Finance (No. 2) Bill (HC Bill 155)

(“company CP”) through a particular direct interest company
(“company DIC”) at a particular time is given by—

23 (1) The fraction of the voting rights in a company that is held
indirectly by company DIC is calculated—

(a) by applying sections 1156 and 1157 of CTA 2010, as read
with section 1155 of that Act, as if references in those
15sections to owning the ordinary share capital of a company
were references to holding voting rights in a company, and

(b) on the assumptions specified in sub-paragraph (2).

(2) The assumptions are—

(a) where company DIC directly holds more than 50% of the
20voting rights in a company, company DIC is taken to hold
all the voting rights in that company;

(b) where a company other than company DIC (“company B”)
directly holds more than 50% of the voting rights in
another company (“company C”) which is a member of a
25group of companies of which company DIC is a member,
company B is taken to hold all the voting rights in
company C.

Part 4 Interpretation of this schedule

30Meaning of “P”

24 (1) In the case of a material disposal of business assets, “P” means the
individual making the disposal.

(2) In the case of a disposal of trust business assets—

(a) “P” means any relevant beneficiary, but

(b) 35in any reference to P passing or failing the tests mentioned
in paragraphs 3 and 13(1), P is to be read as being a single
body consisting of all the relevant beneficiaries (so that, for
the purposes of determining if those tests are met,
percentages are to be calculated in respect of each relevant
40beneficiary and then aggregated).

(3) The following are “relevant beneficiaries”—

(a) the qualifying beneficiary in relation to the disposal (see
section 169J(3)), and

(b) any other beneficiary who is, in relation to the disposal, a
beneficiary mentioned in section 169O(1).

Meaning of “relevant period”

25 “The relevant period” means—

(a) 5for the purposes of conditions A and C in section 169I, the
period of 1 year ending with the date of the disposal,

(b) for the purposes of conditions B and D in section 169I, the
period of 1 year ending with the date mentioned in
subsection (7)(a) or (b) or (7O)(a) or (b) of that section, and

(c) 10for the purposes of section 169J(4), a period of 1 year
ending not earlier than 3 years before the date of the
disposal.

Other interpretation provisions

26 (1) Terms used in this Schedule which are defined in subsection (14)
15of section 165A have the same meaning as they have in that
subsection.

(2) References to a person holding voting rights include references to
a person who has the ability to control the exercise of voting rights
by another person.

(3) 20For the purposes of Part 3 of this Schedule, the assets of—

(a) a Scottish partnership, or

(b) a partnership under the law of any other country or
territory under which assets of a partnership are regarded
as held by or on behalf of the partnership as such,

25are to be treated as held by the members of the partnership in the
proportions in which they are entitled to share in the capital
profits of the partnership.”

6 The amendments made by this Schedule have effect in relation to disposals
made on or after 18 March 2015.

Section 76

30SCHEDULE 14 Investors’ relief

1 (1) In the heading to Part 5 of TGCA 1992, after “ASSETS” insert “,
ENTREPRENEURS’ RELIEF AND INVESTORS’ RELIEF”.

(2) In the heading to Chapter 1 of that Part, before “GENERAL PROVISIONS”
35insert “TRANSFER OF BUSINESS ASSETS:”

2 In Part 5 of TCGA 1992, after section 169V insert—

““CHAPTER 5 Investors' relief

Overview

169VA Overview of Chapter

(1) 5This Chapter provides for a relief, in the form of a lower rate of
capital gains tax, in respect of disposals of certain ordinary shares in
unlisted companies.

(2) Section 169VB defines “qualifying shares”, “potentially qualifying
shares” and “excluded shares”.

(3) 10Section 169VC creates the relief, and relief under that section is to be
known as “investors’ relief”.

(4) Section 169VD makes provision about disposals from holdings
consisting partly of qualifying shares.

(5) Sections 169VE to 169VG contain rules for cases where there have
15been previous disposals from a holding, to determine which shares
remain in the holding.

(6) Section 169VH provides for a cap on the amount of investor’s relief
that can be claimed.

(7) Sections 169VI to 169VO make provision about how investor’s relief
20applies following a company’s reorganisation of its share capital, an
exchange of shares or securities or a scheme of reconstruction.

(8) Sections 169VP to 169VR contain definitions for the purposes of this
Chapter.

Qualifying shares

169VB 25 Qualifying shares, potentially qualifying shares and excluded shares

(1) Where there is a disposal of all or part of a holding of shares in a
company, this section applies to determine whether a share which is
in the holding at the time immediately before the disposal (“the
relevant time”) is, for the purposes of this Chapter—

(a) 30a qualifying share,

(b) a potentially qualifying share, or

(c) an excluded share.

(2) The share is a “qualifying share” at the relevant time if—

(a) the share was subscribed for, within the meaning given by
35section 169VP, by the person making the disposal (“the
investor”),

(b) the investor has held the share continuously for the period
beginning with the issue of the share and ending with the
relevant time (“the share-holding period”),

(c) 40the share was issued on or after 17 March 2016,

(d) at the time the share was issued, none of the shares or
securities of the company that issued it were listed on a
recognised stock exchange,

(e) the share was an ordinary share when issued and is an
5ordinary share at the relevant time,

(f) the company that issued the share —

(i) was a trading company or the holding company of a
trading group (as defined by section 169VQ) when
the share was issued, and

(ii) 10has been so throughout the share-holding period,

(g) neither the investor nor a person connected with the investor
has been an officer or employee of that company, or of a
company connected with that company, at any time in that
period, and

(h) 15the period beginning with the date the share was issued and
ending with the date of the disposal is at least 3 years.

(3) The share is a “potentially qualifying share” at the relevant time if—

(a) the conditions in subsection (2)(a) to (g) are met, but

(b) the period beginning with the date the share was issued and
20ending with the date of the disposal is less than 3 years.

(4) The share is an “excluded share” at the relevant time if it is, at that
time—

(a) not a qualifying share, and

(b) not a potentially qualifying share.

(5) 25This section is subject to Schedule 7ZB (disqualification of share
where value received by investor).

(6) In relation to a share issued on or after 17 March 2016 but before 6
April 2016, any reference in subsection (2)(h) or (3) to “3 years” is to
be read as a reference to the minimum period.

(7) 30In subsection (6) “the minimum period” means the period of 3 years
extended by a period equal in length to the period beginning with
the date the share was issued and ending with 5 April 2016.

The relief

169VC Investors’ relief

(1) 35This section applies where—

(a) a qualifying person disposes of a holding, or part of a
holding, of shares in a company, and

(b) immediately before that disposal some or all of the shares in
the holding are qualifying shares.

(2) 40If—

(a) a chargeable gain accrues to the qualifying person on the
disposal, and

(b) a claim for relief under this section is made,

the rate of capital gains tax in respect of the relevant gain is 10 per
45cent.

(3) In subsection (2) “the relevant gain” means—

(a) where immediately before the disposal all the shares in the
holding are qualifying shares, the chargeable gain on the
disposal;

(b) 5where at that time only some of the shares in the holding are
qualifying shares, the appropriate part of that chargeable
gain (defined by section 169VD).

(4) Subsection (2) is subject to section 169VH (cap on investors’ relief).

(5) A reference in subsection (3) to the chargeable gain on the disposal,
10or to the appropriate part of that gain, is a reference to that
chargeable gain, or (as the case may be) that part, after any deduction
of allowable losses which is made in accordance with this Act from
that chargeable gain or from that part.

(6) In this Chapter a “qualifying person”, in relation to a holding, means
15an individual who is sole holder of the shares in the holding.

169VD Disposal where holding consists partly of qualifying shares

(1) This section applies where—

(a) a disposal (“the disposal concerned”) is made as mentioned
in section 169VC(1), and

(b) 20at the time immediately before the disposal, only some of the
shares in the holding are qualifying shares.

(2) Where this section applies, for the purposes of section 169VC(3) “the
appropriate part” of the chargeable gain on the disposal is so much
of that chargeable gain as is found by multiplying it by the
25appropriate fraction.

(3) The appropriate fraction is—

(4) The qualifying shares to be treated for the purposes of this section as
disposed of in the disposal concerned are—

(a) all the qualifying shares in the holding at the time
35immediately before the disposal, or

(b) if less, such number of those qualifying shares as equals the
number of shares disposed of in that disposal.

169VE Which shares are in holding immediately before disposal

(1) This section applies where—

(a) 40a particular disposal is made as mentioned in section
169VC(1) (“the current disposal”),

(b) there have been one or more previous disposals of shares by
the qualifying person from the holding mentioned in section
169VC(1) before the current disposal, and

(c) it is necessary to determine for the purposes of this Chapter
5which shares are to be treated as in the holding immediately
before the current disposal (and, accordingly, which shares
are to be treated as having been disposed of in those previous
disposals).

(2) In the case of a previous disposal as regards which investors’ relief
10has been claimed or is being claimed, the shares to be treated as
disposed of in that previous disposal are to be determined in
accordance with the rules in section 169VF.

(3) In the case of a previous disposal not falling within subsection (2),
the shares to be treated as disposed of in that previous disposal are
15to be determined in accordance with the rules in section 169VG.

169VF Shares treated as disposed of in previous disposal where claim made

(1) The rules referred to in section 169VE(2) are as follows; and in this
section “the disposal concerned” means the previous disposal
mentioned in section 169VE(2).

(2) 20There are to be treated as having been disposed of in the disposal
concerned—

(a) all the qualifying shares in the holding at the time
immediately before that disposal (“the material time”), or

(b) if less, such number of those qualifying shares as equals the
25number of shares disposed of in that disposal.

(3) If—

(a) the number of qualifying shares in the holding at the material
time was less than the total number of shares disposed of,
and

(b) 30excluded shares were in the holding at the material time,

the available excluded shares are also to be treated as having been
disposed of.

(4) “The available excluded shares” means—

(a) all the excluded shares in the holding at the material time, or

(b) 35if less, such number of those excluded shares as is equal to the
difference between—

(i) the total number of shares disposed of, and

(ii) the number of qualifying shares in the holding at the
material time.

(5) 40If the number of shares treated under subsections (2) to (4) as
disposed of in the disposal concerned is less than the total number of
shares disposed of, such number of the potentially qualifying shares
in the holding at the material time as is equal to the difference are
also to be treated as having been disposed of.

(6) 45Where the number of potentially qualifying shares in the holding at
the material time exceeds the difference mentioned in subsection (5),

under that subsection potentially qualifying shares acquired later are
to be treated as disposed of in preference to ones acquired earlier.

(7) In this section “disposed of” (without more) means disposed of in the
disposal concerned.

169VG 5 Shares treated as disposed of in previous disposal: no claim made

(1) The rules referred to in section 169VE(3) are as follows; and in this
section “the disposal concerned” means the previous disposal
mentioned in section 169VE(3).

(2) If any excluded shares were in the holding at the time immediately
10before the disposal concerned (“the material time”), the maximum
number of excluded shares are to be treated as having been disposed
of in the disposal concerned.

(3) “The maximum number of excluded shares” means—

(a) all the excluded shares in the holding at the material time, or

(b) 15if less, such number of those excluded shares as is equal to the
number of shares disposed of.

(4) If—

(a) there were no excluded shares in the holding at the material
time, or the number of such shares was less than the total
20number of shares disposed of, and

(b) potentially qualifying shares were in the holding at the
material time,

the available potentially qualifying shares are to be treated as having
been disposed of.

(5) 25“The available potentially qualifying shares” means—

(a) all the potentially qualifying shares in the holding at the
material time, or

(b) if less, such number of those potentially qualifying shares as
is equal to the difference between—

(i) 30the total number of shares disposed of, and

(ii) the number of excluded shares in the holding at the
material time.

(6) Where the number of potentially qualifying shares in the holding at
the material time exceeds the difference mentioned in subsection (5),
35potentially qualifying shares acquired later are to be treated as
disposed of in preference to ones acquired earlier.

(7) If the number of shares treated under subsections (2) to (5) as
disposed of in the disposal concerned is less than the total number of
shares disposed of, such number of the qualifying shares in the
40holding at the material time as is equal to the difference are to be
treated as having been disposed of.

(8) In this section “disposed of” (without more) means disposed of in the
disposal concerned.

169VH Cap on relief

(1) 45This section applies if, on a disposal within section 169VC(1) made
by an individual (“the disposal in question”), the aggregate of—

(a) the amount of the relevant gain, and

(b) the total amount of any gains that, in relation to earlier
disposals by the individual, were charged at the rate in
section 169VC(2),

5exceeds £10 million.

(2) The rate in section 169VC(2) applies only to so much (if any) of the
relevant gain as, when added to the total amount mentioned in
subsection (1)(b), does not exceed £10 million.

(3) Section 4 (rates of capital gains tax) applies to so much of the relevant
10gain as is not subject to the rate in section 169VC(2).

(4) In this section “the relevant gain” means the relevant gain, within the
meaning given by section 169VC, in respect of the disposal in
question.

Reorganisations

169VI 15 Reorganisations where no consideration given

(1) This section applies where—

(a) there is a reorganisation within the meaning of section 126,

(b) immediately before the reorganisation, a qualifying person
holds ordinary shares which, in relation to that
20reorganisation, are original shares within the meaning of
section 126,

(c) on the reorganisation that person does not give or become
liable to give any consideration for, or for any part of, a new
holding, and

(d) 25at a time after the reorganisation, there is a disposal of all or
part of a new holding.

(2) In this section a “new holding” means—

(a) the holding that immediately after the reorganisation is (in
relation to the original shares) the new holding within the
30meaning of section 126, or

(b) where the new holding within the meaning of section 126
consists of two or more actual holdings, any of those actual
holdings.

(3) Subsections (4) and (5) apply for the purposes of determining (for
35any purpose of this Chapter) the status of shares that immediately
before the disposal mentioned in subsection (1)(d) are in the new
holding mentioned there (“the new holding concerned”).

(4) Where a number of the original shares were—

(a) subscribed for by the qualifying person,

(b) 40issued on a particular date (“the relevant issue date”), and

(c) held continuously by that person for a particular period
ending immediately before the reorganisation (“the period
concerned”),

the following assumption is to be made.

(5) 45That assumption is that an appropriate number of the new shares
were—

(a) subscribed for by the qualifying person,

(b) issued on the relevant issue date, and

(c) had by the time immediately after the reorganisation already
been held continuously by that person for the period
5concerned.

(6) In subsections (4) and (5)—

• “the appropriate number” has the meaning given by section
  169VJ;

• “the original shares” means the shares held by the qualifying
  10person immediately before the reorganisation that were
  original shares in relation to the reorganisation;

• “the new shares” means the shares that immediately after the
  reorganisation were in the new holding concerned (including
  such, if any, of the original shares as remained after the
  15reorganisation and were in that holding).

(7) In this section a reference to the “status” of a share is to whether it is
qualifying, potentially qualifying or excluded.

(8) Section 169VE applies to determine, for the purposes of this Chapter,
which shares are included in a holding immediately before a
20reorganisation as it applies for the purposes of determining which
shares are included in a holding immediately before a particular
disposal.

(9) References in this section to consideration are to be read in
accordance with section 128(2).

169VJ 25 The appropriate number

(1) The “appropriate number” for the purposes of section 169VI(5) is the
number found by multiplying the number of shares that are in the
new holding concerned immediately after the reorganisation by the
fraction—

30

(2) In this section—

• “the new holding concerned” has the meaning given by section
  40169VI(3);

• “the original shares” has the meaning given by section 169VI(6);

• “the relevant issue date” has the meaning given by section
  169VI(4);

Finance (No. 2) BillPage 429

• “the period concerned” has the meaning given by section
  169VI(4).

169VK Reorganisations where consideration given

(1) This section applies where—

(a) 5there is a reorganisation within the meaning of section 126,

(b) immediately before the reorganisation, a qualifying person
holds ordinary shares which, in relation to that
reorganisation, are original shares within the meaning of
section 126,

(c) 10on the reorganisation that person gives or becomes liable to
give consideration for shares (“shares issued for
consideration”) which—

(i) are issued to that person on the reorganisation, and

(ii) immediately after the reorganisation are in a new
15holding, and

(d) at a time after the reorganisation, there is a disposal of all or
part of that new holding.

(2) In this section a “new holding” means—

(a) the holding that immediately after the reorganisation is (in
20relation to the original shares) the new holding within the
meaning of section 126, or

(b) where the new holding within the meaning of section 126
consists of two or more actual holdings, any of those actual
holdings.

(3) 25In determining, for any purpose of this Chapter, the status of shares
that immediately before the disposal mentioned in subsection (1)(d)
are in the new holding mentioned there—

(a) the date of issue of the shares issued for consideration is to be
taken to be their actual date of issue (rather than the date of
30issue of any of the original shares), and

(b) in relation to any part of the new holding for which
consideration was not given, sections 169VI(3) to (6) and
169VJ apply but as if any reference to the new holding
concerned were to that part of the new holding.

(4) 35Section 169VI(3) to (6) and 169VJ also apply in relation to any other
holding which is a new holding in relation to the reorganisation and
as respects which the person did not, on the reorganisation, give or
become liable to give any consideration.

(5) In this section a reference to the “status” of a share is to whether it is
40qualifying, potentially qualifying or excluded.

(6) References in this section to consideration are to be read in
accordance with section 128(2).

169VL Exchange of shares for those in another company

(1) This section applies where section 135 applies in relation to an issue
45of shares in a company (“company B”) in exchange for shares in
another company (“company A”).

(2) For the purposes of sections 169VI to 169VK—