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PART III |
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EIS DEFERRAL OF CHARGEABLE GAINS |
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Preliminary |
| | 26. Schedule 5B to the Taxation of Chargeable Gains Act 1992 (enterprise investment scheme: re-investment) shall be amended in accordance with the following provisions of this Part.
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Application of Schedule |
| | 27. - (1) In sub-paragraph (1)(b) of paragraph 1, after the words "in accordance with" there shall be inserted the words "section 164F or 164FA,".
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(2) For sub-paragraphs (2) and (3) of that paragraph there shall be substituted the following sub-paragraphs-
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"(2) The investor makes a qualifying investment for the purposes of this Schedule if-
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(a) eligible shares in a company for which he has subscribed wholly in cash are issued to him at a qualifying time and, where that time is before the accrual time, the shares are still held by the investor at the accrual time, |
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(b) the company is a qualifying company in relation to the shares, |
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(c) at the time when they are issued the shares are fully paid up (disregarding for this purpose any undertaking to pay cash to the company at a future date), |
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(d) the shares are subscribed for, and issued, for bona fide commercial purposes and not as part of arrangements the main purpose or one of the main purposes of which is the avoidance of tax, |
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(e) the requirements of section 289(1A) of the Taxes Act are satisfied in relation to the company, |
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(f) all the shares comprised in the issue are issued in order to raise money for the purpose of a qualifying business activity, and |
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(g) the money raised by the issue is employed not later than the time mentioned in section 289(3) of the Taxes Act wholly for the purpose of that activity,
and for the purposes of this Schedule, the condition in paragraph (g) above does not fail to be satisfied by reason only of the fact that an amount of money which is not significant is employed for another purpose.
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(3) In sub-paragraph (2) above "a qualifying time", in relation to any shares subscribed for by the investor, means-
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(a) any time in the period beginning one year before and ending three years after the accrual time, or |
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(b) any such time before the beginning of that period or after it ends as the Board may by notice allow." |
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Failure of conditions of application |
| | 28. After that paragraph there shall be inserted the following paragraph-
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"Failure of conditions of application |
| | 1A. - (1) If the condition in sub-paragraph (2)(b) of paragraph 1 above is not satisfied in consequence of an event occurring after the issue of eligible shares, the shares shall be treated for the purposes of this Schedule as ceasing to be eligible shares on the date of the event.
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(2) If the condition in sub-paragraph (2)(e) of that paragraph is not satisfied in consequence of an event occurring after the issue of eligible shares, the shares shall be treated for the purposes of this Schedule as ceasing to be eligible shares on the date of the event.
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(3) If the condition in sub-paragraph (2)(f) of that paragraph is not satisfied in relation to an issue of eligible shares, the shares shall be treated for the purposes of this Schedule as never having been eligible shares.
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(4) If the condition in sub-paragraph (2)(g) of that paragraph is not satisfied in relation to an issue of eligible shares, the shares shall be treated for the purposes of this Schedule-
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(a) if the claim under this Schedule is made after the time mentioned in section 289(3) of the Taxes Act, as never having been eligible shares; and |
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(b) if that claim is made before that time, as ceasing to be eligible shares at that time. |
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(5) None of the preceding sub-paragraphs applies unless-
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(a) the company has given notice under paragraph 16(2) or (4) below or section 310(2) of the Taxes Act; or |
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(b) an inspector has given notice to the company stating that, by reason of the matter mentioned in that sub-paragraph, the shares should, in his opinion, be treated for the purposes of this Schedule as never having been or, as the case may be, as ceasing to be eligible shares. |
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(6) The giving of notice by an inspector under sub-paragraph (5) above shall be taken, for the purposes of the provisions of the Management Act relating to appeals against decisions on claims, to be a decision refusing a claim made by the company.
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(7) Where any issue has been determined on an appeal brought by virtue of section 307(1B) of the Taxes Act (appeal against notice that relief was not due), the determination shall be conclusive for the purposes of any appeal brought by virtue of sub-paragraph (6) above on which that issue arises."
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Postponement of original gain |
| | 29. In sub-paragraph (3) of paragraph 2, for paragraph (a) there shall be substituted the following paragraph-
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"(a) the investor's qualifying expenditure on any relevant shares is the amount subscribed by him for the shares; and". |
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Chargeable events |
| | 30. - (1) In sub-paragraph (1) of paragraph 3-
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(a) in paragraphs (c) and (d), for the words "the first relevant period" there shall be substituted the words "the five year period"; and |
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(b) for paragraphs (e) and (f) there shall be substituted the words "or |
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(e) those shares cease (or are treated for the purposes of this Schedule as ceasing) to be eligible shares." |
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(2) Sub-paragraph (2) of that paragraph shall cease to have effect.
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(3) After sub-paragraph (5) of that paragraph there shall be inserted the following sub-paragraph-
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"(6) Any reference in the following provisions of this Schedule to a chargeable event falling within a particular paragraph of sub-paragraph (1) above is a reference to a chargeable event arising for the purposes of this Schedule by virtue of that paragraph."
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Gains accruing on chargeable event |
| | 31. - (1) For sub-paragraphs (2) to (4) of paragraph 4 there shall be substituted the following sub-paragraphs-
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"(2) Any question for the purposes of capital gains tax as to whether any shares to which a disposal (including a disposal within marriage) relates are shares to which deferral relief is attributable shall be determined in accordance with sub-paragraphs (3) and (4) below.
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(3) Where shares of any class in a company have been acquired by an individual on different days, any disposal by him of shares of that class shall be treated as relating to those acquired on an earlier day rather than to those acquired on a later day.
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(4) Where shares of any class in a company have been acquired by an individual on the same day, any of those shares disposed of by him shall be treated as disposed of in the following order, namely-
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(a) first any to which neither deferral relief nor relief under Chapter III of Part VII of the Taxes Act is attributable; |
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(b) next any to which deferral relief, but not relief under that Chapter, is attributable; |
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(c) next any to which relief under that Chapter, but not deferral relief, is attributable; and |
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(d) finally any to which both deferral relief and relief under that Chapter are attributable. |
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(4A) The following, namely-
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(a) any shares to which deferral relief, but not relief under Chapter III of Part VII of the Taxes Act, is attributable and which were disposed of to an individual by a disposal within marriage; and |
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(b) any shares to which relief under that Chapter is attributable and which were transferred to an individual as mentioned in section 304 of that Act,
shall be treated for the purposes of sub-paragraphs (3) and (4) above as acquired by him on the day on which they were issued.
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(4B) Chapter I of Part IV of this Act has effect subject to sub-paragraphs (2) to (4A) above.
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(4C) Sections 104, 105 and 106A shall not apply to shares to which deferral relief, but not relief under Chapter III of Part VII of the Taxes Act, is attributable."
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(2) In sub-paragraph (5)(b) of that paragraph, for the words "the assumptions for which sub-paragraph (3) above provides" there shall be substituted the words "sub-paragraphs (3) to (4A) above".
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(3) This paragraph has effect in relation to disposals made on or after 6th April 1998.
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Persons to whom gain accrues |
| | 32. In sub-paragraph (1) of paragraph 5, for paragraphs (c) and (d) there shall be substituted the words "or
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(c) to the person who holds the shares in question when they cease (or are treated for the purposes of this Schedule as ceasing) to be eligible shares." |
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Claims |
| | 33. For paragraph 6 there shall be substituted the following paragraph-
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"Claims |
| | 6. - (1) Subject to sub-paragraph (2) below, section 306 of the Taxes Act shall apply in relation to a claim under this Schedule in respect of relevant shares as it applies in relation to a claim for relief under Chapter III of Part VII of that Act in respect of eligible shares.
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(2) That section, as it so applies, shall have effect as if-
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(a) any reference to the conditions for the relief were a reference to the conditions for the application of this Schedule; |
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(b) in subsection (1), the words "(or treated by section 289B(5) as so issued)" were omitted; and |
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(c) subsections (7) to (9) were omitted." |
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