Finance (No. 3) Bill (HL Bill 304)

(6) For the purposes of this paragraph the election ceases to have
effect in “disqualifying circumstances” if—

(a) it ceases to have effect as a result of a notice of revocation
under paragraph 15(5)(a) in a case where a designated
5officer of Revenue and Customs is of the opinion that there
have been at least three serious breaches of provision made
by or under paragraph 15 during the period for which the
election has had effect, or

(b) it ceases to have effect as a result of a notice of revocation
10under paragraph 18(1).

(7) In this paragraph “the relevant time” means the time immediately
before—

(a) the election ceases to have effect, or

(b) the relevant fund manager starts to take steps with a view
15to the disposal of all or the assets of the relevant fund so
that it can be wound up.

(8) For the purposes of this paragraph an election made under
paragraph 12 in respect of Q is taken to be the same election as one
made at a subsequent time in respect of another qualifying fund or
20qualifying company (“A”) if, at the subsequent time, Q is wholly
owned by A.

Exemption for disposals by companies wholly owned by certain investors

33 (1) This paragraph applies if an election under paragraph 12 has been
made in respect of a qualifying fund or qualifying company.

(2) 25If—

(a) a participant in the relevant fund disposes of a unit in the
relevant fund,

(b) the participant is a company which is wholly owned by
one or more investors to which this paragraph applies, and

(c) 30the participant is not a collective investment vehicle,

any gain accruing on the disposal is not a chargeable gain.

(3) Nothing in paragraph 21 is to result in a deemed disposal of an
asset held by any investor to which this paragraph applies other
than an insurance company.

(4) 35Each of the following is an investor to which this paragraph
applies—

(a) any person who is a qualifying institutional investor
within the meaning of Schedule 7AC (substantial
shareholding exemption),

(b) 40a company carrying on life assurance business where,
immediately before the disposal, its right or interest in the
participant is an asset which, applying the rules in section
138 of the Finance Act 2012, is wholly matched to a liability
of its life assurance business that is not BLAGAB,

(c) 45a company carrying on long-term business none of which
is BLAGAB where, immediately before the disposal, its
right or interest in the participant is an asset held for the
purposes of its long-term business, and

(d) a qualifying fund or qualifying company in respect of
which an election under paragraph 12 has effect.

(5) In this paragraph “BLAGAB” means basic life assurance and
general annuity business.

5Disapplication of paragraph 3A of Schedule 7AC: qualifying institutional investors

34 (1) This paragraph applies if—

(a) a gain or loss accrues to a company (“the investing
company”) which has ordinary share capital owned by one
or more qualifying institutional investors,

(b) 10some of the gain or loss is not chargeable or allowable as a
result of paragraph 16(3), and

(c) some or all of the ownership of the qualifying institutional
investors in the investing company is through the
company which is Q for the purposes of paragraph 16(3).

(2) 15The ownership of the qualifying institutional investors in the
investing company is to be ignored for the purpose of applying the
exemption conferred by paragraph 3A of Schedule 7AC so far as
the ownership is through Q.

(3) In this paragraph “qualifying institutional investors” has the same
20meaning as in Schedule 7AC.

(4) Paragraph 3B of Schedule 7AC (meaning of “ownership”) applies
for the purposes of this paragraph as it applies for the purposes of
paragraph 3A of that Schedule.

Relationship between rules in this Part and REIT rules in Part 12 of CTA 2010

35 (1) 25Nothing in this Part of this Schedule is to exempt so much of any
qualifying REIT gain as accrues on a disposal made by a company
which is, or is a member of, a UK REIT.

(2) A chargeable gain is a “qualifying REIT gain” so far as—

(a) the gain is not a chargeable gain as a result of section 535
30or 535A of CTA 2010, and

(b) the gain is not one falling to be exempted as a result of the
application of either of those sections following a notice
given under section 586(1) or 587(1) of that Act (venturing
group).

(3) 35In this paragraph “UK REIT” has the same meaning as in Part 12
of CTA 2010.

36 (1) This paragraph applies if—

(a) a gain accrues on a disposal made by a company (“the JV
company”) which is a member of a group UK REIT,

(b) 40the gain is one falling to be exempted as a result of the
application of section 535 or 535A of CTA 2010 following a
notice given under section 586(1) or 587(1) of that Act
(venturing group),

(c) the principal company of the group UK REIT that gave the
notice is covered by an election made under paragraph 12
in respect of a qualifying fund, and

(d) the JV company is also covered by the election.

(2) 5The amount of the gain accruing to the JV company which is not a
chargeable gain as a result of the operation, by reference to the
election, of the rules in this Part of this Schedule—

(a) is found by first taking the two steps mentioned below
(which require the application of each of the exemption
10rules without regard to the other), and

(b) once those two steps are taken, is so much of the amount
found by the first step as exceeds the amount found by the
second step.

(3) The first step is, ignoring the effect of Part 12 of CTA 2010, to apply
15the rules in this Part of this Schedule that operate by reference to
the election to identify the amount of the gain which (but for this
paragraph) would not be chargeable.

(4) The second step is, ignoring the effect of this Part of this Schedule,
to apply the rules in Part 12 of CTA 2010 that operate in relation to
20the group UK REIT to identify the amount of the gain accruing to
the JV company which falls to be exempted as mentioned in sub-
paragraph (1)(b).

(5) In the case of a disposal, a company is “covered by an election
made under paragraph 12” for the purposes of this paragraph if
25the disposal is one to which paragraph 16 applies where the
election concerned is the one referred to in this paragraph.

(6) In this paragraph “group UK REIT” has the same meaning as in
Part 12 of CTA 2010.

Separate application of exemptions under this Schedule and elsewhere

37 (1) 30If—

(a) a person disposes of a right or interest in a company on
which a gain or loss accrues, and

(b) proportions of the gain or loss are not chargeable or
allowable as a result of the operation of any relevant
35exemption provision,

each relevant exemption provision is to work separately (without
regard to the other) in relation to each proportion of the gain or
loss to which the relevant exemption provision applies.

(2) Accordingly—

(a) 40each relevant exemption provision is to operate by
reference to the whole of the gain or loss (ignoring the
effect of the other relevant exemption provision), and

(b) the total proportion of the gain or loss which is not
chargeable or allowable is the total of the proportions
45separately found (but not so as to exceed the whole
amount of the gain or loss).

(3) Each of the following is a “relevant exemption provision” for the
purposes of this paragraph—

(a) any provision made by this Part of this Schedule,

(b) any provision made by paragraph 3A of Schedule 7AC,
5and

(c) any provision made by Part 12 of CTA 2010.

(4) This paragraph is subject to paragraphs 34 to 36.

Meaning of meeting “the applicable exemption conditions”

38 (1) For the purposes of Part of this Schedule a qualifying fund “meets
10the applicable exemption conditions” at any time if, at that time—

(a) it is a collective investment vehicle, and

(b) it meets the entitlement conditions set out in paragraph
12(2).

(2) For the purposes of Part of this Schedule a qualifying company
15“meets the applicable exemption conditions” at any time if, at that
time, it meets the entitlement conditions set out in paragraph
12(3).

Meaning of “the relevant fund” and “the relevant fund manager”

39 (1) In this Part of this Schedule “the relevant fund”—

(a) 20in the case of an election in respect of a qualifying fund
under paragraph 12, means the collective investment
vehicle concerned, and

(b) in the case of an election in respect of a qualifying company
under paragraph 12, means the collective investment
25scheme which wholly (or almost wholly) owns that
company.

(2) In this Part of this Schedule “the relevant fund manager”, in the
case of an election in respect of a qualifying fund or qualifying
company under paragraph 12, means the manager of the relevant
30fund.

Meaning of “wholly owned” or “wholly (or almost wholly) owned”

40 (1) For the purposes of this Part of this Schedule a collective
investment scheme, or a person or persons together, wholly owns
or own a company at any time if the scheme, or person or persons
35together, has or have a 100% investment in the company at that
time.

(2) Whether a scheme, or person or persons together, have a 100%
investment in a company at any time is determined—

(a) by applying a modified version of the rule in paragraph 9
40of Schedule 1A, and,

(b) in the case of a collective investment scheme, on the
assumption that it is a person.

(3) The reference here to a modified version of the rule in paragraph
9 of Schedule 1A is to the rule in that paragraph as it has effect

without regard to paragraph 10 and as if in sub-paragraph (1) of
paragraph 9 the following modifications were made—

(a) for the opening words substitute “A person or persons
together (“P”) has or have a 100% investment in a company
5(“C”) if all of the following conditions are met—”,

(b) omit paragraph (a),

(c) in each of paragraphs (b), (c) and (d), for “25% or more”
substitute “100%”, and

(d) for the “or” at the end of paragraph (c) substitute “and”.

41 (1) 10For the purposes of this Part of this Schedule a collective
investment scheme or person wholly (or almost wholly) owns a
company at any time if—

(a) the scheme or person wholly owns the company at that
time, or

(b) 15the scheme or person has a 99% investment in the
company at that time.

(2) Whether a scheme or person has a 99% investment in a company
at any time is determined—

(a) by applying a modified version of the rule in paragraph 9
20of Schedule 1A, and,

(b) in the case of a collective investment scheme, on the
assumption that it is a person.

(3) The reference here to a modified version of the rule in paragraph
9 of Schedule 1A is to the rule in that paragraph as it has effect
25without regard to paragraph 10 and as if in sub-paragraph (1) of
paragraph 9 the following modifications were made—

(a) omit paragraph (a),

(b) for “25%”, in each place, substitute “99%”, and

(c) for the “or” at the end of paragraph (c) substitute “and”.

30Meaning of “designated HMRC officer”

42 In this Part of this Schedule “designated HMRC officer” means an
officer of Revenue and Customs who has been designated by the
Commissioners for Her Majesty’s Revenue and Customs for the
purpose of revoking elections under paragraph 12.

35Part 5 Reporting and payment

Reporting by collective investment vehicles

43 (1) The Treasury may by regulations make provision for managers of
collective investment vehicles to elect to provide information to an
40officer of Revenue and Customs in respect of any participant in the
vehicle who holds units the disposal of which would constitute an
indirect disposal of UK land.

(2) The regulations may specify circumstances in which the provision
of information or documents in accordance with the regulations is
45taken to satisfy obligations of the participant (or anyone else) to

provide information or documents to an officer of Revenue and
Customs.

(3) The regulations may be framed so as to apply to obligations of a
description specified in the regulations.

5Withholding of amounts on account of capital gains tax

44 (1) The Treasury may by regulations make provision for managers of
collective investment vehicles to elect to meet the liability to
capital gains tax or corporation tax in respect of indirect disposals
of UK land made by any participant in the vehicle.

(2) 10The regulations may make provision for a simplified calculation of
the tax liability of the participant in respect of those disposals.

(3) The regulations may make provision authorising the manager of a
collective investment vehicle (or anyone else of a description
specified in the regulations) to deduct an amount on account of
15capital gains tax from amounts that would otherwise be receivable
by the participant.

(4) The regulations—

(a) may provide for the times at which amounts deducted on
account of capital gains tax are to be paid to Her Majesty’s
20Revenue and Customs, and

(b) may set out the extent to which those payments meet the
liability of the participant to capital gains tax or
corporation tax in respect of any indirect disposal of UK
land.

25General

45 (1) Regulations under this Part of this Schedule—

(a) may make different provision for different purposes, and

(b) may make supplementary, incidental, consequential or
transitional or saving provision.

(2) 30Regulations under this Part of this Schedule may make provision
having effect in relation to times before the regulations are made.

Part 6 General

Meaning of “close company”, “qualifying investor” and “direct or indirect
35participator”

46 (1) This paragraph has effect for the purposes of the provisions of this
Schedule which apply this paragraph (or to which this paragraph
is applied).

(2) Whether a company is “a close company” is determined in
40accordance with the rules in Chapter 2 of Part 10 of CTA 2010 but
subject to the following modifications—

(a) section 442(a) (non-UK resident companies) is to be treated
as omitted,

(b) section 444 (companies involved with non-close
companies) is to be treated as omitted,

(c) 5section 447(1)(a) (shares in quoted companies beneficially
held by non-close companies) is to be treated as omitted,
and

(d) for the purposes of any attribution under section 451(4)
(rights of a person’s associates to be attributed to the
10person etc in determining “control”) the rights and powers
of a person (“A”) are not to be attributed to another person
(“P”) merely because A is a partner of P.

(3) A “qualifying investor” means—

(a) a person who is within any of section 528(4A)(a), (b), (c), (i)
15or (j) of CTA 2010 where, if the collective investment
vehicle mentioned in the provision concerned is a
company, it meets the non-close condition or, if not, the
vehicle meets the genuine diversity of ownership
condition,

(b) 20a person who is within any other provision of section
528(4A) of that Act, or

(c) a qualifying fund or qualifying company in respect of
which an election under paragraph 12 has effect.

(4) For the purposes of sub-paragraph (3)(a) a collective investment
25vehicle meets the genuine diversity of ownership condition at any
time if, at that time—

(a) it meets conditions A to C of regulation 75 of the Offshore
Funds (Tax) Regulations 2009, or

(b) it meets the condition in regulation 75(5) of those
30Regulations,

and those Regulations apply for the purposes of this sub-
paragraph as if any collective investment vehicle which is not an
offshore fund were regarded as an offshore fund.

(5) For the purposes of sub-paragraph (3)(a) a company meets the
35non-close condition at any time if, at that time, it—

(a) is not a close company, or

(b) is a close company but only because it has a qualifying
investor as a direct or indirect participator,

applying the provisions of this paragraph for the purposes of this
40sub-paragraph.

(6) A person is a “direct participator” if the person is a participator for
the purposes of Part 10 of CTA 2010 (see section 454).

(7) A person is an “indirect” participator in a company if the person
has a share or interest in the capital or income of the company
45through another body corporate or other bodies corporate.

(8) The reference here to having a share or interest in the capital or
income of a company through a body corporate is to be read as
follows.

(9) Suppose that 3 or more bodies corporate are ordered in a series
such that each body in the series (other than the last) has a share
or interest in the capital or income of the body immediately below
it in the series.

(10) 5If B is a body that is below, but not immediately below, A in the
series, A is said to own a share or interest in the capital or income
of B through each body corporate that is between A and B in the
series.

(11) A person is regarded for the purposes of sub-paragraphs (7) to (10)
10as having a share or interest in the capital or income of a company
if the person would be a participator in the company as a result of
section 454(2) of CTA 2010.

Other definitions

47 (1) In this Schedule—

• 15“double taxation arrangements” means arrangements having
  effect under section 2(1) of TIOPA 2010,

• “interest in UK land” is to be read in accordance with section
  1C,

• “the manager”, in relation to a collective investment vehicle,
  20means—

  (a)

  any person who is the manager of the property that is
  the subject of or held by the vehicle, or

  (b)

  any other person who has, or is expected to have, day-
  to-day control of that property, and

• 25“prospectus”, in relation to a collective investment vehicle,
  means any document (however described) which is made
  available to investors and which sets out descriptions of
  the investments to be made, or intended to be made, by the
  vehicle.

(2) 30For the purposes of this Schedule—

(a) a reference to a direct disposal of UK land is to a disposal
of an interest in UK land, and

(b) a reference to an indirect disposal of UK land is to a
disposal of an asset deriving at least 75% of its value from
35UK land.

(3) For this purpose the reference to a disposal of an asset deriving at
least 75% of its value from UK land is to be read in accordance with
Part 2 of Schedule 1A.

Power to make provision in relation to UK property rich collective investment vehicles
40etc

48 (1) The Treasury may by regulations make provision for the purposes
of any provision of this Act in relation to—

(a) collective investment vehicles that are UK property rich, or

(b) investments made (directly or indirectly) by collective
45investment vehicles in companies that are UK property
rich.

(2) Among other things, the regulations—

(a) may amend any provision made by this Schedule, or

(b) may disapply any provision made by or under this Act or
provide for any provision made by or under this Act to
5have effect with modifications specified in the regulations.

(3) The regulations may make provision having effect in relation to
times before the regulations are made.

(4) The regulations—

(a) may make different provision for different purposes, and

(b) 10may make supplementary, incidental, consequential or
transitional or saving provision.

Part 7 Transitional provision

Elections for transparency under paragraph 8

49 (1) 15This paragraph applies in the case of an offshore collective
investment vehicle to which paragraph 8 applies which was
constituted before 6 April 2019.

(2) Paragraph 9(1)(c) has effect as if it permitted the election under
paragraph 8 to be made before 6 April 2020.

(3) 20The election is to have effect in relation to disposals made on or
after 6 April 2019 (so that paragraph 8(2) has effect subject to this
sub-paragraph).

(4) If a person is a participant in the vehicle on 6 April 2019—

(a) the making of an election under paragraph 8 is not to be
25regarded as being a disposal of the person’s units in the
vehicle, and

(b) any question arising for the purposes of this Act, in
relation to a disposal on or after 6 April 2019 of the
person’s units in the vehicle, is to be determined as if the
30election under paragraph 8 had had effect in relation to all
times on or after the vehicle’s constitution.

Elections under paragraph 12 and information about disposals by participants

50 Nothing in paragraph 14 requires information about disposals
made before 6 April 2019.”

Part 2 Consequential amendments

TMA 1970

22 In TMA 1970, after section 8B insert—

“8C 5 Returns so far as relating to capital gains tax

(1) This section applies if—

(a) the amount of chargeable gains accruing to a person in a tax
year does not exceed the annual exempt amount for the year
applicable to the person under section 1K of the 1992 Act,

(b) 10the total amount or value of the consideration for all
chargeable disposals of assets made by the person in the year
does not exceed four times that annual exempt amount,

(c) the person is not a remittance-basis individual for the year,
and

(d) 15a notice under section 8 or 8A is given to the person requiring
information for the purpose of establishing the amount in
which the person is chargeable to capital gains tax for the
year.

(2) If the person makes a statement confirming the matters set out in
20subsection (1)(a) to (c), the statement constitutes sufficient
compliance with that requirement.

(3) For the purposes of this section every disposal is a “chargeable
disposal” other than—

(a) a disposal on which any gain accruing is not a chargeable
25gain, and

(b) a disposal to which section 58 of the 1992 Act applies
(spouses and civil partners).

(4) For the purposes of this section an individual is “a remittance-basis
individual” for a tax year if—

(a) 30section 809B of ITA 2007 applies to the individual for the
year, or

(b) paragraph 2 of Schedule 1 to the 1992 Act applies in relation
to any gains that are treated as accruing to the individual in
the year as a result of paragraph 1 of that Schedule.”

35TCGA 1992

23 TCGA 1992 is amended as follows.

24 In section 16 (computation of losses), omit subsection (3).

25 (1) Section 25 (non-residents: deemed disposals) is amended as follows.

(2) In subsection (3A), for paragraph (b) substitute—

“(b) 40on ceasing to carry on the trade the asset is disposed of in
circumstances in which section 139 or 171 applies.”