Finance (No. 3) Bill (HC Bill 282)

(c) in subsections (7) and (7B)(b) and (c), for “1 year” substitute “2
years”, and

(d) after subsection (7) insert—

“(7ZA) If, in any case where an individual disposes of any shares in
5a company—

(a) there has been an issue of shares in the company to
the individual following a relevant business transfer,
and

(b) any of the issued shares constitute, or otherwise form
10part of, the shares disposed of,

the conditions in subsection (6)(a) and (b) are to be treated as
met in any period ending immediately before the transfer
throughout which the individual owned the business.

(7ZB) For the purposes of subsection (7ZA), shares have been
15issued “following a relevant business transfer” if they have
been issued wholly or partly in exchange for the transfer of a
business as a going concern, together with the whole assets of
the business or the whole of those assets other than cash.”

(3) In section 169J (disposal of trust business assets)—

(a) 20in subsection (4), for “1 year” substitute “2 years”, and

(b) in subsection (5)(a), for “1 year” substitute “2 years”.

(4) In section 169K(4) (disposal associated with relevant material disposal), for
“1 year” substitute “2 years”.

(5) In section 169O(6) (amount of relief: special provisions for certain trust
25disposals), for “1 year” substitute “2 years”.

(6) In Schedule 7ZA (“trading company” and “trading group”), in paragraph 25
(meaning of “relevant period”)—

(a) in sub-paragraph (a), for “1 year” substitute “2 years”, and

(b) in sub-paragraphs (b) and (c), for “1 year” substitute “2 years”.

30Additional requirements relating to the beneficial ownership of companies

2 (1) Chapter 3 of Part 5 of TCGA 1992 (transfer of business assets: entrepreneurs’
relief) is amended as follows.

(2) In section 169K(1B)(a) (disposals associated with relevant material
disposal)—

(a) 35omit the “and” at the end of each of sub-paragraphs (i) and (ii), and

(b) after sub-paragraph (ii) insert—

“(“iii) beneficially entitle P to at least 5% of the
profits available for distribution to the equity
holders of the company, and

(iv) 40would beneficially entitle P, on a winding up
of the company, to at least 5% of the assets of
the company available for distribution to
equity holders, and”.

(3) In section 169LA (relevant business assets: goodwill transferred to a close
45company)—

(a) for subsection (1) substitute—

“(1) Subject to subsection (1A), subsection (4) applies if, as part of
a qualifying business disposal, a person (“P”) disposes of
goodwill directly or indirectly to a close company (“C”) and
5immediately after the disposal—

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

(b) P and any relevant connected person together hold
105% of the voting rights in C or in any relevant group
company,

(c) P and any relevant connected person together are
beneficially entitled to—

(i) 5% or more of the profits of C available for
15distribution to the equity holders of C, or

(ii) 5% or more of the profits of any relevant
group company available for distribution to
the equity holders of that company, or

(d) P and any relevant connected person together would
20be beneficially entitled—

(i) on a winding up of C, to 5% or more of the
assets available for distribution to the equity
holders of C, or

(ii) on a winding-up of any relevant group
25company, to 5% or more of the assets available
for distribution to the equity holders of that
company.”,”

(b) in subsection (1A)(a), for “subsection (1)(aa)” substitute “any of
paragraphs (a) to (d) of subsection (1)”, and

(c) 30in subsection (8), after the definition of “relevant connected person”
insert—

• “““relevant group company”, in relation to C, means any
  company which is a member of a group of companies
  of which C is a member.”

(4) 35In section 169S (interpretation of Chapter)—

(a) for subsection (3) substitute—

“(3) For the purposes of this Chapter a company is a “personal
company” in relation to an individual if the individual—

(a) holds at least 5% of the ordinary share capital of the
40company, and

(b) by virtue of that holding—

(i) may exercise at least 5% of the voting rights in
the company,

(ii) is beneficially entitled to at least 5% of the
45profits available for distribution to the equity
holders of the company, and

(iii) would be beneficially entitled, on a winding
up of the company, to at least 5% of the assets
of the company available for distribution to
50equity holders.”,”

(b) in subsection (4) for the words from “(and” to the end substitute
“and—

“(a) as able to exercise voting rights by virtue of that
holding,

(b) 5as being beneficially entitled to the profits of the
company available for distribution by virtue of that
holding, and

(c) as being beneficially entitled, on a winding up of the
company, to the assets which would be available for
10distribution by virtue of that holding.”, and

(c) after subsection (4) insert—

“(4ZA) Chapter 6 of Part 5 of CTA 2010 (group relief: equity holders
and profits or assets available for distribution) applies for the
purposes of section 169K(1B)(a), section 169LA(1) and
15subsection (3) as it applies for the purposes of the provisions
mentioned in section 157(1) of that Act but as if—

(a) in section 158 of that Act after subsection (2) there
were inserted—

"(2A) But for those purposes a person carrying on a
20business of banking is not treated as a loan
creditor of a company in respect of any loan
capital or debt issued or incurred by the
company for money lent by the person to the
company in the ordinary course of that
25business.”, and

(b) sections 171(1)(b) and (3), 173, 174 and 176 to 181 of
that Act were omitted.”

Relief where company ceases to be individual’s personal company

3 In Part 5 of TCGA 1992 (transfer of business assets), after Chapter 3
30(entrepreneurs’ relief) insert—

““CHAPTER 3A Entrepreneurs' relief where company ceases to be individual's
personal company

169SB Overview of Chapter

35This Chapter makes provision about an individual claiming
entrepreneurs’ relief in certain cases where relief would otherwise
become unavailable because of a company ceasing to be the
individual’s personal company.

169SC Election by individual where company ceases to be personal company

(1) 40If the following conditions are met, an individual may elect for this
section to have effect.

(2) The first condition is that, as a result of a relevant share issue, the
company ceases to be the individual’s personal company.

(3) The second condition is that—

(a) if, immediately before the relevant share issue, the individual
had made a disposal at their relevant value of all assets
consisting of shares in or securities of the company, the
disposal would have been a material disposal of business
5assets, and

(b) if a claim for entrepreneurs’ relief had been made in respect
of that disposal, a chargeable gain would have been treated
by section 169N(2) as accruing to the individual.

(4) Where this section has effect, the individual is to be treated for the
10purposes of this Act—

(a) as having made a disposal immediately before the relevant
share issue of all assets consisting of shares in or securities of
the company, and

(b) immediately after that event, as having reacquired those
15assets,

at their relevant value.

(5) In this section—

• “material disposal of business assets” and “personal company”
  have the same meanings as in Chapter 3 (see section 169S),

• 20“relevant share issue” means an issue of shares by the company
  where—

  (a)

  the shares are issued by the company for
  consideration consisting wholly of cash, and

  (b)

  the shares are subscribed, 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

• “relevant value” means—

  (a)

  in relation to an asset consisting of shares, an amount
  30equal to the consideration that would be apportioned
  to the asset if, immediately before the relevant share
  issue, the whole of the issued share capital of the
  company were sold for a consideration equal to its
  market value at that time, or

  (b)

  35in relation to any other asset, its market value at the
  time of the relevant share issue.

(6) For the purposes of the definition of “relevant share issue” in
subsection (5)—

• “arrangements” includes any agreement, understanding,
  40scheme, transaction or series of transactions (whether or not
  legally enforceable), and

• “tax advantage” means—

  (a)

  relief or increased relief from tax,

  (b)

  repayment or increased repayment of tax,

  (c)

  45the avoidance or reduction of a charge to tax or an
  assessment to tax, or

  (d)

  the avoidance of a possible assessment to tax,

  and for the purposes of this definition “tax” means capital
  gains tax, corporation tax or income tax.

(7) In this Chapter—

(a) references to “the notional disposal” are references to the
disposal mentioned in subsection (4)(a),

(b) references to “the notional gain” are references to the
5chargeable gain mentioned in subsection (3)(b), and

(c) references to shares in or securities of a company include
references to interests in such shares or securities.

169SD Supplementary election to defer gains until subsequent disposal

(1) An individual who makes an election under section 169SC may also
10elect that, for the purposes of this Act—

(a) no chargeable gain or allowable loss is to be treated as
accruing to the individual on the notional disposal, but

(b) a chargeable gain calculated in accordance with this section is
to be treated as accruing to the individual on any subsequent
15disposal by the individual of one or more assets consisting of
shares in or securities of the company (in addition to any gain
or loss that actually accrues on that disposal).

(2) The chargeable gain treated as accruing to the individual on a
subsequent disposal is the amount resulting from the following
20steps—

Step 1

Attribute the notional gain to each of the classes of shares in or
securities of the company which are the subject of the notional
disposal.

25The attribution must be made, in relation to each class, by reference
to the proportion that—

(a) the relevant gains (see section 169N(5)) accruing on the
notional disposal in respect of shares or securities within each
class bears to

(b) 30the total amount of relevant gains accruing on the notional
disposal.

Step 2

Apportion the amount attributed to each class under Step 1 to the
shares or securities of that class which are the subject of the
35subsequent disposal.

The apportionment must be by reference to the proportion that—

(a) the nominal value of the shares or securities of that class
which are the subject of the subsequent disposal bears to

(b) the nominal value of shares or securities of that class which
40are the subject of the notional disposal.

Step 3

The amount resulting from these steps is—

(a) the total of the amounts apportioned to shares or securities
under Step 2, but

(b) 45excluding, in relation to each class of shares or securities, so
much of those amounts as would, together with any
chargeable gains treated by this section as accruing on

previous disposals of shares or securities of that class, exceed
the amount attributed to that class under Step 1.

(3) If the subsequent disposal is a disposal by virtue of section 122, the
nominal value of shares of a particular class which are the subject of
5that disposal is to be treated for the purposes of Step 2 of subsection
(2) as being equal to the nominal value of shares of that class as are
the subject of the notional disposal.

169SE Application of section 169SD where section 116 applies

(1) This section has effect in any case where a transaction occurs to
10which section 116 (reorganisations, conversions and reconstructions)
applies.

(2) If sections 116(10)(b) and 169SD(1)(b) have effect in relation to a
subsequent disposal of the new asset—

(a) there must be calculated the chargeable gain that would have
15been treated by section 169SD(1)(b) as accruing to the
individual if, at the time of the relevant transaction, the old
asset had been disposed of immediately before that
transaction,

(b)
the whole or a corresponding part of the chargeable gain
20mentioned in paragraph (a) is to be treated as accruing on the
subsequent disposal of the whole or part of the new asset (in
addition to any gain or loss that actually accrues on that
disposal and any chargeable gain treated by section
116(10)(b) as accruing on that disposal), and

(c) 25on that subsequent disposal, section 115 (exemptions for gilt-
edged securities and qualifying corporate bonds) has effect
only in relation to any gain that actually accrues and not in
relation to any gain which is treated as accruing by virtue of
paragraph (b).

(3) 30In subsection (2) “the new asset”, “the old asset” and “the relevant
transaction” have the same meanings as in section 116.

169SF Application of section 169SD where sections 127 to 130 apply

(1) This section has effect in any case where a transaction occurs to
which sections 127 to 130 (treatment of share capital following a
35reorganisation) apply by virtue of any provision of Chapter 2 of Part
4.

(2) If a gain is treated by section 169SD(1)(b) as accruing on a subsequent
disposal of the new holding and it is necessary to apportion the gain
between shares or securities forming part of that new holding, the
40apportionment must be made in the same proportions as those in
which the costs of acquisition of the original shares fall to be
apportioned under the provisions of that Chapter.

(3) If subsection (3) of section 128 (consideration given or received by
holder) has effect in relation to an individual, the individual is
45treated for the purposes of section 169SD as making the disposal of
the interest in the original shares mentioned in that subsection.

(4) In this section “the new holding” and “the original shares” have the
same meanings as in sections 127 to 130 (see section 126).

169SG Elections under sections 169SC and 169SD

(1) An election under section 169SC or 169SD is irrevocable.

(2) An election under section 169SC must be made on or before the first
anniversary of the 31 January following the tax year in which the
5notional disposal is made (“the relevant tax year”).

(3) An election under section 169SD may not be made more than 4 years
after the end of the relevant tax year.

(4) If—

(a) an individual makes an election under both sections 169SC
10and 169SD, and

(b) a tax return under the Management Act would not otherwise
be required for the relevant tax year,

the individual may make the elections by giving notice on or before
the first anniversary of the 31 January following the relevant tax year.

169SH 15 Claims for relief in respect of subsequent disposals

(1) Where, as a result of an election under section 169SD, a chargeable
gain is to be treated as accruing on a subsequent disposal, the
following rules have effect.

(2) The individual making the subsequent disposal must make a claim
20for entrepreneurs’ relief on or before the first anniversary of the 31
January following the first tax year in which, as a result of the
election, the chargeable gain is to be treated as accruing.

(3) The chargeable gain is to be treated for the purposes of section 169N
as the amount resulting from a calculation under subsection (1) of
25that carried out when that chargeable gain accrues and because of the
claim mentioned in subsection (2).

(4) If the chargeable gain is a part only of the notional gain, each
chargeable gain that subsequently accrues is to be treated for the
purposes of section 169N as the amount resulting from a calculation
30under subsection (1) of that section carried out when that chargeable
gain arises and because of the claim mentioned in subsection (2).

(5) In relation to the claim for entrepreneurs’ relief in respect of the
chargeable gain, the company is to be treated for the purposes of
condition A in section 169I(6) as if it were, throughout the period of
352 years ending with the date of the subsequent disposal, the
individual’s personal company.”

Commencement

4 (1) Subject as follows, the amendments made by paragraph 1 of this Schedule
have effect in relation to disposals on or after 6 April 2019.

(2) 40The amendments made by paragraph 1(2)(b), (3)(b) and (4) do not have
effect in relation to a disposal where the time at which the business ceases to
be carried on is before 29 October 2018.

(3) The amendments made by paragraph 1(2)(c), (3)(a) and (6)(b) do not have
effect in relation to a disposal where the date on which the company—

(a) ceases to be a trading company without continuing to be or
becoming a member of a trading group, or

(b) ceases to be a member of a trading group without continuing to be a
trading company,

5is before 29 October 2018.

(4) The amendments made by paragraph 2 of this Schedule have effect in
relation to disposals on or after 29 October 2018.

(5) The amendment made by paragraph 3 of this Schedule has effect in relation
to relevant share issues (within the meaning given by section 169SC(5) of
10TCGA 1992) which take place on or after 6 April 2019.

Section 51

SCHEDULE 16 VAT treatment of vouchers

1 VATA 1994 is amended as follows.

2 In section 51B—

(a) 15in the heading, at the end insert “issued before 1 January 2019”;

(b) the existing text becomes subsection (1);

(c) after that subsection insert—

“(2) Schedule 10A does not have effect with respect to a face value
voucher (within the meaning of that Schedule) issued on or
20after 1 January 2019.”

3 After section 51B insert—

“51C Vouchers issued on or after 1 January 2019

(1) Schedule 10B makes provision about the VAT treatment of vouchers.

(2) Schedule 10B has effect with respect to a voucher (within the
25meaning of that Schedule) issued on or after 1 January 2019.

51D Postage stamps issued on or after 1 January 2019

(1) The issue of a postage stamp, and any subsequent transfer of it, is a
supply of services for the purposes of this Act.

(2) The consideration for the issue or subsequent transfer of a postage
30stamp is to be disregarded for the purposes of this Act, except to the
extent (if any) that it exceeds the face value of the stamp.

(3) The “face value” of the stamp is the amount stated on or recorded in
the stamp or the terms and conditions governing its use.

(4) This section has effect with respect to postage stamps issued on or
35after 1 January 2019.”

4 In the heading to Schedule 10A, at the end insert “issued before 1 January
2019”.

5 After Schedule 10A insert—

Section 51C

““Schedule 10B VAT treatment of vouchers issued on or after 1 January 2019

Meaning of “voucher”

1 (1) In this Schedule “voucher” means an instrument (in physical or
5electronic form) in relation to which the following conditions are
met.

(2) The first condition is that one or more persons are under an
obligation to accept the instrument as consideration for the
provision of goods or services.

(3) 10The second condition is that either or both of—

(a) the goods and services for the provision of which the
instrument may be accepted as consideration, and

(b) the persons who are under the obligation to accept the
instrument as consideration for the provision of goods or
15services,

are limited and are stated on or recorded in the instrument or the
terms and conditions governing the use of the instrument.

(4) The third condition is that the instrument is transferable by gift
20(whether or not it is transferable for consideration).

(5) The following are not vouchers—

(a) an instrument entitling a person to a reduction in the
consideration for the provision of goods or services;

(b) an instrument functioning as a ticket, for example for
25travel or for admission to a venue or event;

(c) postage stamps.

Meaning of related expressions

2 (1) This paragraph gives the meaning of other expressions used in
this Schedule.

(2) 30“Relevant goods or services”, in relation to a voucher, are any
goods or services for the provision of which the voucher may be
accepted as consideration.

(3) References in this Schedule to the transfer of a voucher do not
include the voucher being offered and accepted as consideration
35for the provision of relevant goods or services.

(4) References in this Schedule to a voucher being offered or accepted
as consideration for the provision of relevant goods or services
include references to the voucher being offered or accepted as part
consideration for the provision of relevant goods or services.

VAT treatment of vouchers: general rule

3 (1) The issue, and any subsequent transfer, of a voucher is to be
treated for the purposes of this Act as a supply of relevant goods
or services.

(2) 5References in this Schedule to the “paragraph 3 supply”, in
relation to the issue or transfer of a voucher, are to the supply of
relevant goods or services treated by this paragraph as having
been made on the issue or transfer of the voucher.

Single purpose vouchers: special rules

4 (1) 10A voucher is a single purpose voucher if, at the time it is issued,
the following are known—

(a) the place of supply of the relevant goods or services, and

(b) that any supply of relevant goods or services falls into a
single supply category (and what that supply category is).

(2) 15The supply categories are—

(a) supplies chargeable at the rate in force under section 2(1)
(standard rate),

(b) supplies chargeable at the rate in force under section 29A
(reduced rate),

(c) 20zero-rated supplies, and

(d) exempt supplies and other supplies that are not taxable
supplies.

(3) For the purposes of this paragraph, assume that the supply of
relevant goods or services is the provision of relevant goods or
25services for which the voucher may be accepted as consideration
(rather than the supply of relevant goods or services treated as
made on the issue or transfer of the voucher).

5 (1) This paragraph applies where a single purpose voucher is
accepted as consideration for the provision of relevant goods or
30services.

(2) The provision of the relevant goods or services is not a supply of
goods or services for the purposes of this Act.

(3) But where the person who provides the relevant goods or services
(the “provider”) is not the person who issued the voucher (the
35“issuer”), for the purposes of this Act the provider is to be treated
as having made a supply of those goods or services to the issuer.

Multi-purpose vouchers: special rules

6 A voucher is a multi-purpose voucher if it is not a single purpose
voucher.

7 (1) 40Any consideration for the issue or subsequent transfer of a multi-
purpose voucher is to be disregarded for the purposes of this Act.

(2) The paragraph 3 supply made on the issue or subsequent transfer
of a multi-purpose voucher is to be treated as not being a supply
within section 26(2).