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Periods of share ownership not to count where there is a change of activity by the company |
| | 11. - (1) This paragraph applies where-
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(a) there is a disposal of an asset consisting of shares in a close company; and |
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(b) the period beginning with the relevant time and ending with the time of the disposal includes at least one relevant change of activity involving that company. |
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(2) So much of the period after 5th April 1998 for which the asset had been held at the time of its disposal as falls before the time, or latest time, in that period when there was a relevant change of activity involving the close company shall not count for the purposes of taper relief.
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(3) Where-
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(a) a close company or any of its 51 per cent. subsidiaries has at any time begun to carry on a trade, and |
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(b) immediately before that time, neither that company nor any of its 51 per cent. subsidiaries was carrying on a trade, |
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a relevant change of activity involving the close company shall be taken to have occurred at that time. |
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(4) For the purposes of this paragraph where-
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(a) at the time of the disposal of the shares, the close company was carrying on a business of holding investments, and |
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(b) there has been any occasion falling within- |
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(i) the period of twelve months ending with that time, or
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(ii) the period of twelve months ending with any earlier time after the relevant time,
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when the close company was not carrying on that business or when the size of that business was small by comparison with its size at the end of that period, |
| | a relevant change of activity involving the close company shall be taken to have occurred immediately after the latest such occasion before the time of the disposal.
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(5) For the purposes of sub-paragraph (4) above the size of any business at any time shall be determined by assuming it to correspond to the aggregate of the amounts and values given by way of consideration for the assets held at that time for the purposes of the business.
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(6) In determining for the purposes of this paragraph whether a close company is at any time carrying on a business of holding investments, and in determining for those purposes the size at any time of such a business-
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(a) all the activities of a close company and of all its 51 per cent. subsidiaries shall be taken together as if they were all being carried on by the close company; and |
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(b) the activities that are included in a business of holding investments shall be taken not to include- |
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(i) holding shares in a 51 per cent. subsidiary of the company holding the shares;
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(ii) making loans to an associated company or to a participator in the company making the loan or in an associated company; or
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(iii) placing money on deposit.
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(7) In this paragraph-
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(a) references to a company's carrying on a trade, or to beginning to carry one on, do not include references to its carrying on or beginning to carry on a trade that is merely incidental to any non-trading activities carried on by that company or another company in the same group of companies; and |
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(b) references to a business of holding investments includes a reference to a business of making investments. |
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(8) For the purposes of this paragraph a company is to be treated as another's associated company at any time if at that time, or at another time within one year previously-
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(a) one of them has had control of the other; or |
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(b) both have been under the control of the same person or persons. |
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(9) In this paragraph-
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"51 per cent. subsidiary", in relation to another company, means a company which, in accordance with section 170(7), is an effective 51 per cent. subsidiary of the other company for the purposes of sections 170 to 181; and |
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"participator", in relation to a company, has the meaning given by section 417(1) of the Taxes Act. |
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(10) In this paragraph "the relevant time", in relation to the disposal of an asset consisting of shares in a company, means the beginning of the period after 5th April 1998 for which that asset had been held at the time of its disposal.
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Periods of share ownership not to count in a case of value shifting |
| | 12. - (1) This paragraph applies (subject to sub-paragraph (4) below) where-
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(a) there is a disposal of an asset consisting of shares in a close company, and |
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(b) at least one relevant shift of value involving that asset has occurred between the relevant time and the time of the disposal. |
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(2) So much of the period after 5th April 1998 for which the asset had been held at the time of its disposal as falls before the time, or latest time, in that period at which there was a relevant shift of value involving that asset shall not count for the purposes of taper relief.
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(3) For the purposes of this paragraph a relevant shift of value involving any asset shall be taken to have occurred whenever-
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(a) a person having control of a close company exercised his control of that company so that value passed into that asset out of a relevant holding; or |
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(b) effect was given to any other transaction by virtue of which value passed into that asset out of a relevant holding. |
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(4) A relevant shift of value involving an asset shall be disregarded for the purposes of this paragraph if-
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(a) that shift of value is one in which the value passing into that asset out of the relevant holding is insignificant; or |
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(b) that shift of value took place at a time when the qualifying holding period for the relevant holding was at least as long as the qualifying holding period for that asset. |
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(5) In sub-paragraphs (3) and (4) above the references to a relevant holding shall be construed, in relation to any case in which value has passed out of one asset into another asset consisting of shares in a company, as a reference to any holding by-
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(a) the person who, following the exercise of control or other transaction by virtue of which the value has passed, held the other asset, or |
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(b) a person connected with him, |
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of any shares in that company or in a company under the control of the same person or persons as that company. |
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(6) For the purposes of sub-paragraph (4)(b) above the reference to the qualifying holding period of a holding or other asset at the time when a shift of value takes place shall be taken to be what, in relation to a disposal at that time of that holding or other asset by the person then entitled to dispose of it, would be taken to have been its qualifying holding period for the purposes of section 2A.
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(7) In this paragraph references to shares in a company include references to rights over a company.
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(8) In this paragraph "the relevant time", in relation to the disposal of an asset consisting of shares in a company, means the beginning of the period after 5th April 1998 for which that asset had been held at the time of its disposal.
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Rules for options |
| | 13. - (1) This paragraph applies where by virtue of section 144-
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(a) the grant of an option and the transaction entered into by the grantor in fulfilment of his obligations under the option, or |
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(b) the acquisition of an option and the transaction entered into by the person exercising the option, |
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fall to be treated as one transaction. |
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(2) The time of the disposal of any asset disposed of in pursuance of the transaction shall be the time of the following disposal-
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(a) if the option binds the grantor to sell, the disposal made in fulfilment of the grantor's obligations under the option; |
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(b) if the option binds the grantor to buy, the disposal made to the grantor in consequence of the exercise of the option. |
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(3) The time of the acquisition of any asset acquired in pursuance of the option, or in consequence of its exercise, shall be the time of the exercise of the option.
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(4) Any question whether the asset disposed of or acquired was a business asset at any time shall be determined by reference to the asset to which the option related, and not the option.
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Further rules for assets derived from other assets |
| | 14. - (1) This paragraph applies if, in a case where-
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(b) an asset has divided or otherwise changed its nature, or |
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(c) different rights or interests in or over any asset have been created or extinguished at different times, |
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the value of any asset disposed of is derived (through one or more successive events falling within paragraphs (a) to (c) above but not otherwise) from one or more other assets acquired into the same ownership at a time before the acquisition of the asset disposed of. |
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(2) The asset disposed of shall be deemed for the purposes of this Schedule to have been acquired at the earliest time at which any asset from which its value is derived was acquired into the same ownership.
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(3) Any determination of whether the asset disposed of was a business asset at a time when another asset from which its value is derived was in the ownership of the person making the disposal shall be made as if that other asset were the asset disposed of or, as the case may be, were comprised in it.
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Special rules for assets transferred between spouses |
| | 15. - (1) This paragraph applies where a person ("the transferring spouse") has disposed of any asset to another ("the transferee spouse") by a disposal falling within section 58(1).
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(2) Paragraph 2 above shall have effect in relation to any subsequent disposal of the asset as if the time when the transferee spouse acquired the asset were the time when the transferring spouse acquired it.
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(3) Where for the purposes of paragraph 2 above the transferring spouse would be treated-
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(a) in a case where there has been one or more previous disposals falling within section 58(1), by virtue of sub-paragraph (2) above, or by virtue of that sub-paragraph together with any other provision of this Schedule, or |
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(b) in a case where there has not been such a previous disposal, by virtue of such another provision, |
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as having acquired the asset at a time other than the time when the transferring spouse did acquire it, the reference in that sub-paragraph to the time when the transferring spouse acquired it shall be read as a reference to the time when for the purposes of that paragraph the transferring spouse is treated as having acquired it. |
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(4) Where there is a disposal by the transferee spouse, any question whether the asset was a business asset at a time before that disposal shall be determined as if-
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(a) in relation to times when the asset was held by the transferring spouse, references in paragraph 5(2) above to the individual by whom the disposal is made included references to the transferring spouse; and |
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(b) the reference in paragraph 5(5) above to the acquisition of the asset as a legatee by the individual by whom the disposal is made included a reference to its acquisition as a legatee by the transferring spouse. |
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(5) Where, in the case of any asset, there has been more than one transfer falling within section 58(1) during the period after 5th April 1998 for which the transferee spouse has held it at the time of that spouse's disposal of that asset, sub-paragraph (4) above shall have effect as if a reference, in relation to any time, to the transferring spouse were a reference to the individual who was the transferring spouse in relation to the next disposal falling within section 58(1) to have been made after that time.
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