Finance Bill (HC Bill 47)

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(3) The rate in section 169VC(2) applies to the current gain only to the
extent (if any) that the current gain when added to the aggregate of
the total amounts mentioned in subsection (2)(b) and (c) does not
exceed £10 million.

(4) 5Section 4 (rates of capital gains tax) applies to so much of the current
gain as is not subject to the rate in section 169VC(2).

(5) In this section—

  • “the current gain” means the reckonable trust gain on the
    disposal in question;

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

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

    (a)

    15if section 169VI(1)(c) applies 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)

    otherwise, the relevant gain on that disposal;

  • 20“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.

Claims for relief

169VM Claims for relief

(1) 25Any claim for investors’ relief must be made—

(a) in the case of a disposal by an individual, by that individual;

(b) in the case of a disposal by the trustees of a settlement, jointly
by—

(i) the trustees, and

(ii) 30the eligible beneficiary in respect of the disposal,
within the meaning given by section 169VH(2) (or, if
more than one, all those eligible beneficiaries).

(2) Any claim for investors’ relief in respect of a disposal must be made
on or before the first anniversary of the 31 January following the tax
35year in which the disposal is made.

Reorganisations

169VN Reorganisations where no consideration given

(1) This section applies where—

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

(b) 40immediately 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) on the reorganisation that person does not give or become
45liable to give any consideration for, or for any part of, a new
holding, and

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(d) at 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
5relation 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) 10Subsections (4) and (5) apply for the purposes of 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 (“the new holding concerned”).

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

(a) 15subscribed for by the qualifying person,

(b) issued 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”),

20the following assumption is to be made.

(5) That 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) 25had by the time immediately after the reorganisation already
been held continuously by that person for the period
concerned.

(6) In subsections (4) and (5)—

  • “the appropriate number” has the meaning given by section
    30169VO;

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

  • “the new shares” means the shares that immediately after the
    35reorganisation were in the new holding concerned (including
    such, if any, of the original shares as remained after the
    reorganisation 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) 40Section 169VE applies to determine, for the purposes of this Chapter,
which shares are included in a holding immediately before a
reorganisation as it applies for the purposes of determining which
shares are included in a holding immediately before a particular
disposal.

(9) 45References in this section to consideration are to be read in
accordance with section 128(2).

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169VO The appropriate number

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


where—

  • A is the number of the original shares that were—

    (a)

    subscribed for by the qualifying person,

    (b)

    10issued on the relevant issue date, and

    (c)

    continuously held by that person for the period
    concerned, and

  • B is the total number of the original shares.

(2) In this section—

  • 15“the new holding concerned” has the meaning given by section
    169VN(3);

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

  • “the relevant issue date” has the meaning given by section
    20169VN(4);

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

169VP Reorganisations where consideration given

(1) This section applies where—

(a) 25there 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) 30on 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
35holding, 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
40relation 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.

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(3) In 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
5taken to be their actual date of issue (rather than the date of
issue of any of the original shares), and

(b) in relation to any part of the new holding for which
consideration was not given, sections 169VN(3) to (6) and
169VO apply but as if any reference to the new holding
10concerned were to that part of the new holding.

(4) Section 169VN(3) to (6) and 169VO 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) 15In this section a reference to the “status” of a share is to whether it is
qualifying, potentially qualifying or excluded.

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

169VQ Exchange of shares for those in another company

(1) 20This section applies where section 135 applies in relation to an issue
of shares in a company (“company B”) in exchange for shares in
another company (“company A”).

(2) For the purposes of sections 169VN to 169VP—

(a) companies A and B are to be treated as if they were the same
25company, and

(b) the exchange of shares is to be treated as if it were a
reorganisation of that company’s share capital.

169VR New shares issued on scheme of reconstruction

(1) This section applies where—

(a) 30section 136 applies in relation to an arrangement between a
company (“company A”) and the persons holding shares, or
any class of shares, in company A, under which another
company (“company B”) issues shares to those persons, and

(b) under section 136(2)(a) those persons are treated as
35exchanging shares in company A for the shares held by them
in consequence of the arrangement.

(2) For the purposes of sections 169VN to 169VP—

(a) companies A and B are to be treated as if they were the same
company, and

(b) 40the exchange of shares is to be treated as if it were a
reorganisation of that company’s share capital.

(3) In the following provisions of this Chapter, any reference to an
exchange of shares includes anything that section 136(2)(a) treats as
an exchange of shares.

169VS 45 Modification of conditions for being a qualifying share

(1) This section applies where—

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(a) an ordinary share (“the original share”) is subscribed for by a
qualifying person (“the investor”);

(b) the conditions in section 169VB(2)(c) and (d) are met in
relation to the original share,

(c) 5the share is involved in an exchange of shares treated under
section 169VQ or 169VR as a reorganisation of share capital,
and accordingly is included in the original shares within the
meaning of section 169VN(6), and

(d) subsequently there is a disposal of all or part of a holding of
10shares that in relation to that exchange is a new holding
within the meaning given by section 169VN(2).

(2) As respects a share which is in that holding immediately before that
disposal, the conditions in section 169VB(2)(f) and (g) are to be
regarded as met if (and only if)—

(a) 15in relation to the period beginning with the issue of the
original share and ending with the exchange of shares, those
conditions were met by the original share, and

(b) in relation to the period beginning with the exchange of
shares and ending with the disposal, those conditions were
20met by a share representing the original share.

(3) Accordingly—

(a) in section 169VB(2)(f) and (g) as they apply to the original
share, any reference to the share-holding period is to be read
as to the period mentioned in subsection (2)(a) above, and

(b) 25in section 169VB(2)(f) and (g) as they apply to a share
representing the original share, any reference to the share-
holding period is to be read as to the period mentioned in
subsection (2)(b) above.

(4) In subsection (1)(c) “the share” includes a share that, following a
30reorganisation or following an exchange of shares in relation to
which section 169VQ or 169VR applies, represents the original share,
and subsections (2) and (3) apply in such a case with the necessary
modifications.

169VT Election to disapply section 127

(1) 35This section applies where—

(a) there is—

(i) a reorganisation (within the meaning of section 126),
or

(ii) an exchange of shares which is treated as such a
40reorganisation by virtue of section 135 or 136, and

(b) the original shares and the new holding would fall to be
treated by virtue of section 127 as the same asset.

(2) If an election is made under this section, a claim for investors’ relief
may be made as if the reorganisation or exchange of shares involved
45a disposal of the original shares; and if such a claim is made section
127 and sections 169VN to 169VS do not apply.

(3) Any election under this section must be made—

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(a) if the reorganisation or exchange of shares would (apart from
section 127) involve a disposal by the trustees of a settlement,
jointly by—

(i) the trustees, and

(ii) 5the person who if the disposal were made would be
the eligible beneficiary in respect of the disposal,
within the meaning given by section 169VH(2) (or, if
more than one, all the persons who would be such
eligible beneficiaries);

(b) 10otherwise, by the individual concerned.

(4) Any election under this section must be made on or before the first
anniversary of the 31 January following the tax year in which the
reorganisation or exchange of shares takes place.

(5) In this section “the original shares” and “the new holding” have the
15meaning given by section 126.

Supplemental

169VU “Subscribe” etc

(1) For the purposes of this Chapter (other than this subsection) a person
“subscribes for” a share in a company if—

(a) 20that person subscribes for the share,

(b) the share is issued to that person by the company for
consideration consisting wholly of cash,

(c) the share is fully paid up at the time it is issued,

(d) the share is subscribed for, and issued, for genuine
25commercial reasons and not as part of arrangements the main
purpose, or one of the main purposes, of which is to secure a
tax advantage to any person, and

(e) the share is subscribed for, and issued, by way of a bargain at
arm’s length.

(2) 30In subsection (1) “arrangements” and “tax advantage” have the same
meaning as in section 16A.

(3) If—

(a) an individual (“A”) subscribed for, or is treated under this
subsection as having subscribed for, any shares,

(b) 35A transferred the shares to another individual (“B”) during
their lives, and

(c) A was living together with B as B’s spouse or civil partner at
the time of the transfer,

B is to be treated for the purposes of this Chapter as having
40subscribed for the shares.

(4) Accordingly, for the purposes of this Chapter any period for which
A held the shares continuously is to be added to, and treated as part
of, the period for which B held the shares continuously.

(5) In this Chapter, apart from subsections (3) and (4), references to a
45person’s having subscribed for a share include the person’s having
subscribed for the share jointly with any other person (and

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references to a person’s holding a share or to a share being issued to
a person are to be read accordingly).

169VV “Trading company” etc

(1) In this Chapter “trading company” and “the holding company of a
5trading group” have the same meaning as in section 165 (see section
165A).

(2) For the purposes of this Chapter a company is not to be regarded as
ceasing to be a trading company, or the holding company of a
trading group, merely because of anything done in consequence of—

(a) 10the company, or any of its subsidiaries, being in
administration or receivership, or

(b) a resolution having been passed, or an order made, for the
winding up of the company or any of its subsidiaries.

(3) But subsection (2) applies only if—

(a) 15the entry into administration or receivership, or the
resolution or order for winding up, and

(b) everything done as a result of the company concerned being
in administration or receivership, or as a result of that
resolution or order,

20is for genuine commercial reasons and is not part of a scheme or
arrangement the main purpose or one of the main purposes of which
is the avoidance of tax.

169VW “Relevant employee”

(1) This section applies to determine for the purposes of—

(a) 25section 169VB(2)(g), or

(b) section 169VH(2)(c),

whether a particular person has at any time in the relevant period
been a “relevant employee” in respect of the issuing company.

(2) A person who has at any time in the relevant period been an officer
30or employee of—

(a) the issuing company, or

(b) a connected company,

is to be regarded as having at that time been a relevant employee in
respect of the issuing company, but this is subject to subsections (3)
35and (5).

(3) If—

(a) a person is an unremunerated director of the issuing
company or a connected company at any time in the relevant
period, and

(b) 40the condition in subsection (4) is met,

the fact that the person holds that directorship at that time does not
make the person a relevant employee in respect of the issuing
company at that time.

(4) The condition referred to in subsection (3) is that at no time before the
45relevant period had the person mentioned in that subsection, or a
person connected with that person, been—

(a) connected with the issuing company, or

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(b) involved in carrying on (whether on the person’s own
account or as a partner, director or employee) the whole or
any part of the trade, business or profession carried on by the
issuing company or a company connected with that
5company.

(5) If—

(a) a person becomes an employee of the issuing company or a
connected company at a time which is—

(i)(i) within the relevant period, but

(ii) 10not within the first 180 days of that period,

(b) at the beginning of the relevant period, there was no
reasonable prospect that the person would become such an
employee within the relevant period, and

(c) the person is not at any time in the relevant period a director
15of the issuing company or a connected company,

that employment of the person does not make the person a relevant
employee in respect of the issuing company at any time in the
relevant period.

(6) For the purposes of subsection (5) there is a “reasonable prospect” of
20a thing if it is more likely than not.

(7) In this section—

  • “director” is to be read in accordance with section 452 of CTA
    2010,

  • “connected company” means a company which at any time in
    25the relevant period is connected with the issuing company
    (and it does not matter for this purpose whether that time is
    a time when the person in question is an officer or employee
    of either company);

  • “the issuing company” means the company mentioned in (as
    30the case may be) section 169VB(2)(g) or section 169VH(2)(c);

  • “the relevant period” means the period mentioned in (as the
    case may be) section 169VB(2)(g) or section 169VH(2)(c);

  • “unremunerated director” has the meaning given by section
    169VX.

169VX 35 “Unremunerated director”

(1) For the purposes of section 169VW a person (“the person
concerned”) is an “unremunerated director” of the issuing company
or a connected company at a particular time in the relevant period if
that person is a director of that company at that time and—

(a) 40does not receive in the relevant period any disqualifying
payment from the issuing company or a related person, and

(b) is not entitled to receive any such payment in respect of that
period or any part of it.

(2) In this section “disqualifying payment” means any payment other
45than—

(a) a payment or reimbursement of travelling or other expenses
wholly, exclusively and necessarily incurred by the person
concerned in the performance of his or her duties as a
director,

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(b) any interest which represents no more than a reasonable
commercial return on money lent to the issuing company or
a related person,

(c) any dividend or other distribution which does not exceed a
5normal return on the investment to which the dividend or
distribution relates,

(d) any payment for the supply of goods which does not exceed
their market value,

(e) any payment of rent for any property occupied by the issuing
10company or a related person which does not exceed a
reasonable and commercial rent for the property, or

(f) any necessary and reasonable remuneration which is—

(i) paid for qualifying services that are provided to the
issuing company or a related person in the course of
15a trade or profession carried on wholly or partly in the
United Kingdom, and

(ii) taken into account in calculating for tax purposes the
profits of that trade or profession.

(3) In this section a “related person” means—

(a) 20a connected company of which the person concerned is a
director, or

(b) any person connected with the issuing company or with a
company within paragraph (a).

(4) In this section any reference to a payment to the person concerned
25includes a payment made to that person indirectly or to that person’s
order or for that person’s benefit.

(5) In this section “qualifying services” means services which are—

(a) not secretarial or managerial services, and

(b) not services of a kind provided by the person to whom they
30are provided.

(6) In this section the following expressions have the same meaning as
in section 169VW—

  • “connected company”;

  • “director”;

  • 35“issuing company”;

  • “relevant period”.

169VY General definitions

In this Chapter—

  • “employee” (except in the expression “relevant employee”,
    40which is to be read in accordance with section 169VW) has
    the meaning given by section 4 of ITEPA 2003;

  • “employment” has the meaning given by section 4 of ITEPA
    2003;

  • “exchange of shares” is to be read in accordance with section
    45169VR(3);

  • “excluded share” has the meaning given by section 169VB;

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  • a “holding” of shares in a company means a holding of such
    shares which by virtue of section 104(1) is to be regarded as a
    single asset;

  • “investors’ relief” has the meaning given by section 169VA(3);

  • 5“office” has the meaning given by section 5(3) of ITEPA 2003;

  • “ordinary shares”, in relation to a company, means any shares
    forming part of the company’s ordinary share capital (within
    the meaning given by section 989 of ITA 2007);

  • “potentially qualifying share” has the meaning given by section
    10169VB;

  • “qualifying person” has the meaning given by section 169VC(7);

  • “qualifying share” has the meaning given by section 169VB;

  • “subscribe” is to be read in accordance with section 169VU;

  • “trading company” and “the holding company of a trading
    15group” are to be read in accordance with section 169VV.”

3 After Schedule 7ZA of TCGA 1992 (inserted by Schedule 13) insert—

“Schedule 7ZB Section 169VB Investors’ relief: disqualification of shares

Disqualification of shares where value received in period of restriction

1 (1) Sub-paragraph (2) applies where—

(a) 20shares in a company are issued to a qualifying person (“the
investor”) on a particular date,

(b) any of those shares would, apart from this Schedule, be or
be treated as being qualifying shares or potentially
qualifying shares at a particular time (“the relevant time”),
25and

(c) the investor receives any value, other than insignificant
value, from the company at any time in the period of
restriction.

(2) The shares in question are to be treated for the purposes of this
30Chapter as being excluded shares at the relevant time.

(3) Where—

(a) the investor receives value (“the relevant receipt”) from the
company during the period of restriction,

(b) the investor has received from the company one or more
35receipts of insignificant value at a time or times—

(i) during that period, but

(ii) not later than the time of the relevant receipt, and

(c) the aggregate amount of the value of the receipts within
paragraphs (a) and (b) is not an amount of insignificant
40value,

the investor is to be treated for the purposes of this Schedule as if
the relevant receipt had been a receipt of an amount equal to that
aggregate amount.