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Acquisition of share capital by new company |
| | 17. - (1) After section 304 of the Taxes Act 1988 there shall be inserted the following section-
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| "Acquisition of share capital by new company. |
304A. - (1) This section applies where-
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(a) a company ("the new company") in which the only issued shares are subscriber shares acquires all the shares ("old shares") in another company ("the old company"); |
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(b) the consideration for the old shares consists wholly of the issue of shares ("new shares") in the new company; |
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(c) the consideration for new shares of each description consists wholly of old shares of the corresponding description; |
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(d) new shares of each description are issued to the holders of old shares of the corresponding description in respect of and in proportion to their holdings; |
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(e) at some time before the issue of the new shares- |
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(i) the old company issued eligible shares; and
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(ii) a certificate in relation to those eligible shares was issued by that company for the purposes of subsection (2) of section 306 and in accordance with that section; and
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(f) before the issue of the new shares, the Board have, on the application of the new company or the old company, notified that company that the Board are satisfied that the exchange of shares- |
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(i) will be effected for bona fide commercial reasons; and
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(ii) will not form part of any such scheme or arrangements as are mentioned in section 137(1) of the 1992 Act.
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(2) For the purposes of this Chapter-
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(a) the exchange of shares shall not be regarded as involving any disposal of the old shares or any acquisition of the new shares; and |
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(b) any relief under this Chapter which is attributable to any old shares shall be attributable instead to the new shares for which they are exchanged. |
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(3) Where, in the case of any new shares held by an individual to which relief becomes so attributable, the old shares for which they were exchanged were subscribed for by and issued to the individual, this Chapter shall have effect as if-
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(a) the new shares had been subscribed for by him at the time when, and for the amount for which, the old shares were subscribed for by him; |
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(b) the new shares had been issued to him by the new company at the time when the old shares were issued to him by the old company; |
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(c) the claim for relief made in respect of the old shares had been made in respect of the new shares; and |
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(d) his liability to income tax had been reduced under section 289A in respect of the new shares for the same year of assessment as that for which his liability was so reduced in respect of the old shares. |
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(4) Where, in the case of any new shares held by an individual to which relief becomes so attributable, the old shares for which they are exchanged were transferred to the individual as mentioned in section 304, this Chapter shall have effect in relation to any subsequent disposal or other event as if-
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(a) the new shares had been subscribed for by him at the time when, and for the amount for which, the old shares were subscribed for; |
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(b) the new shares had been issued by the new company at the time when the old shares were issued by the old company; |
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(c) the claim for relief made in respect of the old shares had been made in respect of the new shares; and |
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(d) his liability to income tax had been reduced under section 289A in respect of the new shares for the same year of assessment as that for which the liability of the individual who subscribed for the old shares was so reduced in respect of those shares. |
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(5) Where relief becomes so attributable to any new shares-
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(a) this Chapter shall have effect as if anything which, under section 306(2), 307(1A) or 310, has been done, or is required to be done, by or in relation to the old company had been done, or were required to be done, by or in relation to the new company; and |
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(b) any appeal brought by the old company against a notice under section 307(1A)(b) may be prosecuted by the new company as if it had been brought by that company. |
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(6) For the purposes of this section old shares and new shares are of a corresponding description if, on the assumption that they were shares in the same company, they would be of the same class and carry the same rights; and in subsection (1) above references to shares, except in the expressions "eligible shares" and "subscriber shares", include references to securities.
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(7) Nothing in section 293(8) shall apply in relation to such an exchange of shares, or shares and securities, as is mentioned in subsection (1) above or arrangements with a view to such an exchange.
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(8) Subsection (2) of section 138 of the 1992 Act shall apply for the purposes of subsection (1)(f) above as it applies for the purposes of subsection (1) of that section."
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(2) This paragraph has effect in relation to new shares (within the meaning of section 304A of the Taxes Act 1988) issued on or after 6th April 1998.
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Relief for loss on disposal of shares |
| | 18. - (1) In subsection (2) of section 305A of the Taxes Act 1988 (relief for loss on disposal of shares), for the words "576(2) and (3)" there shall be substituted the words "576(1) to (3)".
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(2) This paragraph has effect in relation to disposals made on or after 6th April 1998.
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Claims |
| | 19. - (1) In subsection (1) of section 306 of the Taxes Act 1988, after the word "assessment", in the first place where it occurs, there shall be inserted the words "(or treated by section 289B(5) as so issued)".
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(2) In subsection (2) of that section, for the words "the conditions for the relief, so far as applying to the company and the trade," there shall be substituted the words ", except so far as they fall to be satisfied by that person, the conditions for the relief".
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(3) For subsection (3) of that section there shall be substituted the following subsection-
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"(3) Before issuing a certificate for the purposes of subsection (2) above a company shall furnish the inspector with a statement to the effect that, except so far as they fall to be satisfied by the persons to whom eligible shares comprised in the share issue have been issued, the conditions for the relief-
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(a) are satisfied in relation to that issue; and |
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(b) have been so satisfied at all times since the beginning of the relevant period." |
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(4) In subsection (3A) of that section, the words "but section 289B(5) shall not apply for the purposes of this subsection" shall cease to have effect.
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(5) For subsections (4) and (5) of that section there shall be substituted the following subsections-
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"(4) No certificate shall be issued for the purposes of subsection (2) above without the authority of the inspector; but where the company, or a person connected with the company, has given notice to the inspector under section 310(2) or paragraph 16(2) or (4) of Schedule 5B to the 1992 Act, the authority must be given or renewed after the receipt of the notice.
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(5) Any statement under subsection (3) above shall be in such form as the Board may direct and shall contain-
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(a) such additional information as the Board may reasonably require, including in particular information relating to the persons who have requested the issue of certificates under subsection (2) above; |
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(b) a declaration that the statement is correct to the best of the company's knowledge and belief; and |
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(c) such other declarations as the Board may reasonably require." |
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Withdrawal of relief |
| | 20. - (1) In subsection (1A) of section 307 of the Taxes Act 1988-
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(a) for the words "section 289(1)(b) or (c)" there shall be substituted the words "section 289(1)(b), (ba) or (c)"; and |
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(b) after the words "section 310" there shall be inserted the words "or paragraph 16(2) or (4) of Schedule 5B to the 1992 Act". |
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(2) After subsection (1B) of that section there shall be inserted the following subsection-
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"(1C) Where any issue has been determined on an appeal brought by virtue of paragraph 1A(6) of Schedule 5B to the 1992 Act (appeal against notice that shares never have been, or have ceased to be, eligible shares), the determination shall be conclusive for the purposes of any appeal brought by virtue of subsection (1B) above on which that issue arises."
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(3) In subsection (4) of that section, for the words "ordinary shares" there shall be substituted the words "eligible shares".
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(4) In subsection (6)(b) of that section, for the words "section 291" there shall be substituted the words "section 289(1)(ba), 291".
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Application to subsidiaries |
| | 21. In subsection (2) of section 308 of the Taxes Act 1988, for the words "90 per cent", in each place where they occur, there shall be substituted the words "75 per cent".
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Information |
| | 22. - (1) In subsection (1) of section 310 of the Taxes Act 1988, for the words "299A, 300 or 304" there shall be substituted the words "299A or 300".
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(2) In subsection (2) of that section-
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(a) for the words "289(1)(c) or (6), 293, 297" there shall be substituted the words "289(1)(ba) or (c), 293"; and |
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(b) the words "or payment" shall cease to have effect. |
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(3) In subsection (7) of that section, for the words "300, 301 and 303(3)" there shall be substituted the words "300 and 303(3)".
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(4) After subsection (9) of that section there shall be inserted the following subsection-
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"(9A) References in this section to withdrawal of relief include its reduction."
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(5) This paragraph has effect in relation to events occurring on or after 6th April 1998.
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Interpretation of Chapter III |
| | 23. - (1) In subsection (1) of section 312 of the Taxes Act 1988-
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(a) the definition of "new consideration" shall cease to have effect; and |
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(b) for the definitions of "research and development" and "relief" there shall be substituted the following definitions- |
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""relief" means relief under this Chapter; |
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"research and development" means any activity which is intended to result in a patentable invention (within the meaning of the Patents Act 1977) or in a computer program; |
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"the seven year period" has the meaning given by section 291(6);". |
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(2) In subsection (1A) of that section, the words "(disregarding section 289B(5))" shall cease to have effect.
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(3) In subsection (1B)(c) of that section, the words "dealt in on the Unlisted Securities Market or" shall cease to have effect.
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(4) In subsection (2) of that section, for the words "sections 291 to 291B" there shall be substituted the words "section 291, section 291A(1), (4) and (5) and section 291B".
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(5) After subsection (4) of that section there shall be inserted the following subsections-
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"(4A) In this Chapter references (however expressed) to an issue of eligible shares in any company are to any eligible shares in the company that are of the same class and are issued on the same day.
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(4B) For the purposes of this Chapter shares in a company shall not be treated as being of the same class unless they would be so treated if dealt with on the Stock Exchange."
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(6) In subsection (7) of that section, for the words "section 289(2)(c)" there shall be substituted the words "subsection (2)(c) of section 289".
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