Finance Bill

House of Commons

Session 2007 - 08
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Finance Bill

Finance Bill
Schedule 2 — Capital gains tax reform
111

43    (1)
Section 279C (effect of election under section 279A) is amended as follows.
      (2)
For subsections (3) and (4) substitute—
“(3)
The amount of the relevant loss that falls to be deducted (in
accordance with section 2(2)(a)) from the chargeable gains of the first
eligible year is limited to the first year limit.
5
(4)
The first year limit is the amount calculated under section 2(2) (read,
where appropriate, with section 2(4)(a)) for the first eligible year.
(4A)
For the purpose of making that calculation—
(a)
no account is to be taken of the relevant loss, but
(b)
the effect of any previous election under section 279A is to be
10
taken into account.”
      (3)
In subsection (6)(c), for “the provisions specified in subsection (8) below”
substitute “amounts of chargeable gains treated as accruing in that later year
by virtue of section 87 or 89(2) (read, where appropriate, with section 10A)”.
      (4)
Omit subsection (8).
15
      (5)
Omit subsection (10).
44
Omit section 284B(1) (provisions supplementary to section 284A).
45
Omit Schedule A1 (taper relief).
46
Schedule 4C (transfers of value: attribution of gains to beneficiaries) is
amended as follows.
20
47    (1)
Paragraph 6 (gains attributed to settlor) is amended as follows.
      (2)
In sub-paragraph (1), for “the tapered amount of any chargeable gains”
substitute “the amount of any chargeable gains”.
      (3)
Omit sub-paragraph (1A).
48
Omit paragraph 11 (taper relief).
25
49
Omit Schedule 5BA (application of taper relief to enterprise investment
scheme).
50
Omit paragraph 15 of Schedule 7D (enterprise management incentives).
51
In paragraph 45D(7) of Schedule 26 to FA 2002 (derivative contracts), for the
words after “(6)” substitute ““holding company” and “trading company”
30
have the same meaning as in section 165 of TCGA 1992 (see section 165A of
that Act).”
52
In paragraph 86(2) of Schedule 7 to ITEPA 2003 (transitionals and savings),
omit the second sentence.
53
Omit section 185G(3)(c) of FA 2004 (disposal by person holding taxable
35
interest directly).
54
Omit section 161(5) of ITA 2007 (other tax reliefs relating to EIS).
55
In consequence of paragraphs 23 to 54, omit—
(a)
in FA 1998—
(i)
section 121(1) and (2),
40

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Schedule 2 — Capital gains tax reform
112

(ii)
section 140(5),
(iii)
Schedule 20, and
(iv)
paragraphs 2, 4, 6(3) and (4), 7 and 9 of Schedule 21,
(b)
in FA 1999—
(i)
section 72, and
5
(ii)
Schedule 7,
(c)
sections 66 and 67 of FA 2000,
(d)
in FA 2001—
(i)
section 78, and
(ii)
Schedule 26,
10
(e)
in FA 2002—
(i)
sections 46 and 47,
(ii)
paragraph 5(13) of Schedule 9,
(iii)
Schedule 10, and
(iv)
paragraphs 2(2) and 4 to 6 of Schedule 11,
15
(f)
in FA 2003—
(i)
section 160, and
(ii)
paragraph 5 of Schedule 29,
(g)
in Schedule 21 to FA 2004—
(i)
paragraphs 3(4) and 8, and
20
(ii)
in paragraph 10, in sub-paragraph (4), “, 8(2)” and sub-
paragraph (6),
(h)
paragraphs 13 and 27 of Schedule 12 to FA 2006, and
(i)
paragraphs 313 and 343 of Schedule 1 to ITA 2007.
56    (1)
The amendments made by paragraph 31(2) and (3) have effect where the
25
intervening year is the tax year 2008-09 or any subsequent tax year.
      (2)
The amendments made by paragraphs 41 and 43 have effect where the
eligible year is the tax year 2008-09 or any subsequent tax year.
      (3)
The other amendments made by paragraphs 23 to 55 have effect in relation
to chargeable gains accruing or treated as accruing in the tax year 2008-09 or
30
any subsequent tax year.
Abolition of “kink” test
57
TCGA 1992 is amended as follows.
58    (1)
Section 35 (assets held on 31 March 1982) is amended as follows.
      (2)
In subsection (2)—
35
(a)
for “Subject to the following provisions of this section, in” substitute
“In”, and
(b)
for “him” substitute “that person”.
      (3)
After that subsection insert—
“(2A)
For the purposes of corporation tax, subsection (2) above has effect
40
subject to subsections (3) to (8) below (and see also subsections (9)
and (10)).”
      (4)
In subsection (3)(d), for the words after “any of” substitute “the no gain/no
loss provisions.”

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Schedule 2 — Capital gains tax reform
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      (5)
In subsection (4), for “him” substitute “that person”.
      (6)
In subsection (5), for “him” (in both places) substitute “that person”.
      (7)
In subsection (6), omit—
(a)
paragraph (a),
(b)
in paragraph (aa), “in the case of an election for the purposes of
5
corporation tax,”, and
(c)
in paragraph (b), “in either case”.
      (8)
In subsection (7), for “him” substitute “that person”.
      (9)
In subsection (9), after “effect” insert “for the purposes of corporation tax”.
     (10)
In subsection (10), insert at the end “for the purposes of capital gains tax and
10
corporation tax”.
59
After that section insert—
“35A
Disposal of asset acquired on no gain/no loss disposal
(1)
This section applies for the purposes of capital gains tax in relation
to a disposal of an asset if—
15
(a)
the person making the disposal acquired the asset after 31
March 1982 and before 6 April 2008,
(b)
the disposal by which the person acquired the asset (“the
relevant disposal”), and any previous disposal of the asset
after 31 March 1982, was a disposal on which, by virtue of any
20
enactment, neither a gain nor a loss accrued to the person
making the disposal, and
(c)
section 35(2) did not apply to the relevant disposal.
(2)
It is be assumed that section 35(2) did apply to the relevant disposal
(and that section 56(2) applied to the relevant disposal accordingly).”
25
60
In section 55(5) (indexation allowance: assets acquired on no gain/no loss
disposal), for “enactments specified in section 35(3)(d)” substitute “no gain/
no loss provisions”.
61
In section 73(1) (death of life tenant: exclusion of chargeable gain), for “6th
April 1965” substitute “31 March 1982”.
30
62
In section 175(2C) (replacement of business assets by member of group), for
“enactments specified in section 35(3)(d)” substitute “no gain/no loss
provisions”.
63
In section 288 (interpretation), after subsection (3) insert—
“(3A)
For the purposes of this Act, the following are “the no gain/no loss
35
provisions”—
(a)
sections 58, 73, 139, 140A, 140E, 171, 211, 215, 216, 217A, 218
to 221, 257(3), 258(4), 264 and 267(2) of this Act;
(b)
section 148 of the 1979 Act;
(c)
section 148 of the Finance Act 1982;
40
(d)
section 130(3) of the Transport Act 1985;
(e)
section 486(8) of the Taxes Act;
(f)
paragraph 2(1) of Schedule 7 to the Broadcasting Act 1996;
(g)
paragraphs 3 and 9 of Schedule 26 to the Transport Act 2000;

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Schedule 2 — Capital gains tax reform
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(h)
paragraphs 3, 18, 29 and 32 of Schedule 9 to the Energy Act
2004;
(i)
paragraph 9 of Schedule 4 to the Consumers, Estate Agents
and Redress Act 2007.”
64    (1)
Schedule 2 (assets held on 6 April 1965) is amended as follows.
5
      (2)
Omit paragraph 1(3).
      (3)
In paragraph 4—
(a)
omit sub-paragraph (6),
(b)
in sub-paragraph (8), for “him” substitute “the person”,
(c)
in sub-paragraph (9)—
10
(i)
for “either section 58 or” (in both places) substitute “section”,
(ii)
omit “the spouse or civil partner of the holder, or”, and
(iii)
for “him” substitute “the holder”,
(d)
in sub-paragraph (10)(a), for “he” (in both places) substitute “the
person”, and
15
(e)
in sub-paragraph (11), omit—
(i)
paragraph (a),
(ii)
in paragraph (b), “in the case of an election for the purposes
of corporation tax,”, and
(iii)
in paragraph (c), “in either case,”.
20
      (4)
In paragraph 17(3) omit—
(a)
paragraph (a),
(b)
in paragraph (b), “in the case of an election for the purposes of
corporation tax,”, and
(c)
in paragraph (c), “in either case,”.
25
      (5)
Omit paragraph 22.
65    (1)
Schedule 3 (assets held on 31 March 1982) is amended as follows.
      (2)
In paragraph 1—
(a)
in sub-paragraph (1)—
(i)
for “Where—” substitute “For the purposes of corporation
30
tax, where—”, and
(ii)
for “he” (in each place) substitute “the person”, and
(b)
in sub-paragraph (2), for “enactments specified in section 35(3)(d)”
substitute “no gain/no loss provisions”.
      (3)
In paragraph 2(1) and (3), omit “58 or”.
35
66
In paragraph 7 of Schedule 4 (deferred charges on pre-31 March 1982 gains),
for “enactments specified in section 35(3)(d)” substitute “no gain/no loss
provisions”.
67
In paragraph 7 of Schedule 4ZA (sub-fund settlements), for “sections 104(1)
and 109(2)(a)” substitute “section 104(1)”.
40
68
In paragraph 12(b) of Schedule 7A (restriction on set-off or pre-entry losses),
for “enactment specified in section 35(3)(d)” substitute “of the no gain/no
loss provisions”.
69    (1)
FA 1997 is amended as follows.

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Schedule 2 — Capital gains tax reform
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      (2)
In section 89(8)(a) (earn-out rights), for “enactments specified in section
35(3)(d) of that Act” substitute “no gain/no loss provisions (within the
meaning of that Act: see section 288(3A) of that Act)”.
      (3)
In paragraph 7(1)(b) of Schedule 12 (leasing arrangements: finance leases
and loans), for “enactments specified in section 35(3)(d) of the Taxation of
5
Chargeable Gains Act 1992” substitute “no gain/no loss provisions (within
the meaning of the Taxation of Chargeable Gains Act 1992: see section
288(3A) of that Act)”.
70
In consequence of paragraphs 57 to 69, omit—
(a)
in F(No.2)A 1992—
10
(i)
section 46(2),
(ii)
paragraph 21(2) of Schedule 9, and
(iii)
paragraph 5(9) of Schedule 17,
(b)
in FA 1994—
(i)
paragraph 2(2) of Schedule 24, and
15
(ii)
paragraph 4(3) of Schedule 25,
(c)
paragraph 2(3) of Schedule 4 to the Coal Industry Act 1994 (c. 21),
(d)
paragraph 3 of Schedule 7 to the Broadcasting Act 1996 (c. 55),
(e)
in the Transport Act 2000 (c. 38)—
(i)
paragraph 2(3) of Schedule 7, and
20
(ii)
paragraph 37 of Schedule 26,
(f)
paragraph 36 of Schedule 9 to the Energy Act 2004 (c. 20),
(g)
paragraph 33 of Schedule 10 to the Railways Act 2005 (c. 14),
(h)
section 59(2) of F(No.2)A 2005,
(i)
paragraph 14(3) of Schedule 9 to FA 2007, and
25
(j)
paragraph 11 of Schedule 7 to the Consumers, Estate Agents and
Redress Act 2007 (c. 17).
71
The amendments made by paragraphs 57 to 70 have effect in relation to
disposals on or after 6 April 2008.
Abolition of “halving relief”
30
72
TCGA 1992 is amended as follows.
73
In section 36 (reduction of deferred charges where wholly or partly
attributable to pre-31 March 1982 increase in value), for “tax” substitute
“corporation tax in respect of chargeable gains”.
74    (1)
Schedule 4 (deferred charges on pre-31 March 1982 gains) is amended as
35
follows.
      (2)
Before paragraph 1 insert—
“Application of Schedule
A1
This Schedule applies only for the purposes of corporation tax.”
      (3)
In paragraph 2(5), omit—
40
(a)
“, 162, 165”, and
(b)
“of this Act and section 79 of the Finance Act 1980”.
      (4)
In paragraph 4(2), omit “168 (as modified by section 67(6)),”.

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Schedule 2 — Capital gains tax reform
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      (5)
In paragraph 9(1), omit—
(a)
in paragraph (b), “in the case of a disposal made by, or a gain treated
as accruing to, a person chargeable to corporation tax,”,
(b)
paragraph (c), and
(c)
“or (as the case may be) on or before such later date”.
5
75
In consequence of paragraph 74, omit paragraph 43 of Schedule 21 to FA
1996.
76
The amendments made by paragraphs 72 to 75 have effect in relation to
disposals which occur on or after 6 April 2008 and to which Schedule 4 to
TCGA 1992 would otherwise apply.
10
Abolition of indexation allowance
77
TCGA 1992 is amended as follows.
78
At the beginning of Chapter 4 of Part 2 (indexation allowance), insert—
“52A
Chapter to apply only for corporation tax purposes
This Chapter applies only for the purposes of corporation tax.”
15
79
In section 53 (indexation allowance), omit—
(a)
subsection (1A), and
(b)
in subsection (4), “, 110A”.
80    (1)
Section 54 (calculation of indexation allowance) is amended as follows.
      (2)
In subsection (1), for “the relevant month” substitute “the month in which
20
the disposal occurs”.
      (3)
Omit subsection (1A).
81    (1)
Section 145A (call options: indexation allowance) is amended as follows.
      (2)
In subsection (1), omit “(subject to subsection (1A) below)”.
      (3)
Omit subsection (1A).
25
82
In consequence of the amendments made by paragraphs 77 to 81, omit
section 122(1) to (3) and (5) of FA 1998.
83
The amendments made by paragraphs 77 to 82 have effect in computing
gains on disposals made on or after 6 April 2008.
Simplification of pooling etc
30
84
TCGA 1992 is amended as follows.
85    (1)
Section 104 (share pooling: general interpretative provisions) is amended as
follows.
      (2)
For subsections (2) and (2A) substitute—
“(2)
For the purposes of corporation tax, subsection (1) does not apply to
35
any securities acquired by a company before 1 April 1982.
(2A)
See also sections 105 to 105B and—
(a)
section 106A in the case of capital gains tax, or

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Schedule 2 — Capital gains tax reform
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(b)
sections 107 to 114 in the case of corporation tax.”
      (3)
In subsection (3), omit “, 110A”.
      (4)
After that subsection insert—
“(3A)
For the purposes of capital gains tax section 35(2) applies in relation
to a section 104 holding as if the reference to an asset were to any of
5
the securities constituting or forming part of the section 104 holding
which were held by the person making the disposal on 31 March
1982.”
      (5)
In subsection (5), omit “, 110A”.
86
In section 105 (disposal on or before day of acquisition), after subsection (2)
10
insert—
“(3)
None of the securities which, by virtue of this section, are identified
with other securities shall be regarded as forming part of an existing
section 104 holding or as constituting a section 104 holding.”
87    (1)
Section 106A (identification of securities: general rules for capital gains tax)
15
is amended as follows.
      (2)
After subsection (5) insert—
“(5ZA)
None of the securities which, by virtue of subsection (5) above, are
identified with other securities shall be regarded as forming part of
an existing section 104 holding or as constituting a section 104
20
holding.”
      (3)
In subsection (6), before “securities” (in each place) insert “relevant”.
      (4)
Omit subsection (7).
      (5)
Omit subsection (8).
      (6)
For subsection (10) substitute—
25
“(10)
In this section—
“securities” means any securities within the meaning of section
104 or any relevant securities, and
“relevant securities” means—
(a)
securities within the meaning of Chapter 2 of Part 12
30
of ITA 2007 (accrued income profits),
(b)
qualifying corporate bonds, and
(c)
securities which are, or have at any time been,
material interests in a non-qualifying offshore fund,
within the meaning of Chapter 5 of Part 17 of the
35
Taxes Act.”
      (7)
In the heading, omit “general rules for”.
88
In the heading of section 107 (identification of securities etc: general rules),
insert at the end “for corporation tax”.
89
In the heading of section 108 (identification of relevant securities), insert at
40
the end “for corporation tax”.
90    (1)
Section 109 (pre-April 1982 share pools) is amended as follows.