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Finance Bill
Schedule 10 — Chargeable gains: location of assets etc
Part 3 — Commencement

210

 

      (2)  

In subsection (3) (loss accruing to person in year of assessment during which

he is not resident or ordinarily resident in UK not to be allowable loss unless,

under section 10, he would be chargeable to tax in respect of chargeable gain

if the loss had been a gain) after “section 10” insert “or 10B”.

Reallocation within group of gain or loss accruing under section 179

5

8     (1)  

Section 179A of TCGA 1992 is amended as follows.

      (2)  

In subsection (12) (asset is “chargeable asset” if gain accruing to company on

disposal of asset would be chargeable gain and would by virtue of section

10(3) form part of company’s chargeable profits for corporation tax) for

“section 10(3)” substitute “section 10B”.

10

Exemptions for disposals by companies with substantial shareholding

9     (1)  

Schedule 7AC to TCGA 1992 is amended as follows.

      (2)  

In paragraph 3(2)(c)(ii) (one of conditions for exemption that chargeable

gain accruing to company on disposal would by virtue of section 10(3) form

part of company’s chargeable profits for corporation tax) for “section 10(3)”

15

substitute “section 10B”.

Part 3

Commencement

Commencement

10    (1)  

The amendments made by Part 1 of this Schedule have effect for

20

determining for the purposes of TCGA 1992—

(a)   

the situation of any asset, or

(b)   

whether the situation of any asset is in the United Kingdom,

           

at any time on or after 16th March 2005 (irrespective of when the asset was

acquired by the person holding it).

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      (2)  

The amendment made by paragraph 7 has effect in relation to any loss

accruing to a company in an accounting period ending on or after 16th

March 2005.

      (3)  

The amendment made by paragraph 8 has effect for determining for the

purposes of section 179A of TCGA 1992 whether an asset is a “chargeable

30

asset” in relation to a company at any time on or after 16th March 2005.

      (4)  

The amendment made by paragraph 9 has effect in relation to disposals on

or after 16th March 2005.

 

 

Finance Bill
Schedule 11 — Chargeable gains: options
Part 1 — Application of market value rule in case of exercise of option

211

 

Schedule 11

Section 129

 

Chargeable gains: options

Part 1

Application of market value rule in case of exercise of option

Application of market value rule in case of exercise of option

5

1     (1)  

Section 144ZA of TCGA 1992 is amended as follows.

      (2)  

In subsection (1) (cases in which the section applies) at the beginning insert

“Subject to section 144ZB,”.

      (3)  

In subsection (4) (where market value rule is set aside by the section, amount

or value to be taken into account is, subject to section 120, to be actual

10

amount or value) for “(subject to section 120) the actual amount or value”

substitute “(subject to section 119A) the exercise price”.

      (4)  

After that subsection insert—

“(4A)   

In subsection (4) above “exercise price”, in relation to an option,

means the amount or value of the consideration which, under the

15

terms of the option, is—

(a)   

receivable (if the option binds the grantor to buy), or

(b)   

payable (if the option binds the grantor to sell),

   

as a result of the exercise of the option (and does not include the

amount or value of any consideration for the acquisition of the

20

option (whether directly from the grantor or not)).”.

      (5)  

For subsection (5) substitute—

“(5)   

Subsections (5) and (6) of section 144 shall apply for the purposes of

this section and sections 144ZB to 144ZD as they apply for the

purposes of that section.”.

25

Application of market value rule in case of exercise of option: exception

2          

After section 144ZA of TCGA 1992 insert—

“144ZB  

 Exception to rule in section 144ZA

(1)   

This section applies where—

(a)   

section 144ZA would apply but for this section in relation to

30

an option, and

(b)   

the exercise of the option is non-commercial (see section

144ZC).

(2)   

But this section does not apply if—

(a)   

the option is a securities option within the meaning of

35

Chapter 5 of Part 7 of ITEPA 2003 (see section 420(8) of that

Act) to which that Chapter applies or would, apart from

section 474 of that Act, apply (see section 471 of that Act), or

(b)   

section 144ZD of this Act (value of underlying subject matter

of option altered with a view to obtaining a tax advantage)

40

applies in relation to the option.

 

 

Finance Bill
Schedule 11 — Chargeable gains: options
Part 1 — Application of market value rule in case of exercise of option

212

 

(3)   

Where this section applies, neither section 144ZA nor the following

provisions of section 144 shall apply in relation to the option—

(a)   

in subsection (2), the words from “and accordingly” to the

end of that subsection, and

(b)   

in subsection (3), the words from “and accordingly” to the

5

end of that subsection;

   

but subsection (4) or (5) below shall instead have effect (subject to

subsection (6) below).

(4)   

If the option binds the grantor to buy—

(a)   

the cost of acquisition incurred by the grantor in buying in

10

pursuance of his obligations under the option, and

(b)   

the consideration for the disposal of what is bought by the

grantor,

   

shall be deemed for the purposes of tax in respect of chargeable gains

to be the market value, at the time the option is exercised, of what is

15

bought.

(5)   

If the option binds the grantor to sell—

(a)   

the consideration for the sale, and

(b)   

the cost to the person exercising the option of acquiring what

is sold,

20

   

shall be deemed for the purposes of tax in respect of chargeable gains

to be the market value, at the time the option is exercised, of what is

sold.

(6)   

But if the whole or any part of the underlying subject matter of the

option (see subsection (7)) is subject to any right or restriction which

25

is enforceable by the person disposing of the underlying subject

matter or a person connected with him—

(a)   

the market value of the underlying subject matter shall be

determined for the purposes of subsection (4) or (5) above as

if the right or restriction did not exist, and

30

(b)   

to the extent that subsection (6) or (7) of section 18 would

apply apart from this paragraph, it shall be disregarded.

(7)   

In this section “underlying subject matter”, in relation to an option,

means—

(a)   

if the option binds the grantor to sell, what falls to be sold on

35

exercise of the option;

(b)   

if the option binds the grantor to buy, what falls to be bought

on exercise of the option.

144ZC   

 Section 144ZB: non-commercial exercise of option

(1)   

For the purposes of section 144ZB, the exercise of an option which

40

binds the grantor to buy is non-commercial if the exercise price for

the option (see subsection (3)) is less than the open market price (see

subsection (4)) of what is bought.

(2)   

For the purposes of section 144ZB, the exercise of an option which

binds the grantor to sell is non-commercial if the exercise price for

45

the option is greater than the open market price of what is sold.

 

 

Finance Bill
Schedule 11 — Chargeable gains: options
Part 1 — Application of market value rule in case of exercise of option

213

 

(3)   

In this section “exercise price”, in relation to an option, means the

amount or value of the consideration which, under the terms of the

option, is—

(a)   

receivable (if the option binds the grantor to buy), or

(b)   

payable (if the option binds the grantor to sell),

5

   

as a result of the exercise of the option (and does not include the

amount or value of any consideration for the acquisition of the

option (whether directly from the grantor or not)).

(4)   

In this section “open market price”, in relation to the underlying

subject matter of an option (see section 144ZB(7)), means the price

10

which the underlying subject matter might reasonably be expected to

fetch on a sale in the open market at the time the option is exercised;

and subsections (5) to (7) below apply for the purposes of this

subsection.

(5)   

If the whole or any part of the underlying subject matter of the option

15

is subject to any right or restriction which is enforceable by—

(a)   

the person disposing of the underlying subject matter, or

(b)   

a person connected with him,

   

the open market price of the underlying subject matter shall be

determined as if the right or restriction did not exist.

20

(6)   

Section 272(2) (no reduction in estimated market value on account of

assumption that whole of assets are placed on market at one time)

shall apply in estimating the open market price of the underlying

subject matter of an option as it applies in estimating the market

value of any assets.

25

(7)   

Where the underlying subject matter of an option comprises or

includes assets to which section 273 applies (unquoted shares and

securities), subsection (3) of that section (assumption that relevant

information is available) shall apply in determining the open market

price of those assets as it applies for the purposes of a determination

30

falling within subsection (1) of that section.

(8)   

This section is to be construed as one with section 144ZB.

144ZD   

 Section 144ZB: alteration of value to obtain tax advantage

(1)   

This section applies in relation to an option if each of the following

conditions is satisfied (as to the effect of this section applying, see

35

section 144ZB(2)(b)).

(2)   

Condition 1 is that section 144ZB would, apart from subsection (2)(b)

of that section, apply in relation to the option.

(3)   

Condition 2 is that, at the time the option is exercised, the open

market price (see section 144ZC(4)) of the underlying subject matter

40

of the option (see section 144ZB(7)) differs from the open market

price of the underlying subject matter of the option at the time the

option was granted.

(4)   

Condition 3 is that some or all of that change in the open market price

of the underlying subject matter of the option results to any extent,

45

directly or indirectly, from arrangements (see subsection (8)) (“the

relevant arrangements”)—

 

 

Finance Bill
Schedule 11 — Chargeable gains: options
Part 2 — Miscellaneous amendments relating to share options etc

214

 

(a)   

to which a relevant person is or has been a party, or

(b)   

which include one or more transactions to which a relevant

person is or has been a party.

(5)   

In subsection (4) above “relevant person” means any of the

following—

5

(a)   

the grantor of the option;

(b)   

any person who at any time holds the option;

(c)   

a person connected with one or more of the persons

mentioned in paragraph (a) or (b) above.

(6)   

Condition 4 is that, if there were to be disregarded so much of that

10

change in the open market price of the underlying subject matter of

the option as results to any extent, directly or indirectly, from the

relevant arrangements, the exercise of the option would not be non-

commercial (see section 144ZC).

(7)   

Condition 5 is that (apart from this section) as a result, directly or

15

indirectly, of the relevant arrangements—

(a)   

the grantor of the option, or

(b)   

the person exercising the option,

   

would obtain or might be expected to obtain an advantage (see

subsection (9)) in relation to capital gains tax or corporation tax in

20

respect of chargeable gains directly or indirectly in consequence of,

or otherwise in connection with, the exercise of the option.

(8)   

In this section “arrangements” includes any agreement,

understanding, scheme, transaction or series of transactions

(whether or not legally enforceable).

25

(9)   

In this section “advantage”, in relation to capital gains tax or

corporation tax in respect of chargeable gains, means—

(a)   

relief or increased relief from, or repayment or increased

repayment of, that tax, or the avoidance or reduction of a

charge to that tax or an assessment to that tax or the

30

avoidance of a possible assessment to that tax, or

(b)   

the deferral of any payment of that tax or the advancement of

any repayment of that tax.

(10)   

This section is to be construed as one with sections 144ZB and

144ZC.”.

35

Part 2

Miscellaneous amendments relating to share options etc

Shares acquired on same day: election for alternative treatment

3     (1)  

Section 105A of TCGA 1992 is amended as follows.

      (2)  

In subsection (1) (cases in which subsection (2) applies) in paragraph (b)

40

(some of the acquired shares to be approved-scheme shares) for sub-

paragraphs (i) and (ii) substitute—

“(i)   

the exercise of a qualifying option within the meaning

given by section 527(4) of ITEPA 2003 (enterprise

management incentives) in circumstances where

45

 

 

Finance Bill
Schedule 11 — Chargeable gains: options
Part 3 — Commencement

215

 

section 530 or 531 of that Act (exercise of option to

acquire shares) applies, or

(ii)   

the exercise of an option to which Chapter 7 or 8 of

Part 7 of that Act (approved share option schemes)

applies in circumstances where section 519(1) or

5

524(1) of that Act applies.”.

Employment-related securities options

4     (1)  

Section 149A of TCGA 1992 is amended as follows.

      (2)  

In subsection (1) (cases in which the section applies) for paragraph (b)

(option to consist of right to acquire shares in body corporate and to be

10

obtained by individual by reason of his office or employment) substitute—

“(b)   

the option is a securities option within the meaning of

Chapter 5 of Part 7 of ITEPA 2003 (see section 420(8) of that

Act) to which that Chapter applies or would, apart from

section 474 of that Act, apply (see section 471 of that Act),

15

and”.

      (3)  

In that subsection, in paragraph (c) (section 17(1) to apply for calculating

consideration for grant of option) after “section 17(1)” insert “of this Act”.

      (4)  

The heading of the section accordingly becomes “Employment-related

securities options”.

20

Interpretation of TCGA 1992

5     (1)  

Section 288 of TCGA 1992 is amended as follows.

      (2)  

In subsection (1A) (employment-related securities options) for the second

sentence substitute—

   

“In this subsection “employment-related securities option” means a

25

securities option within the meaning of Chapter 5 of Part 7 of ITEPA

2003 (see section 420(8) of that Act) to which that Chapter applies or

would, apart from section 474 of that Act, apply (see section 471 of

that Act); and other expressions used in this subsection and that

Chapter have the same meaning in this subsection as in that

30

Chapter.”.

Part 3

Commencement

Commencement

6     (1)  

The amendments made by paragraphs 1 to 3 have effect in relation to cases

35

where the option in question is exercised on or after 2nd December 2004

(whenever the option was acquired).

      (2)  

The amendments made by paragraphs 4 and 5 have effect in relation to

options granted on or after 2nd December 2004.

 

 

 
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