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Conditions for other assets to qualify as business assets |
| | 5. - (1) This paragraph applies, in the case of the disposal of any asset, for determining (subject to the following provisions of this Schedule) whether the asset was a business asset at a time before its disposal when it was neither shares in a company nor an interest in shares in a company.
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(2) Where the disposal is made by an individual, the asset was a business asset at that time if at that time it was being used, wholly or partly, for purposes falling within one or more of the following paragraphs-
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(a) the purposes of a trade carried on at that time by that individual or by a partnership of which that individual was at that time a member; |
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(b) the purposes of any trade carried on by a company which at that time was a qualifying company by reference to that individual; |
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(c) the purposes of any trade carried on by a company which at that time was a member of a trading group the holding company of which was at that time a qualifying company by reference to that individual; |
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(d) the purposes of any qualifying office or employment to which that individual was at that time required to devote substantially the whole of his time; |
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(e) the purposes of any office or employment that does not fall within paragraph (d) above but was an office or employment with a trading company in relation to which that individual falls to be treated as having, at that time, been a full-time working officer or employee. |
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(3) Where the disposal is made by the trustees of a settlement, the asset was a business asset at that time if at that time it was being used, wholly or partly, for purposes falling within one or more of the following paragraphs-
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(a) the purposes of a trade carried on by the trustees of the settlement; |
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(b) the purposes of a trade carried on at that time by an eligible beneficiary or by a partnership of which an eligible beneficiary was at that time a member; |
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(c) the purposes of any trade carried on by a company which at that time was a qualifying company by reference to the trustees of the settlement or an eligible beneficiary; |
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(d) the purposes of any trade carried on by a company which at that time was a member of a trading group the holding company of which was at that time a qualifying company by reference to the trustees of the settlement or an eligible beneficiary; |
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(e) the purposes of any qualifying office or employment to which an eligible beneficiary was at that time required to devote substantially the whole of his time; |
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(f) the purposes of any office or employment that does not fall within paragraph (e) above but was an office or employment with a trading company in relation to which an eligible beneficiary falls to be treated as having, at that time, been a full-time working officer or employee. |
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(4) Where the disposal is made by an individual's personal representatives, the asset was a business asset at that time if at that time it was being used, wholly or partly, for purposes falling within one or more of the following paragraphs-
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(a) the purposes of a trade carried on by the deceased's personal representatives; |
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(b) the purposes of any trade carried on by a company which at that time was a qualifying company by reference to the deceased's personal representatives; |
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(c) the purposes of any trade carried on by a company which at that time was a member of a trading group the holding company of which was at that time a qualifying company by reference to the deceased's personal representatives. |
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(5) Where the disposal is made by an individual who acquired the asset as legatee (as defined in section 64) and that time is not a time when the asset was a business asset by virtue of sub-paragraph (2) above, the asset shall be taken to have been a business asset at that time if at that time it was-
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(a) being held by the personal representatives of the deceased, and |
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(b) being used, wholly or partly, for purposes falling within one or more of paragraphs (a) to (c) of sub-paragraph (4) above. |
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Companies which are qualifying companies |
| | 6. - (1) The times when a company shall be taken to have been a qualifying company by reference to an individual, the trustees of a settlement or an individual's personal representatives are-
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(a) in the case of an individual, those set out in sub-paragraphs (2) and (3) below; and |
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(b) in the case of the trustees of a settlement, those set out in sub-paragraphs (2) and (4) below; and |
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(c) in the case of personal representatives, those set out in sub-paragraph (2) below. |
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(2) A company was a qualifying company by reference to an individual, the trustees of a settlement or personal representatives at any time when both the following conditions were satisfied, that is to say-
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(a) the company was a trading company or the holding company of a trading group; and |
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(b) the voting rights in that company were exercisable, as to not less than 25 per cent., by that individual or, as the case may be, the trustees of the settlement or the personal representatives. |
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(3) A company was also a qualifying company by reference to an individual at any time when all of the following conditions were satisfied, that is to say-
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(a) the company was a trading company or the holding company of a trading group; |
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(b) the voting rights in that company were exercisable, as to not less than 5 per cent., by that individual; and |
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(c) that individual was a full-time working officer or employee of that company or of a company which at the time had a relevant connection with that company. |
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(4) A company was also a qualifying company by reference to the trustees of a settlement at any time when all the following conditions were satisfied, that is to say-
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(a) the company was a trading company or the holding company of a trading group; |
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(b) the voting rights in that company were exercisable, as to not less than 5 per cent., by the trustees of that settlement; and |
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(c) an eligible beneficiary was a full-time working officer or employee of that company or of a company which at the time had a relevant connection with that company. |
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Persons who are eligible beneficiaries |
| | 7. - (1) An eligible beneficiary, in relation to an asset comprised in a settlement and a time, is any individual having at that time a relevant interest in possession under the settlement in either-
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(a) the whole of the settled property; or |
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(b) a part of the settled property that is or includes that asset. |
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(2) In this paragraph "relevant interest in possession", in relation to property comprised in a settlement, means any interest in possession under that settlement other than-
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(a) a right under that settlement to receive an annuity; or |
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(b) a fixed-term entitlement. |
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(3) In sub-paragraph (2) above "fixed-term entitlement", in relation to property comprised in a settlement, means any interest under that settlement which is limited to a term that is fixed and is not a term at the end of which the person with that interest will become entitled to the property.
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Cases where there are non-qualifying beneficiaries |
| | 8. - (1) This paragraph applies in the case of a disposal of an asset by the trustees of a settlement where the asset's relevant period of ownership is or includes a period ("a sharing period") throughout which-
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(a) the asset was a business asset by reference to one or more eligible beneficiaries; |
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(b) the asset would not otherwise have been a business asset; and |
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(c) there is a non-qualifying part of the relevant income, or there would be if there were any relevant income for that period. |
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(2) The period throughout which the asset disposed of is to be taken to have been a business asset shall be determined as if the relevant fraction of every sharing period were a period throughout which the asset was not a business asset.
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(3) In sub-paragraph (2) above "the relevant fraction", in relation to any sharing period, means the fraction which represents the proportion of relevant income for that period which is, or (if there were such income) would be, a non-qualifying part of that income.
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(4) Where a sharing period is a period in which the proportion mentioned in sub-paragraph (3) above has been different at different times, this paragraph shall require a separate relevant fraction to be determined for, and applied to, each part of that period for which there is a different proportion.
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(5) For the purposes of this paragraph the non-qualifying part of any relevant income for any period is so much of that income for that period as is or, as the case may be, would be-
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(a) income to which no eligible beneficiary has any entitlement; or |
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(b) income to which a non-qualifying eligible beneficiary has an entitlement. |
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(6) In sub-paragraph (5) above "non-qualifying eligible beneficiary", in relation to a period, means an eligible beneficiary who is not a beneficiary by reference to whom (if he were the only beneficiary) the asset disposed of would be a business asset throughout that period.
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(7) In this paragraph "relevant income" means income from the part of the settled property comprising the asset disposed of.
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Cases where an asset is used at the same time for different purposes |
| | 9. - (1) This paragraph applies in the case of a disposal by any person of an asset where the asset's relevant period of ownership is or includes a period ("a mixed-use period") throughout which the asset-
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(a) was a business asset by reference to its use for purposes mentioned in paragraph 5(2) to (5) above; but |
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(b) was, at the same time, being put to a non-qualifying use. |
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(2) The period throughout which the asset disposed of is to be taken to have been a business asset shall be determined as if the relevant fraction of every mixed-use period were a period throughout which the asset was not a business asset.
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(3) In sub-paragraph (2) above "the relevant fraction", in relation to any mixed-use period, means the fraction which represents the proportion of the use of the asset during that period that was a non-qualifying use.
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(4) Where both this paragraph and paragraph 8 above apply in relation to the whole or any part of a period-
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(a) effect shall be given to that paragraph first; and |
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(b) further reductions by virtue of this paragraph in the period for which the asset disposed of is taken to have been a business asset shall be made in respect of only the relevant part of any non-qualifying use. |
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(5) In sub-paragraph (4) above the reference to the relevant part of any non-qualifying use is a reference to the proportion of that use which is not a use to which a non-qualifying part of any relevant income is attributable.
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(6) Where a mixed-use period is a period in which-
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(a) the proportion mentioned in sub-paragraph (3) above has been different at different times, or |
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(b) different attributions have to be made for the purposes of sub-paragraphs (4) and (5) above for different parts of the period, |
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this paragraph shall require a separate relevant fraction to be determined for, and applied to, each part of the period for which there is a different proportion or attribution.
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(7) In this paragraph-
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"non-qualifying use", in relation to an asset, means any use of the asset for purposes which are not purposes in respect of which the asset would fall to be treated as a business asset at the time of its use; and |
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"non-qualifying part" and "relevant income" have the same meanings as in paragraph 8 above. |
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Periods of limited exposure to fluctuations in value not to count |
| | 10. - (1) Where, in the case of any asset disposed of ("the relevant asset"), the period after 5th April 1998 for which that asset had been held at the time of its disposal is or includes a period during which-
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(a) the person making the disposal, or |
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(b) a relevant predecessor of his, |
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had limited exposure to fluctuations in the value of the asset, the period during which that person or predecessor had that limited exposure shall not count for the purposes of taper relief.
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(2) The times when a person shall be taken for the purposes of this paragraph to have had such limited exposure in the case of the relevant asset shall be all the times while he held that asset when a transaction entered into at any time by him, or by a relevant predecessor of his, had the effect that he-
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(a) was not exposed, or not exposed to any substantial extent, to the risk of loss from fluctuations in the value of the relevant asset; and |
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(b) was not able to enjoy, or to enjoy to any substantial extent, any opportunities to benefit from such fluctuations. |
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(3) The transactions referred to in sub-paragraph (2) above do not include-
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(a) any insurance policy which the person in question might reasonably have been expected to enter into and which is insurance against the loss of the relevant asset or against damage to it, or against both; or |
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(b) any transaction having effect in relation to fluctuations in the value of the relevant asset so far only as they are fluctuations resulting from fluctuations in the value of foreign currencies. |
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(4) In this paragraph "relevant predecessor"-
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(a) in relation to a person disposing of an asset, means any person other than the person disposing of it who held that asset at a time falling in the period which is taken to be the whole period for which it had been held at the time of its disposal; and |
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(b) in relation to a relevant predecessor of a person disposing of an asset, means any other relevant predecessor of that person. |
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(5) In sub-paragraph (4) above, the reference, in relation to an asset, to the whole period for which it had been held at the time of its disposal is a reference to the period that would be given for that asset by paragraph 2(1) above if, in paragraph (a), the words "whichever is the later of 6th April 1998 and" were omitted.
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