Finance (No. 2) Bill (HC Bill 193)

Finance (No. 2) BillPage 210

Interpretation

10 (1) For the purposes of this Schedule, the “completion” of the disposal
of an interest in UK land is taken to occur—

(a) at the time of the disposal, or

(b) 5if the disposal is under a contract which is completed by a
conveyance, at the time when the interest is conveyed.

(2) In this Schedule—

  • “conveyance” includes any instrument (and “conveyed” is to
    be construed accordingly);

  • 10“development consent” means development consent under
    the Planning Act 2008;

  • “interest in UK land” has the meaning given by paragraph 2;

  • “land” includes a building;

  • “planning permission” has the meaning given by the relevant
    15planning enactment.

(3) In sub-paragraph (2) “the relevant planning enactment” means—

(a) in relation to land in England and Wales, section 336(1) of
the Town and Country Planning Act 1990;

(b) in relation to land in Scotland, section 227(1) of the Town
20and Country Planning (Scotland) Act 1997;

(c) in relation to land in Northern Ireland, Article 2(2) of the
Planning (Northern Ireland) Order 1991 (S.I. 1991/1220S.I. 1991/1220
(N.I. 11)).

37 After Schedule B1 (as inserted by paragraph 36), insert—

Schedule C1 25Section 14F: meaning of “closely-held company” “widely-marketed
scheme”

Part 1 Meaning of “closely-held company”
Introduction

1 30This Part of this Schedule sets out the rules for determining, for the
purposes of sections 14F and 14G, whether or not a company is a
closely-held company.

Main definition

2 (1) “Closely-held company” means a company in relation to which
35condition A or B is met.

(2) Condition A is that the company is under the control of 5 or fewer
participators.

(3) Condition B is that 5 or fewer participators together possess or are
entitled to acquire—

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(a) such rights as would, in the event of the winding up of the
company (“the relevant company”) on the basis set out in
paragraph 3, entitle them to receive the greater part of the
assets of the relevant company which would then be
5available for distribution among the participators, or

(b) such rights as would, in that event, so entitle them if there
were disregarded any rights which any of them or any
other person has as a loan creditor (in relation to the
relevant company or any other company).

3 (1) 10This paragraph applies for the purposes of paragraph 2(3).

(2) In the notional winding up of the relevant company, the part of the
assets available for distribution among the participators which
any person is entitled to receive is the aggregate of—

(a) any part of those assets which the person would be entitled
15to receive in the event of the winding up of the relevant
company, and

(b) any part of those assets which the person would be entitled
to receive if—

(i) any other company which is a participator in the
20relevant company and is entitled to receive any
assets in the notional winding up were also wound
up on the basis set out in this paragraph, and

(ii) the part of the assets of the relevant company to
which the other company is entitled were
25distributed among the participators in the other
company in proportion to their respective
entitlement to the assets of the other company
available for distribution among the participators.

(3) In the application of sub-paragraph (2)—

(a) 30to the notional winding up of the other company
mentioned in paragraph (b) of that sub-paragraph, and

(b) to any further notional winding up required by that
paragraph (or by any further application of that
paragraph),

35references to “the relevant company” are to be read as references
to the company concerned.

4 (1) This paragraph applies for the purpose of determining whether,
under sub-paragraph (3) of paragraph 2, 5 or fewer participators
together possess or are entitled to acquire rights such as are
40mentioned in paragraph (a) or (b) of that sub-paragraph.

(2) A person is to be treated as a participator in the relevant company
if the person is a participator in any other company which would
be entitled to receive assets in the notional winding up of the
relevant company on the basis set out in paragraph 3.

(3) 45No account is to be taken of a participator which is a company
unless the company possesses or is entitled to acquire the rights in
a fiduciary or representative capacity.

(4) But sub-paragraph (3) does not apply for the purposes of
paragraph 3.

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5 (1) A company is not to be treated as a closely-held company if
condition A or B is met.

(2) Condition A is that the company cannot be treated as a closely-
held company except by taking, as one of the 5 or fewer
5participators requisite for its being so treated, a person which is a
diversely-held company.

(3) Condition B is that the company—

(a) would not be a closely-held company were it not for
paragraph (a) of paragraph 2(3) or paragraph (d) of
10paragraph 12(2), and

(b) would not be a closely-held company if the references in
paragraphs 2(3)(a) and 12(2)(d) to participators did not
include loan creditors which are diversely-held companies
or qualifying institutional investors.

(4) 15In this paragraph “qualifying institutional investor” means any of
the following persons—

(a) a scheme (as defined in section 14F(7)) which is a widely-
marketed scheme;

(b) the trustee or manager of a qualifying pension scheme;

(c) 20a company carrying on life assurance business (as defined
in section 56 of the Finance Act 2012);

(d) a person who cannot be liable for corporation tax or
income tax (as relevant) on the ground of sovereign
immunity.

(5) 25In sub-paragraph (4)(b) “qualifying pension scheme” means a
pension scheme (as defined in section 150(1) of the Finance Act
2004) other than—

(a) an investment-regulated pension scheme within the
meaning of Part 1 of Schedule 29A to that Act, or

(b) 30a pension scheme that would be an investment-regulated
pension scheme if it were a registered pension scheme.

(6) The Treasury may by regulations amend sub-paragraphs (4) and
(5).

(7) Regulations under sub-paragraph (6) may make incidental,
35consequential, supplementary or transitional provision or
savings.

6 (1) Sub-paragraph (2) applies where a participator in a company is a
qualifying institutional investor.

(2) For the purpose of determining whether or not the company is a
40closely-held company, any share or interest which the qualifying
institutional investor has as a participator in the company (in any
of the ways set out in section 454(2) of CTA 2010 or otherwise) is
treated as a share or interest held by more than 5 participators.

(3) Sub-paragraph (4) applies where a participator in a company is a
45general partner of a limited partnership which is a collective
investment scheme (as defined in section 235 of the Financial
Services and Markets Act 2000).

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(4) For the purpose of determining whether or not the company is a
closely-held company, any share or interest which the general
partner has as a participator in the company (in any of the ways
set out in section 454(2) of CTA 2010 or otherwise) is treated as a
5share or interest held by more than 5 participators.

(5) Sub-paragraph (4) does not apply to—

(a) any rights which would, in the event of the winding up of
the company (“the relevant company”) on the basis set out
in paragraph 3, or in any other circumstances, entitle the
10general partner (or a participator in the general partner) to
receive assets of the company which would then be
available for distribution among the participators, or

(b) any rights which would, in that event, so entitle the general
partner (or a participator in the general partner) if there
15were disregarded any rights which a person has as a loan
creditor (in relation to the relevant company or another
company).

(6) In this paragraph “limited partnership” means—

(a) a limited partnership registered under the Limited
20Partnerships Act 1907, or

(b) a firm or entity of a similar character formed under the law
of a territory outside the United Kingdom.

(7) In this paragraph, “general partner”, in relation to a limited
partnership, means a partner other than a limited partner.

(8) 25In this paragraph, “limited partner” means a person carrying on
business as a partner in a limited partnership who—

(a) is not entitled to take part in the management of that
business, and

(b) is entitled to have any liabilities of that business (or those
30beyond a certain limit) for debts or obligations incurred for
the purposes of that business met or reimbursed by some
other person.

(9) In this paragraph “qualifying institutional investor” has the same
meaning as in paragraph 5.

35Meaning of “control”

7 (1) For the purposes of this Schedule, a person (“P”) is treated as
having control of a company (“C”) if P—

(a) exercises,

(b) is able to exercise, or

(c) 40is entitled to acquire,

direct or indirect control over C’s affairs.

(2) In particular, P is treated as having control of C if P possesses or is
entitled to acquire—

(a) the greater part of the share capital or issued share capital
45of C,

(b) the greater part of the voting power in C,

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(c) so much of the issued share capital of C as would, on the
assumption that the whole of the income of C were
distributed among the participators, entitle P to receive the
greater part of the amount so distributed, or

(d) 5such rights as would entitle P, in the event of the winding
up of C or in any other circumstances, to receive the greater
part of the assets of C which would then be available for
distribution among the participators.

(3) Any rights that P or any other person has as a loan creditor are to
10be disregarded for the purposes of the assumption in sub-
paragraph (2)(c).

(4) If two or more persons together satisfy any of the conditions in
sub-paragraphs (1) and (2), they are treated as having control of C.

8 (1) This paragraph applies for the purposes of paragraph 12.

(2) 15If a person—

(a) possesses any rights or powers on behalf of another person
(“A”), or

(b) may be required to exercise any rights or powers on A’s
direction or on A’s behalf,

20those rights or powers are to be attributed to A.

(3) There are also to be attributed to P all the rights and powers of any
associate of P (including rights and powers exercisable jointly by
any two or more associates of P).

(4) In this paragraph “associate”, in relation to P, means—

(a) 25any relative of P,

(b) the trustees of any settlement in relation to which P is a
settlor, and

(c) the trustees of any settlement in relation to which any
relative of P (living or dead) is or was a settlor.

(5) 30In this paragraph “relative” means—

(a) a spouse or civil partner,

(b) a parent or remoter forebear,

(c) a child or remoter issue, or

(d) a brother or sister.

35Interpretation

9 In this Part of this Schedule—

  • “diversely-held company” means a company which is not a
    closely-held company;

  • “loan creditor” has the meaning given by section 453 of CTA
    402010;

  • “open-ended investment company” has the same meaning as
    in Part 17 of the Financial Services and Markets Act 2000
    (see section 236 of that Act);

  • “participator”, in relation to a company, has the meaning
    45given by section 454 of CTA 2010.

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Part 2 Unit trust schemes and OEICs: widely-marketed schemes
Introduction

10 (1) This Part of this Schedule sets out the rules for determining, for the
5purposes of this Schedule and section 14F, whether or not a
scheme is a widely-marketed scheme at any time.

(2) In this Part of this Schedule “scheme” has the same meaning as in
section 14F.

Widely-marketed schemes

11 (1) 10A scheme is a widely-marketed scheme at any time when the
scheme meets conditions A to C.

(2) Condition A is that the scheme produces documents, available to
investors and to Her Majesty’s Revenue and Customs, which
contain—

(a) 15a statement specifying the intended categories of investor,

(b) an undertaking that units in the scheme will be widely
available, and

(c) an undertaking that units in the scheme will be marketed
and made available in accordance with the requirements of
20sub-paragraph (5)(a).

(3) Condition B is that—

(a) the specification of the intended categories of investor does
not have a limiting or deterrent effect, and

(b) any other terms or conditions governing participation in
25the scheme do not have a limiting or deterrent effect.

(4) In sub-paragraph (3) “limiting or deterrent effect” means an effect
which—

(a) limits investors to a limited number of specific persons or
specific groups of connected persons, or

(b) 30deters a reasonable investor falling within one of (what are
specified as) the intended categories of investor from
investing in the scheme.

(5) Condition C is that—

(a) units in the scheme are marketed and made available—

(i) 35sufficiently widely to reach the intended categories
of investors, and

(ii) in a manner appropriate to attract those categories
of investors, and

(b) a person who falls within one of the intended categories of
40investors can, upon request to the manager of the scheme,
obtain information about the scheme and acquire units in
it.

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(6) A scheme is not regarded as failing to meet condition C at any time
by reason of the scheme’s having, at that time, no capacity to
receive additional investments, unless—

(a) the capacity of the scheme to receive investments in it is
5fixed by the scheme documents (or otherwise), and

(b) a pre-determined number of specific persons or specific
groups of connected persons make investments in the
scheme which collectively exhaust all, or substantially all,
of that capacity.

10Interpretation

12 In this Part of this Schedule—

  • “open-ended investment company” has the same meaning as
    in Part 17 of the Financial Services and Markets Act 2000
    (see section 236 of that Act);

  • 15“units” means the rights or interests (however described) of
    the participants in a unit trust scheme or open-ended
    investment company.

38 (1) Schedule 4ZZA (relevant high value disposals: gains and losses) is amended
as follows.

(2) 20In paragraph 1 the existing text becomes sub-paragraph (1).

(3) After that sub-paragraph insert—

(2) See also Part 4 of Schedule 4ZZB, which—

(a) makes provision about non-resident CGT disposals which
are, or involve, relevant high value disposals, and

(b) 25includes provision about the computation of gains or
losses on such disposals which are neither NRCGT gains
or losses (as defined in section 57B and Schedule 4ZZB) nor
ATED-related.

(4) In paragraph 2(1), after paragraph (b) insert—

30See also the special rule in paragraph 6 (which takes precedence
over paragraphs 3 and 4 where it applies).

(5) In paragraph 5, after sub-paragraph (3) insert—

(3A) An election made in relation to an asset under paragraph 2(1)(b) of
Schedule 4ZZB (disposals by non-residents etc of UK residential
35property interests: gains and losses) also has effect as an election
made under this paragraph in relation to the asset.

(6) After paragraph 6 insert—

Special rule for certain disposals to which both this Schedule and Schedule 4ZZB
relate

6A (1) 40This paragraph applies where conditions A and B are met.

(2) Condition A is that the relevant high value disposal is—

(a) a non-resident CGT disposal (see section 14B), or

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(b) one of two or more disposals which are (by virtue of
section 2C and this Schedule) treated as comprised in a
non-resident CGT disposal.

(3) Condition B is that—

(a) 5the interest disposed of by the relevant high value disposal
was held by P on 5 April 2015,

(b) neither Case 2 nor Case 3 in paragraph 2 applies, and

(c) no election under paragraph 5 of this Schedule (or
paragraph 2(1)(b) of Schedule 4ZZB) is or has been made
10in relation to the chargeable interest which (or a part of
which) is the subject of the relevant high value disposal.

(4) The ATED-related gain or loss accruing on the relevant high value
disposal is computed as follows.

Step 1

15Determine the amount of the post-April 2015 ATED-related gain
or loss.

Step 2

Determine the amount of the pre-April 2015 ATED-related gain or
loss.

20Step 3

Add—

  • (a)the amount of any gain or loss determined under Step 1,
    and

  • (b)the amount of any gain or loss determined under Step 2,

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

If the result is a positive amount, that amount is the ATED-related
gain on the relevant high value disposal.

(5) The post-April 2015 ATED-related gain or loss is equal to the
30amount that would be given by paragraph 3(1) as the amount of
the ATED-related gain or loss if the relevant year for the purposes
of that paragraph were 2015.

(6) The “pre-April 2015 ATED-related gain or loss” means the
relevant fraction of the notional pre-April 2015 gain or loss.

(7) 35“The relevant fraction” is—


where—

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

(8) 40If the interest disposed of was not held by P on 5 April 2013, the
“notional pre-April 2015 gain or loss” is the gain or loss which
would have accrued on 5 April 2015 had the interest been

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disposed of on that date for a consideration equal to its market
value on that date.

(9) If the interest disposed of was held by P on 5 April 2013, the
“notional pre-April 2015 gain or loss” is the gain or loss which
5would have accrued on 5 April 2015 if P had—

(a) acquired the interest on 5 April 2013 for a consideration
equal to its market value on that date, and

(b) disposed of it on 5 April 2015 for a consideration equal to
its market value on that date.

(10) 10Paragraph 3(3) applies for the purposes of sub-paragraphs (8) and
(9) as for the purposes of paragraph 3(2).

(11) In sub-paragraph (7) “relevant ownership period” means the
period—

(a) beginning with the day on which P acquired the
15chargeable interest or, if later, 6 April 2013, and

(b) ending with 5 April 2015.

(12) For how to compute the amount of the gain or loss on the relevant
high value disposal that is neither ATED-related nor an NRCGT
gain or loss (as defined in section 57B and Schedule 4ZZB) see
20paragraphs 16 to 19 of Schedule 4ZZB.

(7) After paragraph 7 insert—

Wasting assets

8 (1) Sub-paragraph (2) applies where it is necessary, in computing in
accordance with paragraph 3(2) the notional post-commencement
25gain or loss accruing to a person on a relevant high value disposal,
to determine whether or not the interest which is the subject of the
disposal is a wasting asset.

(2) The assumption in paragraph 3(2) that the interest was acquired
on a particular 5 April is to be ignored in determining that
30question.

(3) Sub-paragraph (4) applies where it is necessary, in computing in
accordance with paragraph 6A(9) the notional pre-April 2015 gain
or loss accruing to a person on a disposal, to determine whether or
not the interest which is the subject of the disposal is a wasting
35asset.

(4) The assumption in paragraph 6A(9) that the interest was acquired
on a 5 April 2013 is to be ignored in determining that question.

(5) In this paragraph references to a “wasting asset” are to a wasting
asset as defined for the purposes of Chapter 2 of Part 2 of this Act.

40Capital allowances

9 (1) Sub-paragraph (2) applies where it is to be assumed for the
purpose of computing—

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(a) the notional post-commencement gain or loss accruing to a
person on a relevant high value disposal in accordance
with paragraph 3(2), or

(b) the notional pre-April 2015 gain or loss accruing to a
5person on a disposal in accordance with paragraph 6A(9),

that an asset was acquired by a person on 5 April 2013 for a
consideration equal to its market value on that date.

(2) For the purposes of that computation, sections 41 (restriction of
losses by reference to capital allowances etc) and 47 (wasting
10assets qualifying for capital allowances) are to apply in relation to
any capital allowance or renewals allowance made in respect of
the expenditure actually incurred by the person in acquiring or
providing the asset as if that allowance were made in respect of the
expenditure treated as incurred by the person on 5 April 2013 as
15mentioned in sub-paragraph (1).

39 After Schedule 4ZZA insert—

Schedule 4ZZB Non-resident CGT disposals: gains and losses

Part 1 Introduction

1 (1) 20This Schedule applies for the purpose of determining, in relation
to a non-resident CGT disposal made by a person (“P”)—

(a) whether an NRCGT gain or loss accrues to P on the
disposal, and the amount of any such gain or loss, and

(b) whether a gain or loss other than an NRCGT gain or loss
25accrues to P on the disposal, and the amount of any such
gain or loss;

(and see also sub-paragraph (2)(c)).

(2) In this Schedule—

(a) Part 2 is about elections to vary the method of computation
30of gains and losses;

(b) Part 3 contains the main rules for computing the gains and
losses;

(c) Part 4 contains separate rules for computing, in a case
where the non-resident CGT disposal is, or involves, a
35relevant high value disposal (as defined in section 2C)—

(i) the amount of any NRCGT gains or losses accruing
on the disposal, and

(ii) the amount of any gains or losses accruing on the
disposal that are neither ATED-related nor NRCGT
40gains or losses;

(d) Part 5 contains special rules about non-resident CGT
disposals made by companies;

(e) Part 6 (miscellaneous provisions) contains special rules
relating to wasting assets and capital allowances;