Finance Bill (HC Bill 47)

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(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 (1) The amendments made by this Schedule (except paragraph 3) have effect in
relation to disposals made on or after 18 March 2015, but only for the
30purposes of determining what is a trading company or trading group at
times on or after that date.

(2) In conditions B and D in section 169I of TCGA 1992 (material disposal of
business assets)—

(a) a reference to a company ceasing to be a trading company does not
35include a case where, as a result of the coming into force of the
amendments made by this Schedule, a company which was a trading
company immediately before 18 March 2015 is treated as ceasing on
that day to be a trading company, and

(b) a reference to a company ceasing to be a member of a trading group
40does not include a case where, as a result of the coming into force of
the amendments made by this Schedule, a company which was a
member of a trading group immediately before 18 March 2015 is
treated as ceasing on that day to be a member of a trading group.

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(3) Sub-paragraph (2) is without prejudice to the operation of section 43(4) of FA
2015.

SCHEDULE 14 Section 86 Investors’ relief

1 (1) 5In 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”
insert “TRANSFER OF BUSINESS ASSETS:”

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

“CHAPTER 5 10Investors' relief

Overview

169VA Overview of Chapter

(1) This Chapter provides for a relief, in the form of a lower rate of
capital gains tax, in respect of disposals of (and disposals of interests
15in) certain ordinary shares in unlisted companies.

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

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

(4) 20Section 169VD makes provision about disposals from holdings
consisting partly of qualifying shares.

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

(6) 25Sections 169VH and 169VI make provision about disposals by
trustees of a settlement.

(7) Section 169VJ makes provision about disposals of interests in shares.

(8) Sections 169VK and 169VL provide for a cap on the amount of
investors’ relief that can be claimed.

(9) 30Section 169VM makes provision about claims for investors’ relief.

(10) Sections 169VN to 169VT make provision about how investors’ relief
applies following a company’s reorganisation of its share capital, an
exchange of shares or securities or a scheme of reconstruction.

(11) Sections 169VU to 169VY contain definitions for the purposes of this
35Chapter.

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Qualifying shares

169VB Qualifying shares, potentially qualifying shares and excluded shares

(1) Where there is a disposal of all or part of (or of an interest in) a
holding of shares in a company, this section applies to determine
5whether 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) a qualifying share,

(b) a potentially qualifying share, or

(c) 10an 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
section 169VU, by the person making the disposal (“the
investor”),

(b) 15the 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) the share was issued on or after 17 March 2016,

(d) at the time the share was issued, none of the shares or
20securities 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
ordinary share at the relevant time,

(f) the company that issued the share—

(i) 25was a trading company or the holding company of a
trading group (as defined by section 169VV) when the
share was issued, and

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

(g) at no time in the share-holding period was the investor or a
30person connected with the investor a relevant employee in
respect of that company (within the meaning given by section
169VW), and

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

(3) 35The 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
ending 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
40time—

(a) not a qualifying share, and

(b) not a potentially qualifying share.

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

(6) 45In 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.

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(7) In 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 5 Investors’ relief

(1) This 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
10the holding are qualifying shares.

(2) If—

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

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

15the rate of capital gains tax in respect of the relevant gain is 10 per
cent.

(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
20disposal;

(b) where 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) In this section—

(a) 25subsection (1) is subject to section 169VH (disposals by
trustees of a settlement: further conditions for relief), and

(b) subsection (2) is subject to—

  • section 169VI (reduction of relief for certain disposals by
    trustees of a settlement), and

  • 30sections 169VK and 169VL (cap on investors’ relief).

(5) A reference in subsection (3) to the chargeable gain on the disposal,
or 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
35that chargeable gain or from that part.

(6) For the application of this section to disposals of interests in shares,
see section 169VJ.

(7) In this Chapter a “qualifying person” means—

(a) an individual, or

(b) 40the trustees of a settlement.

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

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(b) at 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
5of that chargeable gain as is found by multiplying it by the
appropriate fraction.

(3) The appropriate fraction is—


where—

  • 10Q is the number of qualifying shares found under subsection
    (4), and

  • T is the total number of shares disposed of in the disposal
    concerned.

(4) The number of qualifying shares found under this subsection is—

(a) 15all the qualifying shares in the holding at the time
immediately before the disposal concerned, 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) 20This section applies where—

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

(b) there have been one or more previous disposals of shares
from the holding mentioned in section 169VC(1) before the
25current disposal, and

(c) it is necessary to determine for the purposes of this Chapter
which 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
30disposals).

(2) In the case of a previous disposal as regards which investors’ relief
has 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) 35In the case of a previous disposal not falling within subsection (2),
the shares to be treated as disposed of in that previous disposal are
to 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
40section “the disposal concerned” means the previous disposal
mentioned in section 169VE(2).

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(2) There 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) 5if less, such number of those qualifying shares as equals the
number 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,
10and

(b) excluded 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) 15all the excluded shares in the holding at the material time, or

(b) if 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
20material time.

(5) If 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
25also to be treated as having been disposed of.

(6) Where 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) 30In this section “disposed of” (without more) means disposed of in the
disposal concerned.

169VG 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
35mentioned in section 169VE(3).

(2) If any excluded shares were in the holding at the time immediately
before 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) 40“The maximum number of excluded shares” means—

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

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

(4) If—

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

(b) potentially qualifying shares were in the holding at the
5material time,

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

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

(a) all the potentially qualifying shares in the holding at the
10material time, or

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

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

(ii) the number of excluded shares in the holding at the
15material time.

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

(7) 20If 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
holding at the material time as is equal to the difference are to be
treated as having been disposed of.

(8) 25In this section “disposed of” (without more) means disposed of in the
disposal concerned.

Trustees of a settlement: special provision

169VH Disposals by trustees: further conditions for relief

(1) Where a disposal falling within section 169VC(1)(a) and (b) is made
30by the trustees of a settlement, section 169VC does not apply to the
disposal unless there is at least one individual who is an eligible
beneficiary in respect of the disposal.

(2) For the purposes of this section, an individual is an “eligible
beneficiary” in respect of the disposal if—

(a) 35at the time immediately before the disposal, the individual
has under the settlement an interest in possession in settled
property that includes or consists of the holding of shares
mentioned in section 169VC(1),

(b) the individual has had such an interest in possession under
40the settlement throughout the period of 3 years ending with
the date of the disposal,

(c) at no time in that period has the individual been a relevant
employee in respect of the company that issued the shares
(within the meaning given by section 169VW), and

(d) 45the individual has (by the time of the claim under section
169VC in respect of the disposal) elected to be treated as an
eligible beneficiary in respect of the disposal.

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(3) For the purposes of subsection (2)(d), an individual elects to be
treated as an eligible beneficiary in respect of a disposal if the
individual tells the trustees (by whatever means) that he or she
wishes to be so treated; and an election under subsection (2)(d) may
5be withdrawn by the individual at any time until the claim is made.

(4) In this section “interest in possession” does not include an interest in
possession for a fixed term.

(5) In relation to a disposal made by the trustees of a settlement, any
reference in section 169VB(2)(g) to the investor is to be read as a
10reference to any trustee of the settlement.

169VI Disposals by trustees: relief reduced in certain cases

(1) Subsection (2) applies where—

(a) a disposal falling within section 169VC(1)(a) and (b) is made
by the trustees of a settlement,

(b) 15section 169VC applies to the disposal by reason of there being
at least one individual who is an eligible beneficiary in
respect of the disposal (see section 169VH), and

(c) at the time immediately before the disposal, there are two or
more persons each of whom has under the settlement an
20interest in possession in the settled property.

(2) In such a case the reference in section 169VC(2) to the relevant gain
is to be read as a reference—

(a) to the eligible beneficiary’s share of the relevant gain (see
subsections (3) to (6)), or

(b) 25if there is more than one individual who is an eligible
beneficiary in respect of the disposal, to so much of the
relevant gain as is equal to the aggregate of the eligible
beneficiaries’ shares of that gain.

(3) In this section—

  • 30“eligible beneficiary” has the meaning given by section
    169VH(2);

  • “relevant gain” has the meaning given by section 169VC(3);

  • “the settled property” means settled property that includes or
    consists of the holding of shares mentioned in section
    35169VC(1).

(4) Subsection (5) applies to determine for the purposes of this Chapter,
in relation to any individual who is an eligible beneficiary in respect
of a disposal within section 169VC(1) made by the trustees of a
settlement, that individual’s share of the relevant gain.

(5) 40That individual’s share of the relevant gain on the disposal is so
much of the relevant gain on the disposal as bears to the whole of that
gain the same proportion as X bears to Y, where—

  • X is the interest in possession (other than for a fixed term)
    which, at the time immediately before the disposal, that
    45individual has under the settlement in the income from the
    holding of shares mentioned in section 169VC(1), and

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  • Y is all the interests in that income that persons (including that
    individual) with interests in possession in that holding have
    under the settlement at that time.

Disposals of interests in shares

169VJ 5 Disposals of interests in shares: joint holdings etc

(1) In section 169VC(1)(a), the reference to the case where a qualifying
person disposes of a holding, or part of a holding, of shares in a
company includes the case where a qualifying person disposes of an
interest in a relevant holding.

(2) 10In this section a “relevant holding” means either—

(a) a number of shares in a company which are of the same class
and were acquired in the same capacity jointly by the same
two or more persons including the qualifying person, or

(b) a number of shares in a company which are of the same class
15and were acquired in the same capacity by the qualifying
person solely.

(3) In this section—

(a) “an interest” in a relevant holding means any interests of the
qualifying person, in any of the shares in the relevant
20holding, which are by virtue of section 104 to be regarded as
a single asset, and

(b) references to an interest include part of an interest.

(4) Where section 169VC(1) applies by reason of this section, section
169VD(3) and (4) have effect as if any reference to the number of
25shares disposed of were a reference to the number of shares an
interest in which is disposed of.

(5) In relation to a disposal by the trustees of a settlement of an interest
in a relevant holding falling within subsection (2)(a), sections
169VH(2) and 169VI(3) and (5) have effect as if any reference to the
30holding of shares mentioned in section 169VC(1) were to the interest
disposed of.

(6) In accordance with subsection (1)—

(a) in sections 169VN(1)(d), 169VP(1)(d) and 169VS(1)(d)
(reorganisations), any reference to a disposal of all or part of
35a holding includes a disposal by the qualifying person of an
interest in the holding, and

(b) the reference in section 169VT(2) to a disposal of the original
shares is to be read, in relation to a case where the original
shares fall within subsection (2)(a) above, as a reference to a
40disposal of the qualifying person’s interest in those shares.

Cap on relief

169VK Cap on relief for disposal by an individual

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

(a) 45the amount of the relevant gain on the disposal (“the gain in
question”),

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

(c) the total amount of any reckonable trust gains that, on any
5previous trust disposals in respect of which the individual
concerned was an eligible beneficiary, were charged at the
rate in section 169VC(2),

exceeds £10 million.

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

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

(4) 15In this section—

  • “eligible beneficiary”, in relation to a disposal, is to be read in
    accordance with section 169VH(2);

  • “reckonable trust gain”, in relation to a trust disposal in respect
    of which the individual concerned was an eligible
    20beneficiary, means—

    (a)

    if section 169VI(1)(c) applied in relation to the
    disposal, that individual’s share of the relevant gain
    on that disposal, within the meaning given by section
    169VI(4) and (5);

    (b)

    25otherwise, the relevant gain on that disposal;

  • “the relevant gain”, in relation to a disposal, has the meaning
    given by section 169VC(3);

  • “trust disposal” means a disposal by the trustees of a settlement.

169VL Cap on relief for disposal by trustees of a settlement

(1) 30This section applies where—

(a) a disposal (“the disposal in question”) is made by the trustees
of a settlement,

(b) that disposal is within section 169VC(1), and

(c) there is an excess amount in relation to an individual who is
35an eligible beneficiary in respect of the disposal in question
(“the individual concerned”).

(2) For the purposes of this section there is an “excess amount” in
relation to the individual concerned if the aggregate of—

(a) the amount of the current gain,

(b) 40the total amount of any gains that, in relation to earlier
disposals made by the individual concerned, were charged at
the rate in section 169VC(2), and

(c) the total amount of any reckonable trust gains that, on any
previous trust disposals in respect of which the individual
45concerned was an eligible beneficiary, were charged at the
rate in section 169VC(2),

exceeds £10 million.