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Income Tax Bill


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

635

 

(b)   

in subsection (2)(c), the substitution for “either of the conditions in

paragraphs (a) and (b)” of “any of the conditions in paragraphs (a),

(aa), (ab) and (b)”,

(c)   

in subsection (3), the omission of “or any other company” and the

substitution for paragraphs (a) and (b) of “is for genuine commercial

5

reasons, and not part of a scheme or arrangement the main purpose

or one of the main purposes of which is the avoidance of tax”,

(d)   

the omission of subsection (4),

(e)   

in subsection (5), the substitution for paragraphs (a) and (b) of “is to

be for genuine commercial reasons, and not part of a scheme or

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arrangement the main purpose or one of the main purposes of which

is the avoidance of tax”,

(f)   

after subsection (5) the insertion of—

“(6)   

For the purposes of this section the persons who are equity

holders of a subsidiary, and the percentage of the assets of the

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subsidiary to which an equity holder would be entitled, is to

be determined in accordance with paragraphs 1 and 3 of

Schedule 18 to ICTA, taking—

(a)   

references in paragraph 3 to the first company as

references to the equity holder, and

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(b)   

references to a winding up as including references to

any other circumstances in which assets of the

subsidiary are available for distribution to its equity

holders.”

Meaning of “excluded activities”

25

81         

For the purpose of determining whether shares or securities are to be

regarded as comprised in a company’s qualifying holdings at any time,

section 303(1)(g) to (k) (and accordingly sections 307 to 309) do not apply in

relation to shares or securities acquired by the company by means of the

investment of—

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(a)   

money raised by the issue before 17 March 1998 of shares in or

securities of the investing company, or

(b)   

money derived from the investment by that company of any such

money.

Excluded activities: wholesale and retail distribution

35

82         

For the purpose of determining whether shares or securities are to be

regarded as comprised in a company’s qualifying holdings, section 304

applies in relation to shares or securities issued before 6 April 2007 with the

following modifications—

(a)   

in subsection (5)(b), the insertion after “held” of “by the company”

40

and the substitution for “the trader” of “a vendor”, and

(b)   

in subsection (6), the substitution for “of wholesale or retail

distribution”, in the first place where it occurs, of “carried on by any

person” and the substitution for “the trader”, in each place where it

occurs, of “that person”.

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

636

 

Excluded activities: leasing of ships

83    (1)  

For the purpose of determining whether shares or securities are to be

regarded as comprised in a company’s qualifying holdings, section 305 as

applied by the definition of “non-qualifying activities” in section 290(8)

applies in relation to shares or securities issued before 6 April 2007 with the

5

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, section 305

applies in relation to shares or securities issued before 6 April 2004 with the

following modifications—

10

(a)   

in subsection (1), the substitution for “offshore installations” of “oil

rigs”,

(b)   

in subsection (2), the substitution for “offshore installation” of “oil

rig”,

(c)   

in subsection (8), the insertion after “this section” of—

15

““oil rig” means any ship which is an offshore installation for the

purposes of the Mineral Workings (Offshore Installations) Act

1971,”.

Excluded activities: receipt of royalties and licence fees

84         

For the purpose of determining whether shares or securities are to be

20

regarded as comprised in a company’s qualifying holdings, section 306

applies in relation to shares or securities issued before 6 April 2000 with the

substitution for subsections (2) to (6) of—

“(2)   

If the requirement of subsection (3) or (4) is met, a trade is not to be

regarded as consisting in the carrying on of excluded activities

25

within section 303(1)(e) as a result only of its consisting to a

substantial extent in the receiving of royalties of licence fees.

(3)   

The requirement of this subsection is that—

(a)   

the company carrying on the trade is engaged in—

(i)   

the production of films, or

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(ii)   

the production of films and the distribution of films

produced by it since the issue of the relevant holding,

and

(b)   

all royalties and licence fees received by it are in respect of—

(i)   

films produced by it since the issue of the relevant

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holding,

(ii)   

sound recordings in relation to such films, or

(iii)   

other products arising from such films.

(4)   

The requirement of this subsection is that—

(a)   

the company carrying on the trade is engaged in research and

40

development, and

(b)   

all royalties and licence fees received by it are attributable to

research and development which it has carried out.”

 

 

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

637

 

Excluded activities: provision of services or facilities for another business

85    (1)  

For the purpose of determining whether shares or securities are to be

regarded as comprised in a company’s qualifying holdings, section 310

applies in relation to shares or securities issued before 6 April 2007 with the

following modifications—

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(a)   

in subsections (1) to (4), the substitution of “trade” for “business”,

wherever it occurs, and

(b)   

in subsection (5) the substitution for paragraph (b) of—

“(b)   

“trade” includes business, profession or vocation

where what is carried on is carried on by a person

10

other than a company.”

      (2)  

For the purpose of determining whether shares or securities are to be

regarded as comprised in a company’s qualifying holdings at any time,

section 310(1)(a) applies in relation to shares or securities acquired by the

company by means of the investment of—

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(a)   

money raised by the issue before 17 March 1998 of shares in or

securities of the investing company, or

(b)   

money derived from the investment by that company of any such

money,

           

with the substitution for “paragraphs (a) to (k)” of “paragraphs (a) to (f)”.

20

Winding up of the relevant company

86         

For the purpose of determining whether shares or securities are to be

regarded as comprised in a company’s qualifying holdings, section 312(b)

applies in relation to shares or securities issued before 17 March 2004 with

the substitution for “is not” of “not”.

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Acquisitions for restructuring purposes etc

87         

Sections 326 to 329 do not apply in relation to arrangements made, or rights

of conversion exercised, before 16 June 1999.

Power to facilitate company reorganisations

88         

Section 330 does not apply in relation to exchanges of shares or securities

30

taking effect before 21 March 2000.

Meaning of a company being “in administration”

89    (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

35

April 2007, or

(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 331 applies with the substitution for subsection (2) of—

40

“(2)   

A company is “in administration” if—

(a)   

it is in administration within the meaning of Schedule B1 to

the Insolvency Act 1986, or

 

 

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

638

 

(b)   

there is in force in relation to it—

(i)   

an administration order under Part 3 of the

Insolvency (Northern Ireland) Order 1989, or

(ii)   

any corresponding order under the law of a country

or territory outside the United Kingdom.”

5

      (3)  

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 331

applies with the substitution for subsection (2) of—

“(2)   

A company is “in administration” if there is in force in relation to it—

(a)   

an administration order under Part 2 of the Insolvency Act

10

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.”

Meaning of “company”, “shares” and “research and development” in Part 6

15

90    (1)  

This paragraph applies in relation to the meaning of “company”, “shares”

and “research and development” in Part 6 (see section 332).

      (2)  

If—

(a)   

a company holds investments of any description in an entity

immediately before 6 April 2007, and

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(b)   

the entity is a company for any purposes of the Part 6 provisions but

not for the corresponding purposes of the ICTA provisions,

           

any question whether the entity is a company for those purposes of the Part

6 provisions is to be determined in accordance with the ICTA provisions

until such time as the company ceases to hold investments of that

25

description.

      (3)  

If—

(a)   

a company holds investments of any description in an entity

immediately before 6 April 2007, and

(b)   

the investments are shares for any purposes of either of the

30

following—

(i)   

the Part 6 provisions, and

(ii)   

the ICTA provisions,

   

but not for the corresponding purposes of the other set of provisions,

           

any question whether the investments are shares for those purposes of the

35

Part 6 provisions is to be determined in accordance with the ICTA

provisions until such time as the company ceases to hold investments of that

description.

      (4)  

In sub-paragraphs (2) and (3)—

“the ICTA provisions “ means section 842AA of ICTA (VCT approvals)

40

and Schedule 28B to that Act (qualifying holdings),

“the Part 6 provisions” means Chapter 3 of Part 6 (VCT approvals) and

Chapter 4 of that Part (qualifying holdings).

      (5)  

For the purpose of determining whether any shares or securities are to be

regarded as comprised in a company’s qualifying holdings, section 332

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applies in relation to shares issued before 6 April 2000 with the substitution

 

 

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 9 — Other reliefs

639

 

for the definition of “research and development” of—

““research and development” means any activity which is

intended to result in a patentable invention (within the

meaning of the Patents Act 1977) or in a computer program.”

Part 9

5

Other reliefs

Interest: loans for interests in close companies

91         

Section 392(3)(a) does not apply if the shares were acquired before 14 March

1989.

92         

Section 392(3)(b) does not apply if the shares were acquired before 6 April

10

1989.

93    (1)  

In relation to a loan made before 14 November 1986—

(a)   

section 395(1)(c) applies with the substitution for “the trustees of” of

“any person (other than the individual) interested in”, and

(b)   

section 395(1)(d) applies with the substitution for “the personal

15

representatives” of “any person (other than the individual)

interested in the estate”.

      (2)  

No individual is an associate because of sub-paragraph (1)(a) if the trust

relates exclusively to a registered pension scheme.

      (3)  

No individual is an associate because of sub-paragraph (1)(a) if —

20

(a)   

the trust—

(i)   

is exclusively for the benefit of the employees, or the

employees and directors, of the company or their

dependants, and

(ii)   

is not wholly or mainly for the benefit of the directors or their

25

relatives, and

(b)   

the individual—

(i)   

is not (either alone or with relatives) the beneficial owner of

more than 5% of the company’s ordinary share capital, and

(ii)   

could not become so as a result of the operation of the trust.

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      (4)  

For the purposes of sub-paragraph (3)(b), charitable trusts that may arise on

the failure or determination of other trusts are ignored.

      (5)  

In relation to any time before 6 April 2006, sub-paragraph (2) applies as if the

reference to a registered pension scheme were a reference to an exempt

approved scheme, as defined in section 592 of ICTA.

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94         

Section 395(2) does not apply in relation to a loan made before 26 July 1989,

and, for the purposes of that section, section 550 of ITEPA 2003 (which

defines “employee benefit trust” and is applied for the purposes of section

395 by section 395(6)) has effect as if section 550 of ITEPA 2003 referred to

that day instead of 13 March 1989.

40

Interest: loans for interests in employee-controlled companies

95    (1)  

In relation to a loan used before 6 April 1990 in one or more of the ways

specified in section 396(2)—

 

 

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 9 — Other reliefs

640

 

(a)   

section 396 applies as if—

(i)   

the reference in subsection (3) to full-time employees

included a reference to full-time employees’ spouses,

(ii)   

the references in subsection (4) to an individual included a

reference to an individual’s spouse, unless the individual and

5

the individual’s spouse are both full-time employees of the

company within the meaning of section 396(5), and

(b)   

section 397(4) applies as if references to the individual included

references to the individual’s spouse.

      (2)  

If a loan within section 396(2)(b) was made on or after that date, interest on

10

the loan is eligible for relief under section 383 only if interest on the original

loan would have been allowable under section 353 of ICTA after that date.

Interest relief: film partnerships

96         

Section 399(4) (restriction on relief for interest on loans for purchasing

interest in some film partnerships) only applies if the interest accrued on or

15

after 10 March 2006.

Interest: loans for investing in co-operatives

97         

Section 401 applies in relation to a loan used in one or more of the ways

specified in subsection (2)(a) or (b) of that section only if the loan was made

after 10 March 1981, but subsection (2)(c) of that section applies whenever

20

the original loan was made.

Gift aid: gifts of money for relief in poor countries

98         

Despite the amendments made by this Act to section 25 of FA 1990, that

section continues to apply for the purposes of section 48 of FA 1998 (gifts of

money for relief in poor countries) as if those amendments had not been

25

made.

Gift aid: restrictions on associated benefits

99    (1)  

This paragraph applies if—

(a)   

a gift is made on or after 6 April 2007, and

(b)   

a benefit associated with the gift is received before that date or relates

30

(wholly or partly) to a period falling before that date.

      (2)  

Step 2 of the calculation in section 419(8) is to be read as if the words “(and

neither condition C nor condition D is met in relation to it)” were omitted.

Gift aid: election to carry back relief

100   (1)  

This paragraph applies if in the tax year 2007-08 an individual makes a gift

35

to a charity that is a qualifying donation for the purposes of Chapter 2 of Part

8.

      (2)  

Section 426 has effect with the substitution for subsections (2) and (3) of—

“(2)   

The condition is that in year P the grossed up amount of the gift

would, if made in year P, be payable out of profits or gains brought

40

into charge to income tax or capital gains tax.

 

 

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 10 — Special rules about settlements and trustees

641

 

(3)   

If an election is made, section 25(6) to (9A) of FA 1990 have effect in

relation to the individual as if the gift were a qualifying donation

(within the meaning of section 25 of FA 1990) made in year P.”

      (3)  

Section 426 has effect with the omission of subsections (4) and (5).

Qualifying maintenance payments: maintenance assessments

5

101   (1)  

This paragraph applies for the purposes for which, on the day on which this

Act comes into force, the amendments to section 347B of ICTA made by

paragraph 8(1) and (2) of Schedule 3 to the Child Support, Pensions and

Social Security Act 2000 (c. 19) (maintenance assessments superseded by

maintenance calculations) do not have effect.

10

      (2)  

Until a day is appointed for any of those purposes under this paragraph,

section 454 and 455 have effect for that purpose as if—

(a)   

in section 454(7) and section 455(1)(a), (b), (c) and (3) for “calculation”

there were substituted “assessment”, and

(b)   

for section 454(8) there were substituted—

15

“(8)   

In this section “maintenance assessment” means a

maintenance assessment made under the Child Support Act

1991 or the Child Support (Northern Ireland) Order 1991.”

      (3)  

The power to appoint a day under this paragraph is exercisable by the

Secretary of State by order made by statutory instrument and different days

20

may be appointed for different purposes (including different days for

different areas).

Part 10

Special rules about settlements and trustees

Trustees’ expenses to be set against trustees’ trust rate income

25

102   (1)  

This paragraph applies if the trustees of a settlement incur an allowable

expense (see section 484) in a tax year prior to the tax year 2007-08.

      (2)  

So far as the trustees have not paid the expense, the expense cannot, under

Chapter 4 of Part 9, be set against the trustees’ trust rate income for any tax

year.

30

      (3)  

So far as the expense is paid by the trustees in a tax year (“the relevant tax

year”) after the tax year 2006-07, the expense is treated for the purposes of

sections 484(1) and 485(1) as if it were incurred in the relevant tax year.

      (4)  

So far as the expense is paid by the trustees in a tax year prior to the tax year

2007-08, section 485 applies in relation to the expense with the following

35

modifications.

      (5)  

It applies as if for subsection (3) there were substituted—

“(3)   

Condition A is—

(a)   

that section 686(2AA) of ICTA could not be applied in

relation to the allowable expense so as to reduce the trustees’

40

liability to tax for the earlier tax year, and

 

 

 
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