Finance Bill (HC Bill 47)

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4BB Residential property gain or loss

(1) For the purposes of the charge to capital gains tax, a residential
property gain or loss is a gain or loss which accrues on the disposal of
a residential property interest.

(2) 5But a residential property gain or loss does not accrue on a non-resident
CGT disposal.

(3) In this Act “disposal of a residential property interest” means—

(a) a disposal of a UK residential property interest, or

(b) a disposal of a non-UK residential property interest.

(4) 10Schedule B1 gives the meaning in this Act of “disposal of a UK
residential property interest”.

(5) Schedule BA1 gives the meaning in this Act of “disposal of a non-UK
residential property interest”.

(6) See section 57C and Schedule 4ZZC for how to compute—

(a) 15the residential property gain or loss accruing on the disposal of
a residential property interest, and

(b) the gain or loss accruing on the disposal of a residential
property interest which is not a residential property gain or
loss.”

(14) 20Schedule 11 inserts Schedule BA1 in TCGA 1992 and makes related
amendments.

(15) Schedule 12 inserts section 57C and Schedule 4ZZC in TCGA 1992 and makes
related amendments.

(16) The amendments made by this section and Schedules 11 and 12 have effect in
25relation to gains accruing on or after 6 April 2016.

(17) In relation to a time before the tax year appointed under section 14(3)(b) of the
Wales Act 2014 in relation to the provision inserted by section 9(14) of that Act,
subsection (1) of section 4BA of TCGA 1992 (inserted by subsection (13) of this
section) has effect as if the words “, the Welsh higher rate” were omitted.

(18) 30In relation to a time before the tax year appointed under section 13(15) of the
Scotland Act 2016, subsection (1) of section 4BA of TCGA 1992 (inserted by
subsection (13) of this section) has effect as if before “or the dividend upper
rate” there were inserted “, the Scottish higher rate”.

Entrepreneurs' relief

83 35Entrepreneurs’ relief: associated disposals

(1) Section 169K of TCGA 1992 (disposal associated with relevant material
disposal) is amended as follows.

(2) In subsection (1)—

(a) in paragraph (a), after “A1,” insert “A1A,”, and

(b) 40in paragraph (b), for “and C” substitute “, C and D”.

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(3) After subsection (1A) insert—

(1AA) Condition A1A is that P makes a material disposal of business assets
which consists of the disposal of the whole of P’s interest in the assets
of a partnership, and—

(a) 5that interest is an interest of less than 5%,

(b) P holds at least a 5% interest in the partnership’s assets
throughout a continuous period of at least 3 years in the 8 years
ending with the date of the disposal, and

(c) at the date of disposal, no partnership purchase arrangements
10exist.

(1AB) Subject to subsection (6A), for the purposes of conditions A1 and A1A,
in relation to the disposal of an interest in the assets of a partnership,
“partnership purchase arrangements” means arrangements (other than
the material disposal itself) under which P or a person connected with
15P is entitled to acquire any interest in, or increase that person’s interest
in, the partnership (including a share of the profits or assets of the
partnership or an interest in such a share).”

(4) In subsection (1E), in the words before paragraph (a)—

(a) at the beginning insert “Subject to subsection (6A),”, and

(b) 20after “means arrangements” insert “(other than the material disposal
itself)”.

(5) After subsection (3A) insert—

(3AA) Subject to subsection (6A), for the purposes of condition B, in relation
to a disposal mentioned in that condition and a partnership,
25“partnership purchase arrangements” means arrangements under
which P or a person connected with P is entitled to acquire any interest
in, or increase that person’s interest in, the partnership (including a
share of the profits or assets of the partnership or an interest in such a
share), but does not include any arrangements in connection with a
30material disposal in relation to which condition A1 or A1A is met.”

(6) In subsection (3B), for “arrangements” to the end substitute “share purchase
arrangements”.

(7) After subsection (3B) insert—

(3BA) Subject to subsection (6A), for the purposes of condition B, in relation
35to a disposal mentioned in that condition and company A, “share
purchase arrangements” means arrangements under which P or a
person connected with P is entitled to acquire shares in or securities
of—

(a) company A, or

(b) 40a company which is a member of a trading group of which
company A is a member,

but does not include any arrangements in connection with a material
disposal in relation to which condition A2 or A3 is met.”

(8) In subsection (3C), for “(3B)” substitute “(3BA)”.

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(9) After subsection (4) insert—

(4A) Condition D is that the disposal mentioned in condition B is of an asset
which P owns throughout the period of 3 years ending with the date of
that disposal.”

(10) 5Omit subsection (6).

(11) Before subsection (7) insert—

(6A) For the purposes of this section, in relation to a material disposal of
business assets and a disposal mentioned in condition B, arrangements
are not partnership purchase arrangements or share purchase
10arrangements if they were made before both disposals and without
regard to either of them.”

(12) In subsection (9), after “entitled to share in the” insert “capital”.

(13) The amendments made by subsections (2)(a), (3) to (8) and (10) to (12) have
effect in relation to disposals made on or after 18 March 2015.

(14) 15The amendments made by subsections (2)(b) and (9) have effect in relation to
disposals of assets which are acquired on or after 13 June 2016.

84 Entrepreneurs’ relief: disposal of goodwill

(1) Section 169LA of TCGA 1992 (relevant business assets: goodwill transferred to
a related party etc) is amended as follows.

(2) 20In subsection (1)—

(a) at the beginning insert “Subject to subsection (1A),”,

(b) at the end of paragraph (a) insert “and”,

(c) after paragraph (a) insert—

(aa) immediately after the disposal—

(i) 25P and any relevant connected person together
own 5% or more of the ordinary share capital of
C or of any company which is a member of a
group of companies of which C is a member, or

(ii) P and any relevant connected person together
30hold 5% or more of the voting rights in C or in
any company which is a member of a group of
companies of which C is a member.”, and

(d) omit paragraphs (b) and (c).

(3) After subsection (1) insert—

(1A) 35Where—

(a) subsection (1)(aa) applies by virtue of P’s ownership, or any
relevant connected person’s ownership, of C’s ordinary share
capital, and

(b) the conditions mentioned in subsection (1B) are met,

40subsection (4) does not apply.

(1B) The conditions referred to in subsection (1A)(b) are—

(a) P and any relevant connected person dispose of C’s ordinary
share capital to another company (“A”) such that, immediately

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before the end of the relevant period, neither P nor any relevant
connected person own any of C’s ordinary share capital, and

(b) where A is a close company, immediately before the end of the
relevant period—

(i) 5P and any relevant connected person together own less
than 5% of the ordinary share capital of A or of any

company which is a member of a group of companies of
which A is a member, and

(ii) P and any relevant connected person together hold less
10than 5% of the voting rights in A or in any company
which is a member of a group of companies of which A
is a member.

(1C) In subsection (1B) “the relevant period” means the period of 28 days
beginning with the date of the qualifying business disposal, or such
15longer period as the Commissioners for Her Majesty’s Revenue and
Customs may by notice allow.”

(4) Omit subsections (2) and (3).

(5) In subsection (5), omit the words from “(including” to the end.

(6) In subsection (7), omit paragraph (b) and the “or” at the end of paragraph (a).

(7) 20In subsection (8)—

(a) after the definition of “arrangements” insert—

  • ““group” is to be construed in accordance with section
    170;”, and

(b) for the definition of “associate”, “control”, “major interest” and
25“participator” substitute—

  • ““relevant connected person” means—

    (a)

    a company connected with P, and

    (b)

    trustees connected with P.”

(8) In the heading, for “related party etc” substitute “close company”.

(9) 30The amendments made by this section have effect in relation to disposals made
on or after 3 December 2014.

85 Entrepreneurs’ relief: “trading company” and “trading group”

Schedule 13 contains provision about the meaning of “trading company” and
“trading group” for the purposes of Chapter 3 of Part 5 of TCGA 1992
35(entrepreneurs’ relief).

Investors' relief

86 Investors’ relief

Schedule 14 contains provision relating to investors’ relief.

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Employee shareholder shares

87 Employee shareholder shares: limit on exemption

(1) Section 236B of TCGA 1992 (exemption for employee shareholder shares) is
amended in accordance with subsections (2) and (3).

(2) 5After subsection (1) insert—

(1A) Where a gain accrues to a person (“P”) on the first disposal of a post-16
March 2016 exempt employee shareholder share (the “relevant
disposal”), subsection (1) applies only to so much of the gain as, when
added to the total amount of previous potentially chargeable gains,
10does not exceed £100,000.

(1B) For the purposes of subsection (1A), “previous potentially chargeable
gain” means a gain accruing to P on the first disposal of a post-16 March
2016 exempt employee shareholder share at any time before the
relevant disposal.

(1C) 15Where a single transaction disposes of more than one post-16 March
2016 exempt employee shareholder share, the reference in subsection
(1A) to the first disposal of a share is to be treated as a reference to the
disposal of all of the post-16 March 2016 exempt employee shareholder
shares first disposed of by that transaction.”

(3) 20After subsection (3) insert—

(3A) In this section, “post-16 March 2016 exempt employee shareholder
share” means an exempt employee shareholder share acquired in
consideration of an employee shareholder agreement entered into after
16 March 2016.”

(4) 25Section 236F of TCGA 1992 (reorganisation of share capital involving
employee shareholder shares) is amended in accordance with subsections (5)
and (6).

(5) After subsection (1) insert—

(1A) Subsection (1B) applies where—

(a) 30an exempt employee shareholder share (“the original EES
share”) is held by a person (“P”) before, and is concerned in, a
reorganisation, and

(b) the original EES share is disposed of on the reorganisation.

(1B) P is to be treated as if the original EES share were disposed of for
35consideration of an amount determined in accordance with subsections
(1D) to (1H) (the “relevant amount”).

(1C) In this section “notional gain” means the gain, if any, that would accrue
to P if the original EES share were disposed of on the reorganisation for
consideration of an amount equal to the market value of the share.

(1D) 40Subsections (1E) to (1G) apply where a notional gain would accrue to P
on the disposal of the original EES share.

(1E) Where the whole of the notional gain would be a chargeable gain by
virtue of section 236B(1A), the relevant amount is the amount that

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would secure that on the disposal neither a gain nor a loss would accrue
to P.

(1F) Where part (but not the whole) of the notional gain would be a
chargeable gain by virtue of section 236B(1A), the relevant amount is
5the maximum amount, not exceeding the market value of the share,
that would secure that on the disposal no chargeable gain would accrue
to P.

(1G) Where no part of the notional gain would be a chargeable gain by virtue
of section 236B(1A), the relevant amount is equal to the market value of
10the original EES share at the time of the disposal.

(1H) Where no notional gain would accrue to P on the disposal of the
original EES share, the relevant amount is the amount that would
secure that on the disposal neither a gain nor a loss would accrue to P.

(1I) In determining for the purposes of this section whether any part of a
15notional gain is a chargeable gain by virtue of section 236B(1A),
subsection (1B) is to be disregarded.

(1J) Where more than one original EES share is disposed of by P on a
reorganisation, references in this section to the disposal of the original
EES share are to be treated as references to the disposal of all of the
20original EES shares disposed of on the reorganisation.

(1K) In this section “reorganisation” has the same meaning as in section
127.”

(6) In subsection (2) for “reference in subsection (1) to section 127 includes”
substitute “references in this section to section 127 include”.

(7) 25Section 58 of TCGA 1992 (spouses and civil partners) is amended in accordance
with subsections (8) and (9).

(8) In subsection (2)(c) after “disposal is” insert “a relevant disposal”.

(9) After subsection (2) insert—

(3) For the purposes of subsection (2) a disposal of exempt employee
30shareholder shares is a “relevant disposal” if (apart from this section)—

(a) a gain would accrue on the disposal, and

(b) no part of the gain would be a chargeable gain.

(4) Subsection (5) applies where the disposal is of exempt employee
shareholder shares and (apart from this section)—

(a) 35a gain would accrue on the disposal, and

(b) part (but not the whole) of the gain would be a chargeable gain
by virtue of section 236B(1A).

(5) Where this subsection applies, subsection (1) has effect in relation to the
disposal as if—

(a) 40for “such amount as” there were substituted “the maximum
amount, not exceeding the market value of the asset, that”, and

(b) for “neither a gain nor a loss” there were substituted “no
chargeable gain”.”

(10) The amendments made by this section have effect in relation to disposals made
45after 16 March 2016.

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88 Employee shareholder shares: disguised fees and carried interest

(1) In section 236B of TCGA 1992 (exemption for employee shareholder shares),
after subsection (2) insert—

(2A) Subsection (1) does not apply in relation to a gain accruing on a
5disposal where the proceeds of the disposal, in relation to any
individual, constitute—

(a) a disguised fee for the purposes of Chapter 5E of Part 13 of ITA
2007 (see section 809EZA(3) of that Act), or

(b) carried interest within the meaning given by section 809EZC of
10that Act.”

(2) The amendment made by this section has effect in relation to gains accruing on
or after 6 April 2016.

Other provisions

89 Disposals of UK residential property by non-residents etc

(1) 15In Schedule 4ZZA to TCGA 1992 (relevant high value disposals: gains and
losses), in paragraph 2(1), for “paragraph 6” substitute “paragraph 6A”.

(2) In Schedule 4ZZB to TCGA 1992 (non-resident CGT disposals: gains and
losses), in paragraph 17—

(a) omit sub-paragraph (2), and

(b) 20in sub-paragraph (3), omit the words from “If” to “applies”.

(3) The amendment made by subsection (1) has effect in relation to disposals made
on or after 6 April 2015.

(4) The amendment made by subsection (2) has effect in relation to disposals made
on or after 26 November 2015.

90 25NRCGT returns

In TMA 1970, after section 12ZB (NRCGT return) insert—

12ZBA Elective NRCGT return

(1) A person is not required to make and deliver an NRCGT return under
section 12ZB(1), but may do so, in circumstances to which this section
30applies.

(2) The circumstances to which this section applies are where the disposal
referred to in section 12ZB(1) is—

(a) a disposal on or after 6 April 2015 where, by virtue of any of the
no gain/no loss provisions, neither a gain nor a loss accrues, or

(b) 35the grant of a lease on or after 6 April 2015 which is—

(i) for no premium,

(ii) to a person who is not connected with the grantor, and

(iii) under a bargain made at arm’s length.

(3) For the purposes of subsection (2)—

  • 40“connected” is to be construed in accordance with section 286 of
    1992 Act;

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  • “no gain/no loss provisions” has the meaning given by section
    288(3A) of the 1992 Act;

  • “lease” and premium” have the meanings given by paragraph 10
    of Schedule 8 to the 1992 Act.

(4) 5The Treasury may by regulations made by statutory instrument add or
remove circumstances to which this section applies.

(5) Regulations under subsection (4) may—

(a) amend this section or any other enactment;

(b) make consequential provision.

(6) 10A statutory instrument containing regulations under subsection (4) is
subject to annulment in pursuance of a resolution of the House of
Commons.

(7) Paragraph 1 of Schedule 55 to the Finance Act 2009 (penalty for late
returns) does not apply in relation to an NRCGT return which is made
15and delivered by virtue of this section.”

91 Addition of CGT to Provisional Collection of Taxes Act 1968

In section 1 of the Provisional Collection of Taxes Act 1968 (temporary
statutory effect of House of Commons resolutions affecting income tax etc), in
subsection (1), after “income tax,” insert “capital gains tax,”.

20Part 5 Inheritance tax etc

92 Inheritance tax: increased nil-rate band

Schedule 15 contains provision in connection with the increased nil-rate band
provided for by section 8D of IHTA 1984 (extra nil-rate band on death if
25interest in home goes to descendants etc).

93 Inheritance tax: pension drawdown funds

(1) IHTA 1984 is amended as follows.

(2) In the italic heading before section 10, at the end insert “(and omissions that do
not give rise to deemed dispositions)”.

(3) 30In section 12(2G) (interpretation of section 12(2ZA)), in the definition of
“entitled”, for “166(2)” substitute “167(1A), or section 166(2),”.

(4) After section 12 insert—

12A Pension drawdown fund not used up: no deemed disposition

(1) Where a person has a drawdown fund, section 3(3) above does not
35apply in relation to any omission that results in the fund not being used
up in the person’s lifetime.

(2) For the purposes of subsection (1) above, a person has a drawdown
fund if the person has—

(a) a member’s drawdown pension fund,

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(b) a member’s flexi-access drawdown fund,

(c) a dependant’s drawdown pension fund,

(d) a dependant’s flexi-access drawdown fund,

(e) a nominee’s flexi-access drawdown fund, or

(f) 5a successor’s flexi-access drawdown fund, and

in respect of a money purchase arrangement under a registered
pension scheme.

(3) For the purposes of subsection (1) above, a person also has a drawdown
fund if sums or assets held for the purposes of a money purchase
10arrangement under a corresponding scheme would, if that scheme
were a registered pension scheme, be the person’s—

(a) member’s drawdown pension fund,

(b) member’s flexi-access drawdown fund,

(c) dependant’s drawdown pension fund,

(d) 15dependant’s flexi-access drawdown fund,

(e) nominee’s flexi-access drawdown fund, or

(f) successor’s flexi-access drawdown fund,

in respect of the arrangement.

(4) In this section—

  • 20“corresponding scheme” means—

    (a)

    a qualifying non-UK pension scheme (see section 271A
    below), or

    (b)

    a section 615(3) scheme that is not a registered pension
    scheme;

  • 25“money purchase arrangement” has the same meaning as in Part 4
    of the Finance Act 2004 (see section 152 of that Act);

  • “member’s drawdown pension fund”, “member’s flexi-access
    drawdown fund”, “dependant’s drawdown pension fund”,
    “dependant’s flexi-access drawdown fund”, “nominee’s flexi-
    30access drawdown fund” and “successor’s flexi-access
    drawdown fund” have the meaning given, respectively, by
    paragraphs 8, 8A, 22, 22A, 27E and 27K of Schedule 28 to that
    Act.”

(5) The amendment made by subsection (4)—

(a) 35so far as relating to a fund within the new section 12A(2)(a) or (c)
(drawdown pension funds), or to a fund within the new section 12A(3)
that corresponds to a fund within the new section 12A(2)(a) or (c)—

(i) has effect where the person who has the fund dies on or after 6
April 2011, and

(ii) 40is to be treated as having come into force on 6 April 2011, and

(b) so far as relating to a fund mentioned in the new section 12A(2)(b), (d),
(e) or (f) (flexi-access drawdown funds), or to a fund within the new
section 12A(3) that corresponds to a fund within the new section
12A(2)(b), (d), (e) or (f)—

(i) 45has effect where the person who has the fund dies on or after 6
April 2015, and

(ii) is to be treated as having come into force on 6 April 2015.

(6) Where an amount paid by way of—

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(a) inheritance tax, or

(b) interest on inheritance tax,

is repayable as a result of the amendment made by subsection (4), section
241(1) of IHTA 1984 applies as if the last date for making a claim for repayment

5of the amount were 5 April 2020 if that is later than what would otherwise be
the last date for that purpose.

94 Inheritance tax: victims of persecution during Second World War era

(1) After section 153 of IHTA 1984 insert—

“Payments to victims of persecution during Second World War era

153ZA 10Qualifying payments

(1) This section applies where a qualifying payment has at any time been
received by a person (“P”), or by the personal representatives of P.

(2) The tax chargeable on the value transferred by the transfer made on P’s
death (the “value transferred”) is to be reduced by an amount equal
15to—

(a) the relevant percentage of the amount of the qualifying
payment, or

(b) if lower, the amount of tax that would, apart from this section,
be chargeable on the value transferred.

(3) 20In subsection (2) “relevant percentage” means the percentage specified
in the last row of the third column of the Table in Schedule 1.

(4) For the purposes of this section, a “qualifying payment” is a payment
that meets Condition A, B or C.

(5) Condition A is that the payment—

(a) 25is of a kind specified in Part 1 of Schedule 5A, and

(b) is made to a person, or the personal representatives of a person,
who was—

(i) a victim of National-Socialist persecution, or

(ii) the spouse or civil partner of a person within sub-
30paragraph (i).

(6) Condition B is that the payment is of a kind listed in Part 2 of Schedule
5A.

(7) Condition C is that the payment—

(a) is of a kind specified in regulations made by the Treasury, and

(b) 35is made to a person, or the personal representatives of a person,
who was—

(i) held as a prisoner of war, or a civilian internee, during
the Second World War, or

(ii) the spouse or civil partner of a person within sub-
40paragraph (i).

(8) The Treasury may by regulations add a payment of a specified kind to
the list in Part 1 of Schedule 5A.

(9) Regulations under this section are to be made by statutory instrument.