Income Tax Bill

House of Commons

Session 2006 - 07
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Income Tax Bill

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 6 — Losses on disposal of shares
628

Meaning of a company being “in administration”
57    (1)
Sub-paragraph (2) applies in relation to—
(a)
an administration order under Part 3 of the Insolvency (Northern
Ireland) Order 1989 the petition for which was presented before 6
April 2007, or
5
(b)
any corresponding order under the law of a country or territory
outside the United Kingdom the proceedings for which were
instituted before that date.
      (2)
Section 252 (as it applies for the purposes of Chapter 6 of Part 4) applies with
the substitution for subsection (2) of—
10
“(2)
A company is “in administration” if—
(a)
it is in administration within the meaning of Schedule B1 to
the Insolvency Act 1986, or
(b)
there is in force in relation to it—
(i)
an administration order under Part 3 of the
15
Insolvency (Northern Ireland) Order 1989, or
(ii)
any corresponding order under the law of a country
or territory outside the United Kingdom.”
      (3)
For the purposes of sub-paragraph (2), section 252 applies for the purposes
of Chapter 6 of Part 4 in any case where—
20
(a)
it is applied by section 138(5),
(b)
it applies for the purposes of section 190 as applied by section 141(2),
or
(c)
it applies for the purposes of section 191 as applied by section 137(7),
139(4), 140(2) or 142(4).
25
      (4)
In relation to an administration order under Part 2 of the Insolvency Act 1986
the petition for which was presented before 15 September 2003, section 252
(as applied by section 138(5)) applies with the substitution for subsection (2)
of—
“(2)
A company is “in administration” if there is in force in relation to it—
30
(a)
an administration order under Part 2 of the Insolvency Act
1986 or Part 3 of the Insolvency (Northern Ireland) Order
1989, or
(b)
any corresponding order under the law of a country or
territory outside the United Kingdom.”
35
      (5)
Section 252 (as applied by section 138(5)) does not apply in relation to shares
issued before 21 March 2000.
      (6)
In the application of sub-paragraph (5) on or after 21 March 2000, shares—
(a)
that were issued on or after 6 April 1998 but before 21 March 2000,
and
40
(b)
to which EIS relief or relief under Schedule 5B to TCGA 1992 was
attributable immediately before 21 March 2000,

are treated as having been issued on or after 21 March 2000.
      (7)
Sub-paragraphs (1) to (6) apply in relation to Chapter 5A of Part 13 of ICTA
and section 576C(5) of that Act (which make corresponding provision for the
45

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 8 — Venture capital trusts
629

purposes of corporation tax) as they apply in relation to Chapter 6 of Part 4
and section 138(5).
      (8)
For the purposes of sub-paragraph (7), section 252 applies for the purposes
of Chapter 5A of Part 13 of ICTA in any case where—
(a)
it is applied by section 576C(5) of ICTA,
5
(b)
it applies for the purposes of section 190 as applied by section 576F(2)
of ICTA, or
(c)
it applies for the purposes of section 191 as applied by section
576B(7), 576D(4), 576E(2) or 576G(4) of ICTA.
Part 7
10
Enterprise investment scheme
The gross assets requirement
58    (1)
In relation to shares to which sub-paragraph (2) or (3) applies, section 186
applies with the substitution in subsections (1) and (2)—
(a)
of “£15 million” for “£7 million”, and
15
(b)
of “£16 million” for “£8 million”.
      (2)
This sub-paragraph applies to shares issued to a person who subscribed for
them before 22 March 2006.
      (3)
This sub-paragraph applies to shares issued to the managers of an
investment fund approved for the purposes of section 251 by the
20
Commissioners for Her Majesty’s Revenue and Customs if—
(a)
the fund was approved before 22 March 2006,
(b)
investments in the fund have been accepted before 6 April 2006, and
(c)
the shares are issued to the managers as nominee for an individual
who has (whether or not before 6 April 2006) invested in the fund.
25
Part 8
Venture capital trusts
Eligibility for relief
59
Section 261(4) does not apply in relation to shares acquired by a company
before 1 December 2003.
30
Form and amount of relief
60    (1)
In relation to shares issued before 6 April 2006, section 263(2) applies with
the substitution of “tax at the higher rate for the tax year on” for “30% of”.
      (2)
In relation to shares issued before 6 April 2004, section 263(2) applies with
the substitution of “the savings rate” for “the higher rate”.
35
No entitlement to relief if there is a linked loan
61
In relation to shares issued before 6 April 2006, section 264(3) applies with
the substitution, in paragraph (b) of the definition of “the relevant period”,
of “the third anniversary” for “the fifth anniversary”.

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 8 — Venture capital trusts
630

Loss of relief if shares disposed of within 5 years
62    (1)
In relation to shares issued before 6 April 2006—
(a)
subsection (1) of section 266 applies with the substitution of “3 years”
for “5 years”, and
(b)
subsection (4) of that section applies with the omission of “30% of”
5
and the insertion at the end of “multiplied by the higher rate for the
tax year in which the shares were issued”.
      (2)
In relation to shares issued before 6 April 2004, section 266(4) applies with
the substitution of “the savings rate” for “the higher rate”.
Interpretation of Chapter 2
10
63    (1)
In relation to shares issued before 6 April 2007, section 273(1) applies as if it
gave “eligible shares” the same meaning as that given by paragraph 6(1) of
Schedule 15B to ICTA at the time of the issue of the shares.
      (2)
In relation to shares issued before 6 April 2006, section 273(1) applies with
the substitution of “3 years” for “5 years”.
15
The 15% holding limit condition
64
In relation to shares or securities issued before 17 April 2002, section 277(5)
applies with the following modifications—
(a)
the insertion after “reconstruction”, in the first place where it occurs,
of “or amalgamation”, and
20
(b)
the omission of the words from “In this subsection” to the end.
Conditions relating to value of investments
65    (1)
Sub-paragraph (2) applies if any question arises which—
(a)
would otherwise fall to be determined in accordance with section
278, and
25
(b)
is a question whether, in a case where a company (“company A”)
holds investments in a company (“company B”) immediately before
6 April 2007, the 15% holding condition is met if there is an addition
to the holding on or after that date.
      (2)
Any such question is to be determined in accordance with—
30
(a)
section 842AA(11)(c) of ICTA, and
(b)
section 842(3) and (4) of that Act as applied by that provision,

until such time as company A ceases to hold investments in company B.
      (3)
Except in a case to which sub-paragraph (2) applies, section 278(5) applies in
relation to investments issued before 17 April 2002 with the following
35
modifications—
(a)
the insertion after “reconstruction”, in the first place where it occurs,
of “or amalgamation”, and
(b)
the omission of the words from “In this subsection” to the end.
Conditions relating to qualifying holdings and eligible shares: supplementary
40
66
Section 280(3) does not apply in relation to shares issued before 17 April
2002.

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 8 — Venture capital trusts
631

Interpretation of Chapter 3
67
Section 285 applies with the omission of subsections (4) to (6) for the
purposes of determining whether, at any time before 6 April 2007, the
conditions mentioned in section 274(2) are, will be or were met with respect
to a company.
5
The maximum qualifying investment requirement
68
For the purpose of determining whether shares or securities are to be
regarded as comprised in a company’s qualifying holdings, section 287(3)(b)
does not apply in relation to shares or securities issued before 6 April 2007.
The no guaranteed loan requirement
10
69
For the purpose of determining whether shares or securities are to be
regarded as comprised in a company’s qualifying holdings, section 288 does
not apply in relation to shares or securities acquired by a company by means
of the investment of—
(a)
money raised by the issue before 2 July 1997 of shares in or securities
15
of the investing company, or
(b)
money derived from the investment by that company of any such
money.
The proportion of eligible shares requirement
70    (1)
If at any time the requirement of section 289—
20
(a)
would be met in relation to a relevant holding and a company if none
of the old investments were held by the investing company at that
time, but
(b)
would not otherwise be met,

that section applies in relation to that holding as if the old investments were
25
not held by the investing company at that time.
      (2)
In sub-paragraph (1) “old investments” means shares in or securities of the
relevant company acquired by means of the investment of—
(a)
money raised by the issue before 2 July 1997 of shares in or securities
of the investing company, or
30
(b)
money derived from the investment by that company of any such
money.
The trading requirement
71
For the purpose of determining whether shares or securities are to be
regarded as comprised in a company’s qualifying holdings, section 290
35
applies in relation to shares or securities issued before 6 April 2007 with the
following modifications—
(a)
the omission of subsections (2) and (6), and
(b)
in subsection (5)(d), the omission of sub-paragraph (ii) and the “or”
immediately before it.
40

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 8 — Venture capital trusts
632

The carrying on of a qualifying activity requirement
72    (1)
For the purpose of determining whether shares or securities are to be
regarded as comprised in a company’s qualifying holdings, section 291
applies in relation to shares or securities issued before 7 April 2007 with the
omission of subsection (8).
5
      (2)
For the purpose of determining whether shares or securities are to be
regarded as comprised in a company’s qualifying holdings, section 291
applies in relation to shares or securities issued before 17 March 2004 with
the following modifications—
(a)
in subsection (1), the substitution for “a qualifying company
10
(whether or not the same such company at every such time)” of “the
qualifying company”,
(b)
in subsection (3), the substitution for “was intended to be carried on”
of “it intended to carry on” and the omission of “by a qualifying
company”,
15
(c)
in subsection (4)(a), the substitution for “a qualifying company” of
“the qualifying company”,
(d)
in subsection (4)(b), the substitution for “at all times since the end of
that period, a qualifying company (whether or not the same such
company at every such time) has” of “the qualifying company has at
20
all times since the end of that period”, and
(e)
the omission of subsection (6).
Ceasing to meet the requirement because of administration or receivership
73
For the purpose of determining whether shares or securities are to be
regarded as comprised in a company’s qualifying holdings, section 292(1)
25
applies in relation to shares or securities issued before 17 March 2004 with
the omission of “merely”.
The use of the money raised requirement
74
For the purpose of determining whether shares or securities are to be
regarded as comprised in a company’s qualifying holdings, section 293
30
applies in relation to shares or securities issued before 17 March 2004 with
the following modifications—
(a)
in subsection (2), the substitution for “has been or is intended to be
employed” of “is money which the qualifying company has
employed or intends to employ”, and
35
(b)
in subsection (5)(b), the substitution for “a qualifying company” of
“the qualifying company”.
The relevant company to carry on the relevant qualifying activity requirement
75    (1)
For the purpose of determining whether shares or securities are to be
regarded as comprised in a company’s qualifying holdings, section 294
40
applies in relation to shares or securities issued before 6 April 2007 with the
following modifications—
(a)
in subsections (1) and (6) the substitution for “relevant qualifying
activity” of “qualifying activity”,
(b)
in subsection (1) the substitution for “section 293” of “section 291”,
45
and

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 8 — Venture capital trusts
633

(c)
the omission of subsection (7).
      (2)
For the purpose of determining whether shares or securities are to be
regarded as comprised in a company’s qualifying holdings, Chapter 4 of
Part 6 of this Act applies in relation to shares or securities issued before 17
March 2004 with the substitution for section 294 of—
5
“294
Further requirements as to the money raised by the investment in
question
(1)
If—
(a)
the relevant company is a parent company, and
(b)
the business of the group does not consist wholly or as to a
10
substantial part in the carrying on of non-qualifying
activities,

the requirements of this section are not met unless one or more of the
following conditions is met.
(2)
Condition A is that the trader company meets the requirement of
15
section 290(1)(a).
(3)
Condition B is that the trader company would meet that requirement
if its purposes were ignored so far as they consist in the carrying on
of activities in section 290(5).
(4)
Condition C is that the trader company is a qualifying 90% company
20
and—
(a)
apart from incidental purposes, it exists wholly for the
purposes of carrying on activities such as those in section
290(5)(c) and (d), or
(b)
it has no profits for the purposes of corporation tax and no
25
part of its business consists in the making of investments.
(5)
In this section—
“the business of the group” has the same meaning as it has for
the purposes of subsection (1)(b) of section 290,
“incidental purposes” and “non-qualifying activities” have the
30
same meaning as in that section,
“the trader company” means the company (whether the
relevant company or a qualifying subsidiary of the relevant
company) carrying on the qualifying activity which meets the
requirement of section 291.”
35
The gross assets requirement
76    (1)
For the purpose of determining whether shares or securities are to be
regarded as comprised in a company’s qualifying holdings, section 297
applies in relation to shares or securities issued on or after 6 April 1998 and
before 6 April 2006 with the substitution in subsections (1) and (2)—
40
(a)
of “£15 million” for “£7 million”, and
(b)
of “£16 million” for “£8 million”.
      (2)
For the purposes of sub-paragraph (1) any shares or securities acquired by a
company at any time by means of the investment of—
(a)
money raised by the issue before 6 April 2006 of shares in or
45
securities of the investing company, or

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 8 — Venture capital trusts
634

(b)
money derived from the investment by that company of any such
money,

are treated as having been issued before 6 April 2006.
      (3)
For the purpose of determining whether shares or securities are to be
regarded as comprised in a company’s qualifying holdings, section 297
5
applies in relation to shares or securities issued before 6 April 1998 with the
substitution in subsections (1) and (2)—
(a)
of “£10 million” for “£7 million”, and
(b)
of “£11 million” for “£8 million”.
The property managing subsidiaries requirement
10
77
For the purpose of determining whether shares or securities are to be
regarded as comprised in a company’s qualifying holdings, section 299 does
not apply in relation to shares or securities issued before 17 March 2004.
Meaning of “qualifying trade”
78
For the purpose of determining whether shares or securities are to be
15
regarded as comprised in a company’s qualifying holdings, section 300
applies in relation to shares or securities issued before 6 April 2007 with the
following modifications—
(a)
in subsection (2), the omission of paragraph (b) and the “or”
immediately before it, and
20
(b)
the omission of subsection (3).
Meaning of “qualifying 90% subsidiary”
79
For the purpose of determining whether shares or securities are to be
regarded as comprised in a company’s qualifying holdings, section 301 does
not apply in relation to shares or securities issued before 17 March 2004.
25
Meaning of “qualifying subsidiary”
80
For the purpose of determining whether shares or securities are to be
regarded as comprised in a company’s qualifying holdings, section 302
applies in relation to shares or securities issued before 17 March 2004 with
the following modifications—
30
(a)
the substitution for subsection (2)(a) of—
“(a)
the relevant company, or another of its subsidiaries,
possesses at least 75% of the issued capital of, and at
least 75% of the voting power in, the subsidiary,
(aa)
the relevant company, or another of its subsidiaries,
35
would in the event of a winding up of the subsidiary,
or in any other circumstances, be beneficially entitled
to receive at least 75% of the assets of the subsidiary
which would then be available for distribution for the
equity holders of the subsidiary,
40
(ab)
the relevant company, or another of its subsidiaries, is
beneficially entitled to at least 75% of any profits of
the subsidiary which are available for distribution for
the equity holders of the subsidiary,”,