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far as acting in their capacity as personal | |
representatives). | |
(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 the purposes of a trade carried on by— | 5 |
(a) a company which at that time was a qualifying company by | |
reference to that individual, | |
(b) 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, or | 10 |
(c) a partnership whose members at that time included a | |
company within paragraph (a) or (b), | |
or for the purposes of any office or employment held by that | |
individual with a person carrying on a trade. | |
(3) Where the disposal is made by the trustees of a settlement, the asset | 15 |
was a business asset at that time if at that time it was being used, | |
wholly or partly, for the purposes of a trade carried on by— | |
(a) a company which at that time was a qualifying company by | |
reference to the trustees of the settlement or an eligible | |
beneficiary, | 20 |
(b) 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, or | |
(c) a partnership whose members at that time included a | 25 |
company within paragraph (a) or (b), | |
or for the purposes of any office or employment held by an eligible | |
beneficiary with a person carrying on a trade. | |
(4) Where the disposal is made by an individual’s personal | |
representatives, the asset was a business asset at that time if at that | 30 |
time it was being used, wholly or partly, for the purposes of a trade | |
carried on by— | |
(a) a company which at that time was a qualifying company by | |
reference to the deceased’s personal representatives, | |
(b) a company which at that time was a member of a trading | 35 |
group the holding company of which was at that time a | |
qualifying company by reference to the deceased’s personal | |
representatives, or | |
(c) a partnership whose members at that time included a | |
company within paragraph (a) or (b). | 40 |
(5) Where the disposal is made by an individual who acquired the asset | |
as legatee (as defined in section 64), the asset shall be taken to have | |
been a business asset at that time if at that time it was— | |
(a) being held by the personal representatives of the deceased, | |
and | 45 |
(b) being used, wholly or partly, for the purposes of a trade | |
carried on by— | |
(i) a company which at that time was a qualifying | |
company by reference to the deceased’s personal | |
representatives, | 50 |
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| |
(ii) 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, or | |
(iii) a partnership whose members at that time included a | 5 |
company within sub-paragraph (i) or (ii).”. | |
(4) The following amendments in Schedule A1 to the Taxation of Chargeable | |
Gains Act 1992 (c. 12) are consequential on those above— | |
(a) in paragraphs 9(1)(a) and 19(1) for “paragraph 5(2) to (5)” substitute | |
“any provision of paragraph 5”; | 10 |
(b) in paragraph 15(4)(a) for “paragraph 5(2)” substitute “paragraph 5(1) | |
and (2)”. | |
(5) The amendments in this section apply to disposals on or after 6th April 2004 | |
and as they so apply have effect in relation to periods of ownership on or after | |
that date. | 15 |
160 Earn-out rights to be treated as securities unless contrary election | |
(1) Section 138A of the Taxation of Chargeable Gains Act 1992 (use of earn-out | |
rights for exchange of securities) is amended as follows. | |
(2) In subsection (2) (seller’s right to elect for earn-out right to be treated as | |
security of new company)— | 20 |
(a) at the end of paragraph (a) insert “and”; and | |
(b) omit paragraph (c) (the seller’s right of election) and the word “and” | |
immediately preceding it. | |
(3) After subsection (2) insert— | |
“(2A) Subsection (2) above does not have effect if the seller elects under this | 25 |
section for the earn-out right not to be treated as a security of the new | |
company.”. | |
(4) In subsection (4) (election for corresponding treatment where old right | |
extinguished in consideration of new right)— | |
(a) at the end of paragraph (c) insert “and”; | 30 |
(b) omit paragraph (e) (right of election of person on whom the new right | |
is conferred) and the word “and” immediately preceding it; and | |
(c) in the closing words, for “that person” substitute “the person on whom | |
the new right is conferred”. | |
(5) After subsection (4) insert— | 35 |
“(4A) Subsection (4) above does not have effect if the person on whom the | |
new right is conferred elects under this section for it not to be treated as | |
a security of the new company.”. | |
(6) The amendments made by this section have effect in relation to rights | |
conferred on or after 10th April 2003. | 40 |
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161 Deferred unascertainable consideration: election for treatment of loss | |
(1) After section 279 of the Taxation of Chargeable Gains Act 1992 insert— | |
“279A Deferred unascertainable consideration: election for treatment of loss | |
(1) Where— | |
(a) a person (“the taxpayer”) makes a disposal of a right to which | 5 |
this section applies (see subsection (2) below), | |
(b) on that disposal an allowable loss (“the relevant loss”) would, | |
apart from section 279C, accrue to him in any year (“the year of | |
the loss”), and | |
(c) the year of the loss is a year in which the taxpayer is within the | 10 |
charge to capital gains tax (see section 279B(1)), | |
the taxpayer may make an election under this section for the relevant | |
loss to be treated as accruing in an earlier year in accordance with | |
section 279C if condition 1 in subsection (3) below and condition 2 in | |
subsection (5) below are satisfied. | 15 |
(2) This section applies to a right if each of the following conditions is | |
satisfied— | |
(a) the right was, in whole or in part, acquired by the taxpayer as | |
the whole or part of the consideration for a disposal (the | |
“original disposal”) by him of another asset (the “original | 20 |
asset”), | |
(b) the original disposal was made in a year (“the year of the | |
original disposal”) earlier than the year in which the disposal | |
mentioned in subsection (1)(a) above is made (“the year of the | |
right’s disposal”), | 25 |
(c) where the right was acquired by the taxpayer as the whole or | |
part of the consideration for two or more disposals (each of | |
which is accordingly an “original disposal”), the condition in | |
paragraph (b) above is satisfied with respect to each of those | |
disposals (the “original disposals”), | 30 |
(d) on the taxpayer’s acquisition of the right, there was no | |
corresponding disposal of it, | |
(e) the right is a right to unascertainable consideration (see section | |
279B(2) to (6)). | |
(3) Condition 1 for making an election in relation to the relevant loss is that | 35 |
a chargeable gain accrued to the taxpayer on any one or more of the | |
following events— | |
(a) the original disposal, | |
(b) an earlier disposal of the original asset by the taxpayer in the | |
year of the original disposal, | 40 |
(c) a later disposal of the original asset by the taxpayer in a year | |
earlier than the year of the right’s disposal, | |
or would have so accrued but for paragraph 2(2)(a) of Schedule 5B or | |
5C (postponement of original gain). | |
This subsection is subject to subsection (4) below. | 45 |
(4) If the right to which this section applies was acquired by the taxpayer | |
as the whole or part of the consideration for two or more original | |
| |
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| |
disposals (including cases where there are two or more original assets | |
(the “original assets”))— | |
(a) any reference in subsection (3) above to the original disposal is | |
a reference to any of the original disposals, | |
(b) any reference in that subsection to the original asset is a | 5 |
reference to the asset which is the original asset in relation to | |
that original disposal, and | |
(c) any reference in that subsection to the year of the original | |
disposal shall be construed accordingly. | |
(5) Condition 2 for making an election in relation to the relevant loss is that | 10 |
there is a year (an “eligible year”)— | |
(a) which is earlier than the year of the loss but not earlier than the | |
year 1992-93, | |
(b) in which a chargeable gain falling within subsection (3) above | |
or subsection (6) below accrued to the taxpayer, and | 15 |
(c) for which, immediately before the election, there remains a | |
relevant amount on which capital gains tax is chargeable (see | |
subsection (7) below). | |
(6) A chargeable gain falling within this subsection accrues to the taxpayer | |
in a year if— | 20 |
(a) in that year a chargeable gain (the “revived gain”) is treated as | |
accruing to the taxpayer in accordance with paragraphs 4 and 5 | |
of Schedule 5B or 5C (chargeable gain accruing to person on | |
chargeable event), and | |
(b) the gain which, in determining the amount of the revived gain | 25 |
in accordance with those paragraphs, is the original gain | |
consists of or represents the whole or some part of a gain that | |
would have accrued as mentioned in subsection (3) above but | |
for paragraph 2(2)(a) of Schedule 5B or 5C. | |
(7) For the purposes of subsection (5)(c) above, a year is one for which, | 30 |
immediately before an election, there remains a relevant amount on | |
which capital gains tax is chargeable if, immediately before the making | |
of that election, there remains an amount in respect of which the | |
taxpayer is chargeable to capital gains tax for the year— | |
(a) after taking account of any previous elections made by the | 35 |
taxpayer under this section, | |
(b) after excluding any amounts that fall to be brought into account | |
for that year under section 2(4)(b) by virtue of section 2(5)(b), | |
and | |
(c) on the assumption that no part of the relevant loss (or of any | 40 |
other loss in respect of which an election under this section may | |
be, but has not been, made) falls to be deducted in consequence | |
of an election under this section from the chargeable gains | |
accruing to the taxpayer in that year. | |
(8) In this section “year” means year of assessment. | 45 |
(9) This section and sections 279B to 279D are to be construed as one. | |
279B Provisions supplementary to section 279A | |
(1) For the purposes of section 279A(1)(c) a person is within the charge to | |
capital gains tax in any year if— | |
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| |
|
| |
| |
(a) he is chargeable to capital gains tax in respect of chargeable | |
gains accruing to him in that year, or | |
(b) on the assumption that there accrue to him in that year any | |
chargeable gains (excluding amounts in relation to which | |
section 2(4)(a) applies), he would be so chargeable apart from— | 5 |
(i) any deductions that fall to be made from the total | |
amount referred to in section 2(2), and | |
(ii) section 3 (annual exempt amount). | |
(2) Subsections (3) to (6) below have effect for the purposes of section | |
279A(2)(e) (right to unascertainable consideration). | 10 |
(3) A right is a right to unascertainable consideration if, and only if,— | |
(a) it is a right to consideration the amount or value of which is | |
unascertainable at the time when the right is conferred, and | |
(b) that amount or value is unascertainable at that time on account | |
of its being referable, in whole or in part, to matters which are | 15 |
uncertain at that time because they have not yet occurred. | |
This subsection is subject to subsections (4) to (6) below. | |
(4) The amount or value of any consideration is not to be regarded as being | |
unascertainable by reason only— | |
(a) that the right to receive the whole or any part of the | 20 |
consideration is postponed or contingent, if the consideration | |
or, as the case may be, that part of it is, in accordance with | |
section 48, brought into account in the computation of the gain | |
accruing to the taxpayer on the disposal of an asset, or | |
(b) in a case where the right to receive the whole or any part of the | 25 |
consideration is postponed and is to be, or may be, to any extent | |
satisfied by the receipt of property of one description or | |
property of some other description, that some person has a right | |
to select the property, or the description of property, that is to | |
be received. | 30 |
(5) A right is not to be taken to be a right to unascertainable consideration | |
by reason only that either the amount or the value of the consideration | |
has not been fixed, if— | |
(a) the amount will be fixed by reference to the value, and the value | |
is ascertainable, or | 35 |
(b) the value will be fixed by reference to the amount, and the | |
amount is ascertainable. | |
(6) A right which is by virtue of subsection (2) or (4) of section 138A (use of | |
earn-out rights for exchange of securities) assumed in accordance with | |
subsection (3)(a) of that section to be a security, within the definition in | 40 |
section 132, is not to be regarded as a right to unascertainable | |
consideration. | |
(7) For the purposes of section 279A, any question as to— | |
(a) whether a chargeable gain or a loss is one that accrues (or | |
would, apart from any particular provision, accrue) on a | 45 |
particular disposal or a disposal of any particular description, | |
or | |
(b) the time at which, or year in which, any particular disposal | |
takes place, | |
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| |
is to be determined without regard to section 10A(2) (chargeable gains | |
and losses accruing during temporary non-residence to be treated as | |
accruing in year of return). | |
This subsection is subject to subsection (8) below. | |
(8) Subsection (7) above does not affect the determination of any | 5 |
question— | |
(a) as to the year in which the chargeable gain or loss is, by virtue | |
of section 10A(2), to be treated as accruing (apart from section | |
279C), or | |
(b) where (apart from section 279C) a loss is to be treated by virtue | 10 |
of section 10A(2) as accruing in a particular year, whether the | |
loss is an allowable loss. | |
279C Effect of election under section 279A | |
(1) This section applies where an election is made under section 279A by | |
the taxpayer for the relevant loss to be treated as accruing in an earlier | 15 |
year in accordance with this section. | |
(2) Where this section applies, the relevant loss shall be treated for the | |
purposes of capital gains tax as if it were a loss accruing to the taxpayer | |
in the earliest year which is an eligible year (the “first eligible year”), | |
instead of in the year of the loss (but subject to, and in accordance with, | 20 |
the following provisions of this section). | |
(3) The amount of the relevant loss that falls to be deducted from | |
chargeable gains of the first eligible year in accordance with section | |
2(2)(a) is limited to the amount (the “first year limit”) found by taking | |
the following steps— | 25 |
Step 1: take the total amount of chargeable gains accruing to the | |
taxpayer in the first eligible year, | |
Step 2: exclude from that amount any amounts that fall to be | |
disregarded in accordance with section 2(4)(a) for that year, | |
Step 3: deduct from the amount remaining any amounts in respect | 30 |
of allowable losses (other than the relevant loss or any part of it) | |
that fall to be deducted from that amount in accordance with | |
section 2(2) otherwise than by virtue of section 2(5)(aa)(i) | |
(taking account of any previous elections under section 279A). | |
The amount so found is the first year limit, unless the first eligible year | 35 |
is a year in relation to which section 2(5)(aa) has effect, in which case the | |
further steps in subsection (4) below must also be taken. | |
(4) Those further steps are— | |
Step 4: add to the amount found by taking steps 1 to 3 in subsection | |
(3) above every amount which is treated by virtue of section 77 | 40 |
or 86 as an amount of chargeable gains accruing to the taxpayer | |
for the first eligible year (the “attributed amounts”), | |
Step 5: deduct from the resulting amount any amounts (other than | |
the relevant loss or any part of it) that fall to be deducted from | |
the attributed amounts in accordance with section 2(5)(aa)(i) | 45 |
(taking account of any previous elections under section 279A). | |
The amount so found is the first year limit in a case where section | |
2(5)(aa) applies in relation to the first eligible year. | |
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(5) As respects any later year before the year of the loss, the relevant loss | |
(so far as not previously allowed as a deduction from chargeable gains | |
accruing in any previous year) falls to be deducted in accordance with | |
section 2(2)(b) only if that later year is an eligible year. | |
(6) The amount of the relevant loss that falls to be deducted from | 5 |
chargeable gains of that later eligible year in accordance with section | |
2(2)(b) is limited to the amount (the “later year limit”) in respect of | |
which the taxpayer would be chargeable to capital gains tax for that | |
later year— | |
(a) on the assumption in subsection (7) below, | 10 |
(b) taking account of any previous elections under section 279A, | |
and | |
(c) apart from the provisions specified in subsection (8) below. | |
(7) The assumption is that no part of— | |
(a) the relevant loss, or | 15 |
(b) any loss in respect of which an election under section 279A may | |
be, but has not been, made, | |
falls to be deducted, in consequence of an election under section 279A, | |
from any chargeable gains accruing to the taxpayer in that later eligible | |
year. | 20 |
The assumption falls to be made immediately after the making of the | |
election in respect of the relevant loss. | |
(8) The provisions are— | |
(a) section 2(5)(a)(ii) (taper relief), | |
(b) section 2(5)(aa)(ii) (taper relief), | 25 |
(c) section 2(5)(b) (addition of certain amounts treated as amounts | |
of chargeable gains), and | |
(d) section 2A (taper relief), | |
except that paragraphs (b) and (d) above are not to affect the operation | |
of section 2(7) for the purposes of subsection (6) above. | 30 |
(9) All such adjustments shall be made, whether by discharge or | |
repayment of tax, the making of assessments or otherwise, as are | |
required to give effect to the election under section 279A made by the | |
taxpayer for the relevant loss to be treated as accruing in an earlier year | |
in accordance with this section. | 35 |
(10) Any reference in this section or section 279D to deduction in accordance | |
with section 2(2)(a), section 2(2)(b) or section 2(2) includes a reference | |
to such deduction by virtue of section 2(5)(a)(i) or (aa)(i). | |
279D Elections under section 279A | |
(1) An election under section 279A is irrevocable. | 40 |
(2) Any election under that section must be made by giving a notice in | |
accordance with this section. | |
(3) The notice must be given to an officer of the Board. | |
(4) Subsections (5) to (8) below have effect in relation to the notice given by | |
the taxpayer in respect of the relevant loss. | 45 |
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