Finance Bill

House of Commons

Session 2002 - 03
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Finance Bill

Finance Bill
Schedule 20 — Corporate venturing scheme
395

11
In paragraph 36 (requirement as to money raised)—
(a)
in sub-paragraph (1B)(b)—
(i)
for “relevant trade was not being carried on” substitute
“issuing company or a qualifying 90% subsidiary of that
company had not begun to carry on the relevant trade”,
5
(ii)
for “subsidiary” substitute “qualifying 90% subsidiary of that
company”,
(b)
in sub-paragraphs (4)(b)(ii) and (5)(b), for “qualifying subsidiary”
substitute “qualifying 90% subsidiary”.
12
In paragraph 40 (entitlement to claim)—
10
(a)
in sub-paragraph (2), for paragraph (a) substitute—
“(a)
the funded trade has been carried on for four
months by no person other than the issuing
company or a qualifying 90% subsidiary of that
company, disregarding—
15
(i)
any time spent preparing to carry on that
trade, and
(ii)
any person required to be disregarded in
accordance with sub-paragraph (2A) or
(2B), and”,
20
(b)
after sub-paragraph (2) insert—
    “(2A)
At any time when the funded trade is carried on by the
partners in a partnership of which the issuing company, or
a qualifying 90% subsidiary of that company, is a member,
there shall be disregarded for the purposes of sub-
25
paragraph (2)(a) any other members of the partnership at
that time.
     (2B)
At any time when the funded trade is carried on by the
parties to a joint venture to which the issuing company, or
a qualifying 90% subsidiary of that company, is a party,
30
there shall be disregarded for the purposes of sub-
paragraph (2)(a) any other parties to the joint venture at
that time.”,
(c)
for sub-paragraph (5)(a) substitute—
“(a)
by reason only of the issuing company or any other
35
company being wound up or dissolved without
winding up, the funded trade is carried on as
mentioned in sub-paragraph (2)(a) for a period
shorter than four months, and”,
(d)
in sub-paragraph (5)(b), for “was”, in each place, substitute “is”,
40
(e)
for sub-paragraph (6)(a) substitute—
“(a)
by reason only of anything done as a consequence
of the issuing company or any other company
being in administration or receivership, the funded
trade is carried on as mentioned in sub-paragraph
45
(2)(a) for a period shorter than four months, and”,
(f)
in sub-paragraph (6)(b), after “company” insert “concerned”.
13
In paragraph 102 (minor definitions etc) after sub-paragraph (7) insert—
     “(8)
In determining for the purposes of paragraph 3(2), 23(5) or 36(1B)
when a trade is begun to be carried on by a qualifying 90%
50

Finance Bill
Schedule 21 — Chargeable gains: restriction of gifts relief etc
396

subsidiary of the issuing company there shall be disregarded any
carrying on of the trade by it before it became such a subsidiary.”.
14
In paragraph 103 (index of defined expressions), after the entry for
“qualifying subsidiary” insert—

“qualifying 90% subsidiary
paragraph 23(10) and (11)”.

5
15
The amendments made by this Schedule have effect in relation to shares
issued on or after 17th March 2004.
Schedule 21
Section 116

Chargeable gains: restriction of gifts relief etc
Penalties for failure to furnish particulars etc
10
1     (1)
Section 98 of the Taxes Management Act 1970 (c. 9) is amended as follows.
      (2)
In the first column of the Table, insert at the appropriate place—
“Section 169G(2) of the 1992 Act.”.
Charge on settlor with interest in settlement etc: supplementary provisions
2     (1)
Section 79 of the Taxation of Chargeable Gains Act 1992 (c. 12) is amended
15
as follows.
      (2)
After subsection (5) insert—
“(5A)
In subsection (5) above “arrangements” includes any scheme,
agreement or understanding, whether or not legally enforceable.”.
      (3)
In subsection (6) (power of inspector to require information for purposes of
20
sections 77, 78 and 79) for “inspector” substitute “officer of the Board”.
Relief for gifts of business assets
3     (1)
Section 165 of the Taxation of Chargeable Gains Act 1992 is amended as
follows.
      (2)
In subsection (1) (circumstances in which subsection (4) applies, subject to
25
certain provisions) for “and 169” substitute “, 169, 169B and 169C”.
      (3)
In subsection (3) (relief not to apply to disposal in certain cases) after
paragraph (b) insert—
“(ba)
in the case of a disposal of shares or securities, the transferee
is a company,”.
30
      (4)
In subsection (8) (definitions) for paragraph (aa) substitute—
“(aa)
“holding company” has the meaning given by paragraph
22(1), “trading company” has the meaning given by
paragraph 22A, and “trading group” has the meaning given
by paragraph 22B, of Schedule A1; and”.
35
      (5)
In subsection (10) (deduction to be allowed in computing chargeable gain on
subsequent disposal by transferee, where disposal by transferor is

Finance Bill
Schedule 21 — Chargeable gains: restriction of gifts relief etc
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chargeable transfer for inheritance tax purposes) for “after 13th March 1989,
in respect of which a claim is made under this section,” substitute “in
relation to which subsection (4) above applies”.
Gifts relief not to be available on certain transfers to settlor-interested settlements etc
4
After section 169A of the Taxation of Chargeable Gains Act 1992 (c. 12)
5
insert—
“Gifts to settlor-interested settlements etc
169B
Gifts to settlor-interested settlements etc
(1)
Neither section 165(4) nor section 260(3) shall apply in relation to a
disposal (“the relevant disposal”)—
10
(a)
made by a person (“the transferor”) to the trustees of a
settlement, and
(b)
in respect of which Condition 1 or Condition 2 below is
satisfied.
(2)
Condition 1 is that, immediately after the making of the relevant
15
disposal,—
(a)
there is a settlor (see section 169E) who has an interest in the
settlement (see section 169F), or
(b)
an arrangement (see section 169G) subsists under which such
an interest will or may be acquired by a settlor.
20
(3)
Condition 2 is that—
(a)
a chargeable gain would (assuming that neither section
165(4) nor section 260(3) applied in relation to the relevant
disposal) accrue to the transferor on that disposal,
(b)
in computing the gain, the allowable expenditure would to
25
any extent fall to be reduced in consequence, directly or
indirectly, of a claim under section 165 or 260 in respect of an
earlier disposal made by an individual (whether or not to the
transferor), and
(c)
immediately after the making of the relevant disposal,—
30
(i)
that individual has an interest in the settlement, or
(ii)
an arrangement subsists under which such an interest
will or may be acquired by him.
(4)
This section is subject to section 169D (exception for maintenance
funds for historic buildings and certain settlements for disabled
35
persons).
169C
Clawback of relief if settlement becomes settlor-interested etc
(1)
This section applies in relation to a disposal (“the relevant
disposal”)—
(a)
made by a person (“the transferor”) to the trustees of a
40
settlement,
(b)
in relation to which section 165(4) or 260(3) applies, or would
apart from this section apply, and
(c)
in respect of which Condition 1 or Condition 2 below is
satisfied.
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Finance Bill
Schedule 21 — Chargeable gains: restriction of gifts relief etc
398

(2)
Condition 1 is that, at any time during the clawback period,—
(a)
there is a settlor who has an interest in the settlement, or
(b)
an arrangement subsists under which such an interest will or
may be acquired by a settlor.
(3)
Condition 2 is that—
5
(a)
in computing the chargeable gain which would (assuming
that neither section 165(4) nor section 260(3) applied in
relation to the relevant disposal) accrue to the transferor on
that disposal, the allowable expenditure would fall to be
reduced,
10
(b)
that reduction would to any extent fall to be made in
consequence, directly or indirectly, of a claim under section
165 or 260 in respect of an earlier disposal made by an
individual (whether or not to the transferor), and
(c)
at any time during the clawback period,—
15
(i)
that individual has an interest in the settlement, or
(ii)
an arrangement subsists under which such an interest
will or may be acquired by him.
(4)
If no claim for relief under section 165 or 260 in respect of the relevant
disposal is made before the material time, neither section 165(4) nor
20
section 260(3) shall apply in relation to that disposal.
(5)
Subsections (7) to (9) below apply if a claim for relief under section
165 or 260 in respect of the relevant disposal is made before the
material time.
(6)
But those subsections do not apply if—
25
(a)
the transferor is an individual, and
(b)
he dies before the material time.
(7)
A chargeable gain, of an amount equal to the amount of the held-
over gain (within the meaning of section 165 or 260) on the relevant
disposal, shall be treated for the purposes of tax in respect of
30
chargeable gains as accruing to the transferor at the material time.
(8)
For any chargeable period ending after the making of the relevant
disposal, the chargeable gains and allowable losses of—
(a)
the trustees of the settlement, or
(b)
any person whose title to any property to any extent derives,
35
directly or indirectly, from them,

shall be determined on the assumption that neither section 165(4)(b)
nor section 260(3)(b) ever applied in relation to that disposal.
(9)
All such adjustments shall be made, whether by discharge or
repayment of tax, the making of assessments or otherwise, as are
40
required to give effect to subsection (8) above (notwithstanding any
limitation on the time within which any adjustment may be made).
(10)
If a claim for relief under section 165 or 260 in respect of the relevant
disposal is revoked, this section shall apply as if the claim had never
been made.
45
(11)
In this section “the clawback period” means the period—

Finance Bill
Schedule 21 — Chargeable gains: restriction of gifts relief etc
399

(a)
beginning immediately after the making of the relevant
disposal, and
(b)
ending six years after the end of the year of assessment in
which that disposal was made.
(12)
In this section “the material time” means the time at which
5
subsection (1)(c) above first becomes satisfied.
(13)
This section is subject to section 169D.
169D
Exceptions to sections 169B and 169C
(1)
Sections 169B and 169C shall not apply in relation to a disposal to the
trustees of a settlement in a year of assessment if the trustees have
10
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
(b)
any part of the settlement,
15

in relation to that year of assessment.
(2)
Sections 169B and 169C shall not apply in relation to a disposal to the
trustees of a settlement if the following conditions are satisfied.
(3)
The first condition is that, immediately after the making of the
disposal,—
20
(a)
the settled property is held on trusts which secure that,
during the lifetime of a disabled person, not less than half of
the property which is applied is applied for the benefit of that
person, and
(b)
the settled property is held on trusts—
25
(i)
which secure that, during his lifetime, he is entitled to
not less than half of the income arising from the
property,
(ii)
which secure that, during his lifetime, no such income
may be applied for the benefit of any other person, or
30
(iii)
under which, during his lifetime, no interest in
possession in the settled property subsists.
(4)
The second condition is that if, immediately after the making of the
disposal, one or more settlors is an interested settlor, each such
settlor must at that time be a disabled beneficiary.
35
(5)
For the purposes of subsection (4) above a settlor is an “interested
settlor” in relation to a settlement if—
(a)
he has an interest in the settlement, or
(b)
an arrangement subsists under which such an interest will or
may be acquired by him;
40

and for this purpose, the references to an individual’s spouse in
section 169F(2) and (3) shall be disregarded.
(6)
In subsection (4) above “disabled beneficiary”, in relation to a
settlement, means a disabled person who—
(a)
is a beneficiary under the settlement, or
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Finance Bill
Schedule 21 — Chargeable gains: restriction of gifts relief etc
400

(b)
would be such a beneficiary if he had the interest in the
settlement by virtue of which subsection (5)(b) above applies
in relation to him.
(7)
In this section “disabled person” means—
(a)
a person who by reason of mental disorder within the
5
meaning of the Mental Health Act 1983 is incapable of
administering his property or managing his affairs; or
(b)
a person in receipt of attendance allowance or of a disability
living allowance by virtue of entitlement to the care
component at the highest or middle rate.
10
(8)
In this section “attendance allowance” means an allowance under—
(a)
section 64 of the Social Security Contributions and Benefits
Act 1992, or
(b)
section 64 of the Social Security Contributions and Benefits
(Northern Ireland) Act 1992.
15
(9)
In this section “disability living allowance” means a disability living
allowance under—
(a)
section 71 of the Social Security Contributions and Benefits
Act 1992, or
(b)
section 71 of the Social Security Contributions and Benefits
20
(Northern Ireland) Act 1992.
(10)
The trusts on which settled property is held shall not be treated as
falling outside subsection (3) above by reason only of the powers
conferred on the trustees by—
(a)
section 32 of the Trustee Act 1925, or
25
(b)
section 33 of the Trustee Act (Northern Ireland) 1958 (powers
of advancement).
(11)
The references in subsection (3) above to the lifetime of a person
shall, where the income from the settled property is held for his
benefit on trusts of the kind described in section 33 of the Trustee Act
30
1925 (protective trusts), be construed as references to the period
during which the income is held on trust for him.
169E
Meaning of “settlor” in sections 169B to 169D and 169G
(1)
For the purposes of this section, sections 169B to 169D and section
169G, a person is a settlor in relation to a settlement if—
35
(a)
he is an individual, and
(b)
the settled property consists of, or includes, property
originating from him.
(2)
In subsection (1) above, the reference to property originating from a
settlor is a reference to—
40
(a)
property which that settlor has provided directly or
indirectly for the purposes of the settlement, and
(b)
property which wholly or partly represents that property or
any part of it.
(3)
In subsection (2) above, the references to property which a settlor has
45
provided directly or indirectly—

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(a)
include references to property which has been provided
directly or indirectly by another person in pursuance of
reciprocal arrangements with that settlor, but
(b)
do not include references to property which that settlor has
provided directly or indirectly in pursuance of reciprocal
5
arrangements with another person.
(4)
In subsection (2) above, the reference to property which represents
other property includes a reference to property which represents
accumulated income from that other property.
169F
Meaning of “interest in a settlement” in sections 169B to 169D
10
(1)
For the purposes of this section and sections 169B to 169D, an
individual is to be regarded as having an interest in a settlement if
subsection (2) or (3) below applies.
(2)
This subsection applies if—
(a)
any property which may at any time be comprised in the
15
settlement, or
(b)
any derived property,

is, or will or may become, payable to or applicable for the benefit of
the individual or his spouse in any circumstances whatsoever.
(3)
This subsection applies if the individual or his spouse enjoys a
20
benefit deriving directly or indirectly from—
(a)
any property which is comprised in the settlement, or
(b)
any derived property.
(4)
The references in subsections (2) and (3) above to the spouse of the
individual do not include—
25
(a)
a spouse from whom the individual is separated—
(i)
under an order of a court,
(ii)
under a separation agreement, or
(iii)
in such circumstances that the separation is likely to
be permanent, or
30
(b)
the widow or widower of the individual.
(5)
An individual is not to be regarded as having an interest in a
settlement by virtue of subsection (2) above if and so long as none of
the property which may at any time be comprised in the settlement,
and no derived property, can become payable or applicable as
35
mentioned in that provision except in the event of—
(a)
in the case of a marriage settlement, the death of both parties
to the marriage and of all or any of the children of the
marriage, or
(b)
the death of a child of the individual where the child had
40
become beneficially entitled to the property or any derived
property at an age not exceeding 25.
(6)
In this section “derived property”, in relation to any property,
means—
(a)
income from that property,
45
(b)
property directly or indirectly representing—
(i)
proceeds of that property, or