Income Tax Bill

House of Commons

Session 2006 - 07
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Other Bills before Parliament

Income Tax Bill

Income Tax Bill
Part 8 — Other reliefs
Chapter 3 — Gifts of shares, securities and real property to charities etc
232

435
Incidental costs of making disposal
References in section 434 to the incidental costs of making the disposal to the
individual making it are to—
(a)
fees, commission or remuneration paid for the professional services of
a surveyor, valuer, auctioneer, accountant, agent or legal adviser which
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are wholly and exclusively incurred by the individual for the purposes
of the disposal,
(b)
costs of transfer or conveyance wholly and exclusively incurred by the
individual for the purposes of the disposal,
(c)
costs of advertising to find a buyer, and
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(d)
costs reasonably incurred in making any valuation or apportionment
required for the purposes of this Chapter.
436
Consideration
(1)
For the purposes of the formula in section 434(2) consideration for the disposal
is brought into account—
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(a)
without any discount for postponement of the right to receive any part
of it,
(b)
in the first instance, without regard to a risk of any part of it being
irrecoverable, and
(c)
in the first instance, without regard to the right to receive any part of it
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being contingent.
(2)
If—
(a)
any part of the consideration so brought into account subsequently
proves to be irrecoverable, and
(b)
a claim is made,
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such adjustment as is required in consequence must be made.
(3)
An adjustment under subsection (2) may be made by way of discharge or
repayment of tax or otherwise.
Value of net benefit to charity
437
Value of net benefit to charity
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(1)
For the purposes of this Chapter the value of the net benefit to a charity is—
(a)
the market value of the qualifying investment, or
(b)
if the charity is, or becomes, subject to a disposal-related obligation, the
market value of the qualifying investment reduced by the total amount
of the disposal-related liabilities of the charity.
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(2)
This section is supplemented by—
section 438 (market value of qualifying investments),
section 439 (meaning of “disposal-related obligation”), and
section 440 (meaning and amount of “disposal-related liability”).

Income Tax Bill
Part 8 — Other reliefs
Chapter 3 — Gifts of shares, securities and real property to charities etc
233

438
Market value of qualifying investments
(1)
The market value of a qualifying investment for the purposes of this Chapter
is determined in accordance with sections 272 to 274 of TCGA 1992 (subject to
Part 1 of Schedule 11 to that Act).
(2)
But, in the case of an interest in an offshore fund for which separate buying and
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selling prices are published regularly by the managers of the fund, the market
value for the purposes of this Chapter is equal to the buying price (that is the
lower price) published on—
(a)
the day of the disposal, or
(b)
if none were published on that day, on the latest day on which the
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prices were published before that day.
439
Meaning of “disposal-related obligation”
(1)
In this Chapter an obligation is a “disposal-related obligation”, in relation to a
qualifying investment, if condition A or condition B is met in relation to it.
(2)
The obligation may be to any person (whether or not the individual making the
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disposal or a person connected with the individual).
(3)
Condition A is that it is reasonable to suppose that the disposal of the
qualifying investment to the charity would not have been made in the absence
of the obligation.
(4)
Condition B is that the obligation (whether in whole or in part) relates to, is
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framed by reference to, or is conditional on the charity receiving, the qualifying
investment or a disposal-related investment.
(5)
In applying condition A, all the circumstances must be taken into account
(including, in particular, the difference in the value of the net benefit to the
charity calculated under section 437(1)(a) and that value calculated under
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section 437(1)(b)).
(6)
In subsection (4) “disposal-related investment” means any of the following—
(a)
an asset of the same class or description as the qualifying investment
(irrespective of size, quantity or amount),
(b)
an asset derived from, or representing, the qualifying investment,
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whether in whole or in part and whether directly or indirectly, and
(c)
an asset from which the qualifying investment is derived, or which the
qualifying investment represents, whether in whole or in part and
whether directly or indirectly.
(7)
In this Chapter “obligation” includes a reference to each of the following—
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(a)
a scheme, arrangement or understanding of any kind, whether or not
legally enforceable, and
(b)
a series of obligations (whether or not between the same parties).
440
Meaning and amount of “disposal-related liability”
(1)
In this Chapter a liability is a “disposal-related liability” in the case of a
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qualifying investment if it is a liability of the charity under a disposal-related
obligation in relation to the qualifying investment.

Income Tax Bill
Part 8 — Other reliefs
Chapter 3 — Gifts of shares, securities and real property to charities etc
234

(2)
If the disposal-related obligation is contingent, the amount to be brought into
account for the purposes of section 437 at any time in respect of the disposal-
related liability, so far as contingent, is—
(a)
if the contingency occurs, the amount or value of the liability actually
incurred in consequence of the occurrence of the contingency, or
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(b)
if the contingency does not occur, nil.
Special provisions about qualifying interests in land
441
Certificate required from charity
(1)
This section applies if the qualifying investment is a qualifying interest in land.
(2)
No individual may make a claim for relief under this Chapter unless the
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individual has received a certificate given by or on behalf of the charity.
(3)
The certificate must—
(a)
describe the qualifying interest in land,
(b)
specify the date of the disposal, and
(c)
state that the charity has acquired the qualifying interest in land.
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442
Qualifying interests in land held jointly
(1)
This section applies if the qualifying investment is a qualifying interest in land.
(2)
It applies if two or more persons (“the owners”)—
(a)
are jointly beneficially entitled to the qualifying interest in land, or
(b)
are, taken together, beneficially entitled in common to the qualifying
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interest in land.
(3)
Relief under this Chapter is available if—
(a)
at least one of the owners is an individual, and
(b)
all the owners dispose of the whole of their beneficial interests in the
qualifying interest in land to the charity.
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(4)
Relief under this Chapter is available to each of the owners who is an
individual.
(5)
The amount of relief under this Chapter to be given to an individual is such
share of the relievable amount as is allocated to the individual by an agreement
made between those owners who are—
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(a)
individuals, or
(b)
qualifying companies.
(6)
A company is a qualifying company if—
(a)
it is not itself a charity, and
(b)
it is not within section 587B(8)(a) of ICTA.
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(7)
If one or more of the owners is not an individual—
(a)
for the purpose of determining whether the owners’ beneficial interests
are disposed of as mentioned in subsection (3)(b) of this section,
subsections (2) to (4) of section 433 apply as if references to an
individual included a reference to a person who is not an individual,
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and

Income Tax Bill
Part 8 — Other reliefs
Chapter 3 — Gifts of shares, securities and real property to charities etc
235

(b)
the total amount of relief given under this Chapter and section 587B of
ICTA as a result of the disposal of the qualifying interest in land is not
to exceed the relievable amount.
443
Calculation of relievable amount where joint disposal of interest in land
(1)
This section applies for the purpose of calculating the relievable amount in a
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case where relief under this Chapter is available as a result of section 442(3).
(2)
Calculate the relievable amount as if—
(a)
the owners were a single individual, and
(b)
the disposals of the owners’ beneficial interests were a single disposal
by that single individual of the whole of the beneficial interest in the
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qualifying interest in land.
(3)
In particular, calculate the consideration mentioned at Step 1 in section 434(4)
by—
(a)
calculating, for each owner, the consideration for which the disposal of
the owner’s beneficial interest is treated as made for the purposes of
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TCGA 1992 as a result of section 257(2)(a) of that Act, and
(b)
adding together all the consideration calculated under paragraph (a).
(4)
Subsection (5) applies if one or more of the owners is neither—
(a)
an individual, nor
(b)
a qualifying company (see section 442(6)).
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(5)
In calculating the relievable amount make just and reasonable adjustments to
reduce the relievable amount to reflect the fact that relief under this Chapter or
section 587B of ICTA is not available to that owner or to those owners.
(6)
If one or more of the owners is a company within paragraph (b) of section
587B(8) of ICTA, in calculating the relievable amount make just and reasonable
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adjustments to reduce the relievable amount to reflect the requirements of sub-
paragraph (ii) of that paragraph.
444
Disqualifying events
(1)
This section applies if the qualifying investment is a qualifying interest in land.
(2)
If a disqualifying event occurs at any time in the provisional period, the
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following are treated as never having been entitled to relief under this Chapter
in respect of the disposal of the qualifying interest in land—
(a)
in a case to which section 442 does not apply, the individual who made
the disposal, or
(b)
in a case to which section 442 applies, each individual who is an owner.
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(3)
All such assessments and adjustments of assessments are to be made as are
necessary to give effect to subsection (2).
(4)
A disqualifying event occurs if a person mentioned in subsection (5) becomes,
otherwise than for full consideration in money or money’s worth—
(a)
entitled to an interest or right in relation to all or part of the land to
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which the disposal relates, or
(b)
party to an arrangement under which the person enjoys some right in
relation to all or part of that land.

Income Tax Bill
Part 8 — Other reliefs
Chapter 4 — Annual payments and patent royalties
236

(5)
The persons are—
(a)
in a case to which section 442 does not apply—
(i)
the individual who made the disposal, or
(ii)
a person connected with that individual, and
(b)
in a case to which section 442 applies—
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(i)
a person who is an owner, or
(ii)
a person connected with such a person.
(6)
A disqualifying event does not occur if a person becomes entitled to an interest
or right as mentioned in subsection (4)(a) as a result of a disposition of property
on death (whether the disposition is effected by will, under the law relating to
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intestacy or otherwise).
(7)
“The provisional period” is the period beginning with the date of the disposal
of the qualifying interest in land and ending with the fifth anniversary of the
normal self-assessment filing date for the tax year in which the disposal was
made.
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Supplementary
445
Prohibition against double relief
(1)
If a claim is made for relief under this Chapter in respect of a disposal—
(a)
section 108 of ITTOIA 2005 (gifts of trading stock to charities etc) does
not apply in relation to the disposal, and
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(b)
no relief in respect of the disposal is allowable under any other
provision of the Income Tax Acts.
(2)
For the effect on capital gains tax or corporation tax on chargeable gains where
an individual is entitled to relief under this Chapter, see section 257(2A) to (2C)
of TCGA 1992 (gifts to charities etc).
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446
“Charity” to include exempt bodies
In this Chapter “charity” includes—
(a)
the Trustees of the National Heritage Memorial Fund,
(b)
the Historic Buildings and Monuments Commission for England, and
(c)
the National Endowment for Science, Technology and the Arts.
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Chapter 4
Annual payments and patent royalties
447
Overview of Chapter
(1)
This Chapter gives relief for some of the payments from which sums
representing income tax must be deducted under Chapter 6 of Part 15
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(deduction from annual payments and patent royalties).
(2)
For the payments which attract relief, see sections 448 and 449.