shares included in the new holding are treated for
the purposes of subsections (2) and (3) as acquired when the original
shares were acquired.

(7) In this section—

• 40“hold-over relief” means relief under Schedule 8B to TCGA
  1992;

• “new holding” and “original shares” have the same meaning as
  in section 127 of TCGA 1992 (or, as the case may be, that
  section as applied by the enactment concerned).

257TB 45 Meaning of a company being “in administration” or “in receivership”

(1) References in this Part to a company being “in administration” or “in
receivership” are to be read as follows.

(2) A company is “in administration” if—

(a) it is in administration within the meaning of Schedule B1 to
the Insolvency Act 1986 or Schedule B1 to the Insolvency
(Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), or

(b) 5there is in force in relation to it under the law of a country or
territory outside the United Kingdom any appointment
corresponding to an appointment of an administrator under
either of those Schedules.

(3) A company is “in receivership” if there is in force in relation to it—

(a) 10an order for the appointment of an administrative receiver, a
receiver and manager or a receiver under Chapter 1 or 2 of
Part 3 of the Insolvency Act 1986 or Part 4 of the Insolvency
(Northern Ireland) Order 1989, or

(b) any corresponding order under the law of a country or
15territory outside the United Kingdom.

257TC Meaning of “associate”

(1) In this Part “associate”, in relation to a person, means—

(a) any relative or partner of the person,

(b) the trustee or trustees of any settlement in relation to which
20the person, or any relative of the person (living or dead), is or
was a settlor, and

(c) if the person has an interest in any shares or obligations of a
company which are subject to any trust or are part of the
estate of a deceased person—

(i) 25the trustee or trustees of the settlement concerned or,
as the case may be, the personal representatives of the
deceased, and

(ii) if the person is a company, any other company which
has an interest in those shares or obligations.

(2) 30In this section “relative” means spouse, civil partner, ancestor or
lineal descendant.

257TD Meaning of “control”

(1) In this Part “control” is to be read in accordance with sections 450 and
451 of CTA 2010 but as if “company” in those sections included a
35charity that is a trust.

(2) For the purposes of this Part, a charity that is a trust has “control” of
another person if, as a result of the operation of subsection (1), the
trustees (in their capacity as trustees of the trust) have, or any of them
has, control of the person.

(3) 40A person has “control” of a charity that is a trust if—

(a) the person is a trustee of the charity and some or all of the
powers of the trustees of the charity could be exercised by—

(i) the person acting alone, or

(ii) by the person acting together with any other persons
45who are trustees of the charity and who are connected
with the person,

(b) the person, alone or together with other persons, has power
to appoint or remove a trustee of the charity, or

(c) the person, alone or together with other persons, has any
power of approval or direction in relation to the carrying-out
by the trustees of any of their functions.

(4) Subsection (3) is in addition to, and does not limit, subsection (1); and
5both of those subsections are subject to subsection (5).

(5) For the purposes of this Part, a regulator is to be treated as not having
control of any company regulated by the regulator.

(6) Section 995 of this Act (control) does not apply for the purposes of
this Part.

257TE 10 Minor definitions etc

(1) In this Part—

• “arrangements” (except as used, in sections 257LB and 257QK,
  in the expressions “issuing arrangements” and “repayment
  arrangements”) includes any scheme, arrangement or
  15understanding of any kind, whether or not legally
  enforceable, involving a single transaction or two or more
  transactions,

• “bonus shares” means shares which are issued otherwise than
  for payment (whether in cash or otherwise),

• 20“compliance statement” has the meaning given by section
  257PB,

• “director”—

  (a)

  is read in accordance with section 452 of CTA 2010 but
  as if “company” in that section included a charity that
  25is a trust, and

  (b)

  in relation to a charity that is a trust (but subject to
  section 257LF(9)), includes (in particular) each trustee
  of the trust,

• “disposal”, in relation to any shares or other investments,
  30includes disposal of an interest or right in or over them,

• “group” means a parent company and its qualifying
  subsidiaries,

• “group company”, in relation to a group, means the parent
  company or any of its qualifying subsidiaries,

• 35“ordinary shares” means shares forming part of a company’s
  ordinary share capital,

• “parent company” means a company that has one or more
  qualifying subsidiaries,

• “qualifying subsidiary” has the meaning given by section
  40257MU, and

• “single company” means a company that does not have any
  qualifying subsidiaries.

(2) For the purposes of this Part, the market value at any time of any
asset is the price which it might reasonably be expected to fetch on a
45sale at that time in the open market free from any interest or right
which exists by way of security in or over it.”

Part 2 Consequential amendments

2 (1) Section 98 of TMA 1970 (penalties) is amended as follows.

(2) In column 1 of the Table, after the entry for sections 257GG and 257GH(1)
5and (2) of ITA 2007, insert—

(3) In column 2 of the Table, after the entry for sections 257GE and 257GF of ITA
102007, insert—

3 ITA 2007 is amended as follows.

4 15In section 2 (overview of Act) after subsection (5A) insert—

“(5B) Part 5B is about relief for social investments.”

5 In section 24A(7)(d) (share loss relief on the disposal of certain investments
not subject to the limit on deductions imposed by section 24A) after sub-
paragraph (ii) insert “, or

“(iii) 20where SI relief is attributable to the shares in question
as determined in accordance with Part 5B (income tax
relief for social investments).”

6 In section 26(1)(a) (provisions giving rise to deductions at Step 6 of the
calculation in section 23) after the entry for Chapter 1 of Part 5A of ITA 2007
25insert—

• “Chapter 1 of Part 5B (relief for social investments),”.

7 In section 27(5) (order in which certain tax reductions are to be made) after
the entry for Chapter 1 of Part 5A of ITA 2007 insert—

• “Chapter 1 of Part 5B (relief for social investments),”.

8 30In section 29(4B) (limit on certain tax reductions) after the entry for Chapter
1 of Part 5 of ITA 2007 insert—

• “Chapter 1 of Part 5B (relief for social investments),”.

9 In section 32 (liabilities to income tax not dealt with in the calculation under
Chapter 3 of Part 2) after the entry for section 257G of ITA 2007 insert—

• 35“under section 257S (withdrawal or reduction of relief for social
  investments),”.

10 In section 392 (loan to buy interest in close company) after subsection (3)

insert—

“(3A) Subsection (2) does not apply if at any time the individual by whom
the shares are acquired or the money is lent, or that individual’s
spouse or civil partner, makes—

(a) a claim under Part 5B of this Act for relief in respect of the
5amount invested in acquiring the shares or (as the case may
be) in return for the debentures in respect of the money lent,
or

(b) a claim in respect of the amount under Schedule 8B to TCGA
1992 (hold-over relief for gains re-invested in social
10enterprises).

(3B) For the purposes of subsection (3A)(a) “debenture” includes any
instrument creating or acknowledging indebtedness.”

11 In section 416 (gift aid: meaning of “qualifying donation”) after subsection
(6) insert—

“(6A) 15Condition EA is that the payment is by way of, or amounts in
substance to, waiver by the individual of entitlement to sums
(whether of principal or return) due to the individual from the
charity in respect of an amount—

(a) advanced to the charity, and

(b) 20in respect of which a person, whether or not the individual,
has obtained relief under Part 5B (relief for social
investments).”

12 In section 1014(5)(b) (orders and regulations not subject to negative
procedure) after sub-paragraph (iii) insert—

“( iiia) 25section 257MB (amendment of Part 5B: amounts that
may be raised from social investments; and State
aid),”.

13 In section 1022 (meaning of “debenture”) after subsection (1) insert—

“(1A) For the meaning of “debenture” in sections 257KB(3) to (5), 257L(4),
30257LA(2) and 392(3A)(a), see also sections 257KB(6), 257L(6),
257LA(4) and 392(3B).”

Section 53

SCHEDULE 10 Investments in social enterprises: capital gains

1 TCGA 1992 is amended as follows.

2 35After section 255 insert—

“Investments in social enterprises

255A Hold-over relief for gains re-invested in social enterprises

Schedule 8B to this Act (which provides relief in respect of gains re-
invested in social enterprises) has effect.