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Finance Bill
Schedule 22 — Chargeable gains: private residence relief

386

 

Schedule 22

Section 112

 

Chargeable gains: private residence relief

Relief on disposal of private residence

1     (1)  

Section 222 of the Taxation of Chargeable Gains Act 1992 is amended as

follows.

5

      (2)  

In subsection (5)(a) (notice to inspector to determine which of two or more

residences is individual’s main residence) for “the inspector” (on both

occasions) substitute “an officer of the Board”.

Amount of relief

2     (1)  

Section 223 of the Taxation of Chargeable Gains Act 1992 (c. 12) is amended

10

as follows.

      (2)  

In subsection (4) (dwelling-house let as residential accommodation) in

paragraph (a), omit the unnecessary words “or those provisions as applied

by section 225”.

      (3)  

After subsection (7) insert—

15

“(8)   

This section is subject to—

(a)   

section 224 (amount of relief: further provisions), and

(b)   

section 226A (private residence relief: cases where relief

obtained under section 260).”.

Amount of relief: further provisions

20

3     (1)  

Section 224 of the Taxation of Chargeable Gains Act 1992 is amended as

follows.

      (2)  

In subsection (1) (gain accruing from disposal of dwelling-house part of

which is used exclusively for purposes of trade etc: relief to apply only to

portion of gain) for “accrues from” substitute “accrues on”.

25

Private residence occupied under terms of settlement

4     (1)  

Section 225 of the Taxation of Chargeable Gains Act 1992 is amended as

follows.

      (2)  

In the opening words—

(a)   

for “a trustee” substitute “the trustees of a settlement”, and

30

(b)   

for “the trustee” substitute “the trustees”.

      (3)  

In paragraph (a), for “the trustee” substitute “the trustees”.

      (4)  

In paragraph (b)—

(a)   

for “the inspector” substitute “an officer of the Board”, and

(b)   

for “the trustee” substitute “the trustees”.

35

      (5)  

At the end of that paragraph insert “;

   

but section 223 (as so applied) shall apply only on the making of a

claim by the trustees.”.

 

 

Finance Bill
Schedule 22 — Chargeable gains: private residence relief

387

 

Private residence held by personal representatives

5          

After section 225 of the Taxation of Chargeable Gains Act 1992 insert—

“225A   

Private residence held by personal representatives

(1)   

Sections 222 to 224 shall also apply in relation to a gain accruing to

the personal representatives of a deceased person on a disposal of an

5

asset within section 222(1) if the following conditions are satisfied.

(2)   

The first condition is that, immediately before and immediately after

the death of the deceased person, the dwelling-house or part of the

dwelling-house mentioned in section 222(1) was the only or main

residence of one or more individuals.

10

(3)   

The second condition is that—

(a)   

that individual or one of those individuals has a relevant

entitlement, or two or more of those individuals have

relevant entitlements, and

(b)   

the relevant entitlement accounts for, or the relevant

15

entitlements together account for, 75% or more of the net

proceeds of disposal;

   

and for this purpose “relevant entitlement” means an entitlement as

legatee of the deceased person to, or to an interest in possession in,

the whole or any part of the net proceeds of disposal.

20

(4)   

In subsection (3) above “net proceeds of disposal” means—

(a)   

the proceeds of the disposal of the asset realised by the

personal representatives,

  less

(b)   

any incidental costs allowable as a deduction in accordance

25

with section 38(1)(c) in computing the gain accruing to the

personal representatives on that disposal,

   

but on the assumption that none of the proceeds is required to meet

the liabilities of the deceased person’s estate (including any liability

to inheritance tax).

30

(5)   

In sections 222 to 224 as applied by this section—

(a)   

references to the individual shall be taken as references to the

personal representatives except in relation to the occupation

of the dwelling-house or part of the dwelling-house, and

(b)   

the notice which may be given to an officer of the Board

35

under section 222(5)(a) shall be a joint notice by the personal

representatives and the individual or individuals entitled to

occupy the dwelling-house or part of the dwelling-house.

(6)   

But section 223 (as so applied) shall apply only on the making of a

claim by the personal representatives.”.

40

Private residence relief: cases where relief obtained under section 260

6          

After section 226 of the Taxation of Chargeable Gains Act 1992 (c. 12)

insert—

“226A   

Private residence relief: cases where relief obtained under section 260

(1)   

This section applies where—

45

 

 

Finance Bill
Schedule 22 — Chargeable gains: private residence relief

388

 

(a)   

section 223 applies, or would apart from this section apply, in

relation to a gain or part of a gain accruing to an individual

or the trustees of a settlement (“the transferor”) on a disposal

(the “later disposal”),

(b)   

in computing the chargeable gain which would, apart from

5

section 223, accrue to the transferor on the later disposal, the

allowable expenditure would fall to be reduced, and

(c)   

that reduction would to any extent fall to be made in

consequence, directly or indirectly, of a claim or claims under

section 260 in respect of one or more earlier disposals

10

(whether or not made to the transferor).

(2)   

If a claim for relief under section 260 in respect of—

(a)   

the earlier disposal, or

(b)   

if there were two or more such disposals, any of them,

   

is made on or before the making of the later disposal, section 223

15

shall not apply in relation to the gain or part of a gain accruing on the

later disposal.

(3)   

If a claim for relief under section 260 in respect of—

(a)   

the earlier disposal, or

(b)   

if there were two or more such disposals, any of them,

20

   

is made after the making of the later disposal and subsection (2)

above does not apply, it is to be assumed for the purposes of capital

gains tax that section 223 never applied in relation to the gain or part

of a gain accruing on the later disposal.

(4)   

All such adjustments shall be made, whether by discharge or

25

repayment of tax, the making of assessments or otherwise, as are

required to give effect to subsection (3) above (notwithstanding any

limitation on the time within which any adjustment may be made).

(5)   

Where the later disposal is made by the trustees of a settlement, the

references in subsections (2) and (3) above to the making of the later

30

disposal shall be read as references to the making of a claim for relief

under section 223 in respect of the gain or part of a gain accruing on

that disposal.

(6)   

If a claim for relief under section 260 in respect of an earlier disposal

is revoked, this section shall apply as if the claim had never been

35

made.

(7)   

This section is subject to section 226B (exception for maintenance

funds for historic buildings).

226B    

Exception to section 226A

(1)   

Section 226A shall not apply in relation to a later disposal made by

40

the trustees of a settlement if the trustees have elected that section

691(2) of the Taxes Act (certain income of maintenance funds for

historic buildings not to be income of settlor etc) shall have effect in

the case of—

(a)   

the settlement, or

45

(b)   

any part of the settlement,

   

in relation to each year of assessment in which a relevant earlier

disposal is made.

 

 

Finance Bill
Schedule 22 — Chargeable gains: private residence relief

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(2)   

In this section “relevant earlier disposal”, in relation to a later

disposal, means an earlier disposal in respect of which a claim

mentioned in section 226A(1)(c) is made.

(3)   

This section is to be construed as one with section 226A.”.

Commencement

5

7     (1)  

The amendments in paragraphs 1(2) and 4(4)(a) of this Schedule have effect

in relation to any notice given on or after 10th December 2003.

      (2)  

The amendments in paragraphs 2(2), 3(2), 4(2), (3), (4)(b) and (5) and 5 of this

Schedule have effect in relation to disposals made on or after 10th December

2003.

10

      (3)  

Subject to paragraph 8 of this Schedule, the amendments in paragraphs 2(3)

and 6 of this Schedule have effect in relation to gains or parts of gains

accruing on later disposals (within the meaning of the section 226A inserted

by paragraph 6 of this Schedule) made on or after 10th December 2003

(whenever any relevant earlier disposal was made).

15

      (4)  

In sub-paragraph (3) above “relevant earlier disposal”, in relation to a later

disposal (within the meaning of the section 226A inserted by paragraph 6 of

this Schedule), means an earlier disposal in respect of which a claim

mentioned in subsection (1)(c) of that section is made.

Transitional provision

20

8     (1)  

This paragraph has effect where section 226A of the Taxation of Chargeable

Gains Act 1992 (c. 12) (as inserted by paragraph 6 of this Schedule) (“section

226A”) applies in circumstances in which—

(a)   

the relevant earlier disposal, or

(b)   

if there were two or more such disposals, each of them,

25

           

was made before 10th December 2003.

      (2)  

Section 226A shall have effect subject to the following modifications.

      (3)  

In subsection (2), omit “not” and at the end insert “subject to the

modifications set out in subsections (2A) to (2C) below”.

      (4)  

After subsection (2) insert—

30

“(2A)   

Section 223(1) shall not apply.

(2B)   

For the purposes of section 223(2)(a) and (3)—

(a)   

the dwelling-house or the part of the dwelling-house in

question is to be taken not to have been the individual’s only

or main residence during the post-commencement period or

35

any part of that period, and

(b)   

the words “but inclusive of the last 36 months of the period of

ownership in any event” shall not have effect in respect of so

much of that period of 36 months as falls within the post-

commencement period.

40

(2C)   

In subsection (2B) above “post-commencement period” means the

period beginning on 10th December 2003 and ending on the date of

the later disposal.”.

      (5)  

In subsection (3), omit “never” and at the end insert “subject to the

modifications set out in subsections (2A) to (2C) above”.

45

 

 

Finance Bill
Schedule 23 — Finance leasebacks: transitional provision

390

 

      (6)  

In this paragraph “relevant earlier disposal”, in relation to a later disposal,

means an earlier disposal in respect of which a claim mentioned in

subsection (1)(c) of section 226A is made.

      (7)  

This paragraph is to be construed as one with section 226A.

      (8)  

Subsections (5) and (6) of section 223 of the Taxation of Chargeable Gains Act

5

1992 apply in relation to the subsection (2B)(b) treated as inserted by sub-

paragraph (4) above as they apply in relation to subsections (1) and (2)(a) of

that section.

Schedule 23

Section 127

 

Finance leasebacks: transitional provision

10

Introduction

1          

Sections 228B to 228E of the Capital Allowances Act 2001 (c. 2) (as inserted

by section 127) are subject to this Schedule in their application in relation to

existing leasebacks.

Section 228B

15

2     (1)  

This paragraph applies if the pre-commencement rentals are greater than the

total of the actual rental deductions for periods of account up to, but

excluding, the transitional period of account.

      (2)  

Section 228B shall not apply in relation to—

(a)   

the transitional period of account if the lessee’s excess rentals are

20

greater than the notional rental deduction for that period, or

(b)   

a subsequent period of account if the unrelieved portion of the

lessee’s excess rentals is greater than the notional rental deduction

for that period.

      (3)  

Section 228B is subject to sub-paragraph (4) in its application to—

25

(a)   

the transitional period of account if the lessee’s excess rentals are not

greater than the notional rental deduction for that period, or

(b)   

a subsequent period of account if the unrelieved portion of the

lessee’s excess rentals is not greater than the notional rental

deduction for that period.

30

      (4)  

The permitted maximum for that period of account is the total of—

(a)   

the lessee’s excess rentals (in the case of the transitional period of

account) or the unrelieved portion of the lessee’s excess rentals (in

the case of a subsequent period of account), and

(b)   

the amount given by this calculation—equation: times[char[B],char[a],char[s],char[i],char[c],string[" "],char[A],char[m],char[o],

char[u],char[n],cross[char[t],over[id[plus[times[char[N],char[o],char[t],char[i],

char[o],char[n],char[a],char[l],string[" "],char[R],char[e],char[n],char[t],char[

a],char[l],string[" "],char[R],char[e],char[d],char[u],char[c],char[t],char[i],char[

o],char[n]],minus[times[char[D],char[e],char[d],char[u],char[c],char[t],char[i],

char[b],char[l],char[e],string[" "],char[E],char[x],char[c],char[e],char[s],char[

s]]]]],times[char[N],char[o],char[t],char[i],char[o],char[n],char[a],char[l],string[

" "],char[R],char[e],char[n],char[t],char[a],char[l],string[" "],char[R],char[e],

char[d],char[u],char[c],char[t],char[i],char[o],char[n],string[" "]]]]]

35

           

where—

“Basic Amount” means the amount calculated in accordance with

section 228B(2),

“Notional Rental Deduction” means the notional rental deduction for

the period of account in question, and

40

 

 

Finance Bill
Schedule 23 — Finance leasebacks: transitional provision

391

 

“Deductible Excess” means the amount included in the permitted

maximum by virtue of sub-paragraph (4)(a).

      (5)  

But where, in relation to the transitional period of account, the amount given

by sub-paragraph (4) is less than the appropriate fraction of the notional

rental deduction for that period, the permitted maximum shall be that

5

fraction of that deduction.

      (6)  

In this paragraph—

(a)   

“the lessee’s excess rentals” means—

(i)   

the pre-commencement rentals, minus

(ii)   

the total of the actual rental deductions referred to in sub-

10

paragraph (1), and

(b)   

“the unrelieved portion of the lessee’s excess rentals”, in relation to a

period of account, means—

(i)   

the lessee’s excess rentals, minus

(ii)   

the total of the actual rental deductions for periods of account

15

from and including the transitional period up to, but

excluding, the period in question.

      (7)  

In this paragraph—

“actual rental deduction”, in relation to a period of account, means the

amount that may be deducted in respect of amounts payable under

20

the existing leaseback in calculating the lessee’s income or profits

for that period of account for the purpose of income tax or

corporation tax;

“notional rental deduction”, in relation to a period of account, means

the amount that could, if section 228B did not apply, be deducted in

25

respect of amounts payable under the existing leaseback in

calculating the lessee’s income or profits for that period of account

for the purpose of income tax or corporation tax.

      (8)  

Nothing in sub-paragraphs (3) to (5) prevents the inclusion of an amount in

the permitted maximum by virtue of section 228B(3) and (4).

30

      (9)  

This paragraph does not apply in relation to any period of account later than

a period of account for which the permitted maximum has been determined

in accordance with sub-paragraph (3) to (5).

3     (1)  

This paragraph applies where—

(a)   

the existing leaseback terminates, and

35

(b)   

in the period of account immediately following that in which it

terminates, paragraph 2(2)(b) or 2(3)(b) would apply were it not for

the termination.

      (2)  

The permitted maximum for the period of account in which the leaseback

terminates shall also include an amount equal to the amount that the

40

unrelieved portion of the lessee’s excess rentals would have been in the

period of account immediately following.

Section 228C

4          

Section 228C shall not apply where the existing leaseback terminates before

17 March 2004.

45

5     (1)  

This paragraph applies if—

(a)   

the existing leaseback terminates otherwise than by expiry of its

term,

 

 

Finance Bill
Schedule 23 — Finance leasebacks: transitional provision

392

 

(b)   

upon the termination of the leaseback, or during the period of one

month beginning with the date of termination, the lessee becomes

the owner of the plant of machinery by acquiring it—

(i)   

from the lessor, or

(ii)   

where no person other than the lessor or a person connected

5

with the lessee has owned the plant or machinery at any time

since the termination of the leaseback, from a person

connected with the lessee,

(c)   

the person who first acquires the plant or machinery from the lessor

does so as a result of incurring capital expenditure equal (at least) to

10

the market value of the plant or machinery at the termination of the

leaseback, and

(d)   

the amount of the lessee acquisition expenditure that counts as

qualifying expenditure is restricted under section 226.

      (2)  

If the section 226 restriction is greater than the amount calculated in

15

accordance with section 228C(3)—

(a)   

section 228C(2) to (4) shall not apply, but

(b)   

if there is a taxable disposal, section 228C(2) to (4) shall apply subject

to sub-paragraph (5).

      (3)  

If the section 226 restriction is not greater than the amount calculated in

20

accordance with section 228C(3)—

(a)   

the amount by which profits or income are increased in accordance

with section 228C(2) shall be reduced by the section 226 restriction,

and

(b)   

if there is a taxable disposal, section 228C(2) to (4) shall apply again

25

subject to sub-paragraph (5).

      (4)  

For the purposes of sub-paragraphs (2) and (3) there is a taxable disposal if

the lessee ceases to own the plant or machinery during the period of six

years beginning with the date of termination of the leaseback.

      (5)  

Where section 228C(2) to (4) applies subject to this sub-paragraph—

30

(a)   

a reference to the termination shall be treated as a reference to the

cessation of ownership of the plant or machinery, and

(b)   

the amount by which profits or income are increased in accordance

with section 228C(2) shall be this fraction of the amount calculated in

accordance with section 228C(3) (or, in a case where sub-paragraph

35

(3) applied, that amount reduced by the section 226 restriction)—equation: over[(*s12.00s*)id[plus[times[char[D],char[i],char[s],char[p],char[o],char[s],char[

a],char[l],string[" "],char[P],char[r],char[o],char[c],char[e],char[e],char[d],char[

s]],minus[times[char[R],char[e],char[s],char[t],char[r],char[i],char[c],char[t],

char[e],char[d],string[" "],char[Q],char[u],char[a],char[l],char[i],char[f],char[

y],char[i],char[n],char[g],string[" "],char[E],char[x],char[p],char[e],char[n],char[

d],char[i],char[t],char[u],char[r],char[e]]]]],id[plus[times[char[L],char[e],char[

s],char[s],char[e],char[e],string[" "],char[A],char[c],char[q],char[u],char[i],char[

s],char[i],char[t],char[i],char[o],char[n],string[" "],char[E],char[x],char[p],char[

e],char[n],char[d],char[i],char[t],char[u],char[r],char[e]],minus[times[char[R],

char[e],char[s],char[t],char[r],char[i],char[c],char[t],char[e],char[d],string[" "],

char[Q],char[u],char[a],char[l],char[i],char[f],char[y],char[i],char[n],char[g],

string[" "],char[E],char[x],char[p],char[e],char[n],char[d],char[i],char[t],char[

u],char[r],char[e]]]]]]

      (6)  

In sub-paragraph (5) “Disposal Proceeds” means the consideration due to

the lessee under the transaction as a result of which he ceases to own the

plant or machinery or, if higher, the market value of the plant or machinery

at the time of that transaction; but—

40

(a)   

where that amount is greater than the lessee acquisition expenditure,

the Disposal Proceeds shall be the amount of the lessee acquisition

expenditure, or

(b)   

where that amount is less than the Restricted Qualifying

Expenditure, the Disposal Proceeds shall be the amount of the

45

Restricted Qualifying Expenditure.

      (7)  

In this paragraph—

 

 

 
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