Finance Bill (HC Bill 47)

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which is neither ATED-related nor a residential property gain or
loss.

Step 2

Add together the amounts of any balancing gains or losses
5determined under Step 1 (treating any amount which is a loss as a
negative amount).

(2) If the result is a positive amount, that amount is the balancing gain
on the disposal of land.

(3) If the result is a negative amount, that amount (expressed as a
10positive number) is the balancing loss on the disposal of land.

Computation of balancing gains or losses on relevant high value disposal not within
Case 1, 2 or 3 (or where an election is made)

17 (1) In the case of a relevant high value disposal to which paragraph 10
applies, the amount of the balancing gain or loss is determined as
15follows.

(2) Determine the number of balancing days in the relevant
ownership period.

(3) “Balancing day” means a day which is neither—

(a) a residential property chargeable day, nor

(b) 20an ATED chargeable day (as defined in paragraph 3 of
Schedule 4ZZA).

(4) The balancing gain or loss on the disposal is equal to the balancing
fraction of the amount of the gain or (as the case may be) loss
determined under Step 1 of paragraph 10(2).

(5) 25The “balancing fraction” is—


where—

  • “BD” is the number of balancing days in the relevant
    ownership period;

  • 30TD” is the total number of days in the relevant ownership
    period.

(6) In this paragraph “relevant ownership period” has the same
meaning as in paragraph 10.

Computation of balancing gains or losses on relevant high value disposal within Case
351, 2 or 3 (and no election made)

18 (1) The amount of the balancing gain or loss on a relevant high value
disposal to which paragraph 11 applies is found by adding—

(a) the amount of the balancing gain or loss belonging to the
notional pre-ATED gain or loss, and

(b) 40the amount of the balancing gain or loss belonging to the
notional post-ATED gain or loss,

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

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(2) If the result is a positive amount, that amount is the balancing gain
on the relevant high value disposal.

(3) If the result is a negative amount, that amount (expressed as a
positive number) is the balancing loss on the relevant high value
5disposal.

(4) The balancing gain or loss belonging to the notional pre-ATED
gain or loss is equal to the balancing fraction of the notional pre-
ATED gain or loss.

(5) The balancing gain or loss belonging to the notional post-ATED
10gain or loss is equal to the balancing fraction of the notional post-
ATED gain or loss.

(6) The balancing fraction is—


where—

  • 15“BD” is the number of balancing days in the appropriate
    ownership period;

  • TD” is the total number of days in the appropriate
    ownership period.

(7) “Balancing day” means a day which is neither—

(a) 20a residential property chargeable day, nor

(b) an ATED chargeable day (as defined in paragraph 3 of
Schedule 4ZZA).

(8) The appropriate ownership period is—

(a) for the purpose of computing the balancing gain or loss
25belonging to the notional pre-ATED gain or loss, the
relevant ownership period mentioned in paragraph 13(4);

(b) for the purpose of computing the balancing gain or loss
belonging to the notional post-ATED gain or loss, the
relevant ownership period mentioned in paragraph 14(4).

(9) 30In this paragraph—

  • “notional pre-ATED gain or loss” means the same as in
    paragraph 13(2);

  • “notional post-ATED gain or loss” means the same as in
    paragraph 14(2).

35Relevant high value disposal and “other” disposal are comprised in the disposal of land

19 (1) This paragraph applies where the disposals comprised in the
disposal of land include a disposal (the “non-ATED related
disposal”) which is not a relevant high value disposal.

(2) This Part of this Schedule (apart from this paragraph) applies in
40relation to the non-ATED related disposal as if it were a relevant
high value disposal.

(3) Sub-paragraph (4) applies if there has, at any time in the relevant
ownership period, been mixed use of the subject matter of the
disposed of interest.

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(4) The amount of any residential property gain or loss on the non-
ATED related disposal computed under this Part of this Schedule
is taken to be the appropriate fraction of the amount that it would
otherwise be.

(5) 5In sub-paragraph (4) “the appropriate fraction” means the fraction
that is, on a just and reasonable apportionment, attributable to the
dwelling or dwellings.

(6) In this paragraph the “relevant ownership period” means—

(a) where paragraph 10 applies, the relevant ownership
10period as defined in paragraph 10(4), or

(b) where paragraph 11 applies, the relevant ownership
period as defined in paragraphs 13(4) and 14(4).

Interest subsisting under contract for off-plan purchase

20 (1) This paragraph applies where the RPI disposal made by P is a
15disposal of a residential property interest only because of—

(a) the second condition in paragraph 1 of Schedule B1, or

(b) the second condition in paragraph 1 of Schedule BA1,

(interest subsisting under a contract for the acquisition of land that
consists of, or includes, a building that is to be constructed for use
20as a dwelling).

(2) The land that is the subject of the contract concerned is treated for
the purposes of this Part of this Schedule as consisting of (or, as the
case requires, including) a dwelling throughout P’s period of
ownership of the interest in land.”

25SCHEDULE 13 Section 85 Entrepreneurs’ relief: “trading company” and “trading group”

1 TCGA 1992 is amended as follows.

2 In section 169H(7) (introduction), for “Section 169S contains” substitute
“Sections 169S and 169SA contain”.

3 30In section 169S (interpretation of Chapter), subsection (4A) is treated as
never having had effect, and is omitted accordingly.

4 After section 169S insert—

169SA Meaning of “trading company” and “trading group”

Schedule 7ZA gives the meaning in this Chapter of “trading
35company” and “trading group”.”

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5 After Schedule 7 insert—

“Schedule 7ZA Section 169SA Entrepreneurs’ relief: “trading company” and “trading group”

Part 1 Meaning of “trading company” and “trading group”

1 (1) 5This paragraph gives the meaning of “trading company” and
“trading group” where used in the following provisions of
Chapter 3 of Part 5 (entrepreneurs’ relief)—

(a) in section 169I (material disposal of business assets)—

(i) paragraphs (a) and (b) of subsection (6) (which
10apply for the purposes of conditions A and B in that
section), and

(ii) sub-paragraphs (i) and (ii) of subsection (7A)(c)
(which apply for the purposes of conditions C and
D in that section), and

(b) 15section 169J(4) (disposal of trust business assets).

(2) “Trading company” and “trading group” have the same meaning
as in section 165 (see section 165A), but as modified by Part 2 of
this Schedule.

(3) “Trading activities” (see section 165A(4) and (9)) is to be read in
20accordance with Part 3 of this Schedule.

2 In provisions of Chapter 3 of Part 5 not mentioned in paragraph
1(1), “trading company” and “trading group” have the same
meaning as in section 165 (see section 165A), except that
subsections (7) and (12) of section 165A are to be disregarded.

25Part 2 Joint venture companies

Attribution of activities of a joint venture company

3 In relation to a disposal of assets consisting of (or of interests in)
shares in or securities of a company (“company A”), activities of a
30joint venture company are to be attributed to a company under
subsections (7) and (12) of section 165A only if P—

(a) passes the shareholding test in relation to the joint venture
company (see paragraphs 5 to 8), and

(b) passes the voting rights test in relation to the joint venture
35company (see paragraphs 9 to 12).

Meaning of “investing company”

4 (1) For the purposes of this Part, a company is an “investing
company” in relation to P and a joint venture company if it meets
conditions 1 and 2.

(2) 40Condition 1 is that—

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(a) the company is company A (see paragraph 3), or

(b) P directly owns some portion of the ordinary share capital
of the company.

(3) Condition 2 is that the company owns some portion of the
5ordinary share capital of the joint venture company (whether it is
owned directly, indirectly, or partly directly and partly indirectly).

(4) In sub-paragraph (3) the reference to a company owning share
capital indirectly is to be read in accordance with section 1155 of
CTA 2010.

10Shareholding test

5 P passes the shareholding test in relation to a joint venture
company if, throughout the relevant period, the sum of the
percentages given by paragraphs (a) and (b) is at least 5%—

(a) the percentage of the ordinary share capital of the joint
15venture company that is owned directly by P, and

(b) P’s indirect shareholding percentage (see paragraph 6).

6 P’s “indirect shareholding percentage” is found by—

(a) calculating the percentage of the ordinary share capital of
the joint venture company that is owned indirectly by P
20through a particular investing company (see paragraph 7),
and

(b) where there are two or more investing companies, adding
those percentages together.

7 The percentage of the ordinary share capital of a joint venture
25company that is owned indirectly by P through a particular
investing company (“company IC”) at a particular time is given
by—


where—

  • 30R is the fraction of company IC’s ordinary share capital that
    is owned by P at that time, and

  • S is the fraction of the joint venture company’s ordinary share
    capital that is owned by company IC at that time (whether
    it is owned directly, indirectly, or partly directly and partly
    35indirectly) (see paragraph 8).

8 (1) The fraction of the joint venture company’s ordinary share capital
that is owned indirectly by company IC is calculated—

(a) by applying sections 1156 and 1157 of CTA 2010, as read
with section 1155 of that Act, and

(b) 40on the assumptions specified in sub-paragraph (2).

(2) The assumptions are—

(a) where company IC directly owns more than 50% of the
ordinary share capital of a company, company IC is taken
to own the whole of the ordinary share capital of that
45company;

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(b) where a company other than company IC (“company B”)
directly owns more than 50% of the ordinary share capital
of another company (“company C”) which is a member of
a group of companies of which company IC is a member,
5company B is taken to own the whole of the ordinary share
capital of company C.

Voting rights test

9 P passes the voting rights test in relation to a joint venture
company if, throughout the relevant period, the sum of the
10percentages given by paragraphs (a) and (b) is at least 5%—

(a) the percentage of the voting rights that P holds directly in
the joint venture company, and

(b) P’s indirect voting rights percentage (see paragraph 10).

10 P’s “indirect voting rights percentage” is found by—

(a) 15calculating the percentage of the voting rights in the joint
venture company that P holds indirectly through a
particular investing company (see paragraph 11), and

(b) where there are two or more investing companies, adding
those percentages together.

11 20The percentage of the voting rights in a joint venture company that
P holds indirectly through a particular investing company
(“company IC”) at a particular time is given by—


where—

  • 25T is the fraction of the voting rights in company IC that is held
    by P at that time, and

  • U is the fraction of the voting rights in the joint venture
    company that is held by company IC at that time (whether
    the voting rights are held directly, indirectly, or partly
    30directly and partly indirectly) (see paragraph 12).

12 (1) The fraction of the voting rights in the joint venture company that
is held indirectly by company IC 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
35sections 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 IC directly holds more than 50% of the
40voting rights in a company, company IC is taken to hold all
the voting rights in that company;

(b) where a company other than company IC (“company B”)
directly holds more than 50% of the voting rights in
another company (“company C”) which is a member of a
45group of companies of which company IC is a member,

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company B is taken to hold all the voting rights in
company C.

Part 3 Partnerships

5Activities of a company as a member of a partnership

13 (1) In relation to a disposal of assets consisting of (or of interests in)
shares in or securities of a company (“company A”), activities
carried on by a company as a member of a partnership are to be
treated as not being trading activities of the company (see section
10165A(4) and (9)) if P fails either or both of the following—

(a) the profits and assets test in relation to the partnership (see
paragraphs 15 to 20);

(b) the voting rights test in relation to the partnership (see
paragraphs 21 to 23).

(2) 15In relation to such a disposal, activities carried on by a company as
a member of a partnership are also to be treated as not being
trading activities of the company if the company is not a member
of the partnership throughout the relevant period.

Meaning of “direct interest company” and “relevant corporate partner”

14 (1) 20This paragraph applies for the purposes of this Part.

(2) A company is a “direct interest company” in relation to P if—

(a) it is company A (see paragraph 13(1)), or

(b) P directly owns some portion of the ordinary share capital
of the company.

(3) 25A company is a “relevant corporate partner” in relation to P and a
partnership if—

(a) a direct interest company in relation to P (“company DIC”)
owns some portion of the ordinary share capital of the
company (whether it is owned directly, indirectly or partly
30directly and partly indirectly),

(b) the company is a member of a group of companies of
which company DIC is a member, and

(c) the company is a member of the partnership.

(4) In sub-paragraph (3) the reference to a company owning share
35capital indirectly is to be read in accordance with section 1155 of
CTA 2010.

Profits and assets test

15 P passes the profits and assets test in relation to a partnership if,
throughout the relevant period, the sum of the percentages given
40by paragraphs (a), (b) and (c) is at least 5%—

(a) the percentage which is P’s direct interest in the assets of
the partnership,

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(b) the percentage which is P’s share of the partnership
through direct interest companies that are members of the
partnership (see paragraph 16), and

(c) the percentage which is P’s share of the partnership
5through direct interest companies and relevant corporate
partners in the partnership (see paragraph 18).

16 P’s “share of the partnership through direct interest companies
that are members of the partnership” is found by—

(a) calculating the percentage which is P’s indirect share of the
10partnership through each direct interest company that is a
member of the partnership (see paragraph 17), and

(b) where there are two or more direct interest companies that
are members of the partnership, adding those percentages
together.

17 15The percentage which is P’s indirect share of the partnership
through a particular direct interest company that is a member of
the partnership (“company DICP”) at a particular time is given
by—


20where—

  • R is the fraction of company DICP’s ordinary share capital
    that is owned by P at that time, and

  • V is the lower of—

    (a)

    the fraction of the profits of the partnership in which
    25company DICP has an interest at that time, and

    (b)

    the fraction of the assets of the partnership in which
    company DICP has an interest at that time.

18 P’s “share of the partnership through direct interest companies
and relevant corporate partners in the partnership” is found by—

(a) 30calculating the percentage which is P’s indirect share of the
partnership through each direct interest company and
each relevant corporate partner in the partnership (see
paragraph 19), and

(b) where there are two or more direct interest companies or
35two or more relevant corporate partners, or both, adding
those percentages together.

19 The percentage which is P’s indirect share of the partnership
through a particular direct interest company (“company DIC”)
and a particular relevant corporate partner in the partnership
40(“company CP”) at a particular time is given by—


where—

  • R is the fraction of company DIC’s ordinary share capital that
    is owned by P at that time,

  • 45V is the lower of—

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    (a)

    the fraction of the profits of the partnership in which
    company CP has an interest at that time, and

    (b)

    the fraction of the assets of the partnership in which
    company CP has an interest at that time, and

  • 5W is the fraction of company CP’s ordinary share capital that
    is owned by company DIC at that time (whether it is
    owned directly, indirectly, or partly directly and partly
    indirectly) (see paragraph 20).

20 (1) The fraction of a company’s ordinary share capital that is owned
10indirectly by company DIC is calculated—

(a) by applying sections 1156 and 1157 of CTA 2010, as read
with section 1155 of that Act, and

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

(2) The assumptions are—

(a) 15where company DIC directly owns more than 50% of the
ordinary share capital of a company, company DIC is
taken to own the whole of the ordinary share capital of that
company;

(b) where a company other than company DIC (“company B”)
20directly owns more than 50% of the ordinary share capital
of another company (“company C”) which is a member of
a group of companies of which company DIC is a member,
company B is taken to own the whole of the ordinary share
capital of company C.

25Voting rights test

21 (1) P passes the voting rights test in relation to a partnership if,
throughout the relevant period, the sum of P’s direct voting rights
percentage and P’s indirect voting rights percentage is at least 5%.

(2) P’s “direct voting rights percentage” is found by—

(a) 30taking the percentage of the voting rights that P holds
directly in each direct interest company that is a member of
the partnership, and

(b) where P directly holds voting rights in two or more direct
interest companies that are members of the partnership,
35adding those percentages together.

(3) P’s “indirect voting rights percentage” is found by—

(a) calculating the percentage which is P’s indirect holding of
voting rights in each relevant corporate partner in the
partnership through each direct interest company (see
40paragraph 22), and

(b) where there are two or more relevant corporate partners or
two or more direct interest companies, or both, adding
those percentages together.

22 The percentage which is P’s indirect holding of voting rights in a
45particular relevant corporate partner in the partnership

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


where—

  • 5T is the fraction of the voting rights in company DIC that is
    held by P at that time, and

  • X is the fraction of the voting rights in company CP that is
    held by company DIC at that time (whether the voting
    rights are held directly, indirectly, or partly directly and
    10partly indirectly) (see paragraph 23).

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