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Finance Bill
Schedule 3 — Entrepreneurs’ relief

125

 

169O    

Amount of relief: special provisions for certain trust disposals

(1)   

This section applies where, on a disposal of trust business assets,

there is (in addition to the qualifying beneficiary) at least one other

beneficiary who, at the material time, has an interest in possession

in—

5

(a)   

the whole of the settled property, or

(b)   

a part of it which consists of or includes the shares or

securities (or interests in shares or securities) or assets (or

interests in assets) disposed of.

(2)   

Only the relevant proportion of the amount which would otherwise

10

result under subsection (1) of section 169N is to be treated as so

resulting.

(3)   

And the balance of that amount, with no reduction under subsection

(2) of that section, is accordingly a chargeable gain for the purposes

of this Act.

15

(4)   

For the purposes of this section “the relevant proportion” of an

amount is the same proportion of the amount as that which, at the

material time—

(a)   

the qualifying beneficiary’s interest in the income of the part

of the settled property comprising the shares or securities (or

20

interests in shares or securities) or assets (or interests in

assets) disposed of, bears to

(b)   

the interests in that income of all the beneficiaries (including

the qualifying beneficiary) who then have interests in

possession in that part of the settled property.

25

(5)   

In subsection (4) “the qualifying beneficiary’s interest” means the

interest by virtue of which he is the qualifying beneficiary (and not

any other interest the qualifying beneficiary may have).

(6)   

In this section “the material time” means the end of the latest period

of 1 year which ends not earlier than 3 years before the date of the

30

disposal and—

(a)   

in the case of a disposal of settlement business assets within

paragraph (a) of subsection (2) of section 169J, throughout

which the conditions in paragraphs (a) and (b) of subsection

(4) of that section are met, and

35

(b)   

in the case of a disposal of settlement business assets within

paragraph (b) of subsection (2) of that section, throughout

which the business is carried on by the qualifying beneficiary.

169P    

Amount of relief: special provision for certain associated disposals

(1)   

This section applies where, on a disposal associated with a relevant

40

material disposal, any of the conditions in subsection (4) is met.

(2)   

Only such part of the amount which would otherwise result under

subsection (1) of section 169N as is just and reasonable is to be treated

as so resulting.

(3)   

And the balance of that amount, with no reduction under subsection

45

(2) of that section, is accordingly a chargeable gain for the purposes

of this Act.

 
 

Finance Bill
Schedule 3 — Entrepreneurs’ relief

126

 

(4)   

The conditions referred to in subsection (1) are—

(a)   

that the assets which (or interests in which) are disposed of

are in use for the purposes of the business for only part of the

period in which they are in the ownership of the individual,

(b)   

that only part of the assets which (or interests in which) are

5

disposed of are in use for the purposes of the business for that

period,

(c)   

that the individual is concerned in the carrying on of the

business (whether personally, as a member of a partnership

or as an officer or employee of a company which is the

10

individual’s personal company) for only part of the period in

which the assets which (or interests in which) are disposed of

are in use for the purposes of the business, and

(d)   

that, for the whole or any part of the period for which the

assets which (or interests in which) are disposed of are in use

15

for the purposes of the business, their availability is

dependent on the payment of rent.

(5)   

In determining how much of an amount it is just and reasonable to

bring into account under subsection (1) regard is to be had to—

(a)   

in a case within paragraph (a) of subsection (4), the length of

20

the period for which the assets are in use as mentioned in that

paragraph,

(b)   

in a case within paragraph (b) of that subsection, the part of

the assets that are in use as mentioned in that paragraph,

(c)   

in a case within paragraph (c) of that subsection, the length of

25

the period for which the individual is concerned in the

carrying on of the business as mentioned in that paragraph,

and

(d)   

in a case within paragraph (d) of that subsection, the extent to

which any rent paid is less than the amount which would be

30

payable in the open market for the use of the assets.

169Q    

Reorganisations: disapplication of section 127

(1)   

This section applies where—

(a)   

there is a reorganisation (within the meaning of section 126),

and

35

(b)   

the original shares and the new holding (within the meaning

of that section) would fall to be treated by virtue of section

127 as the same asset.

(2)   

If an election is made under this section, a claim for entrepreneurs’

relief may be made as if the reorganisation involved a disposal of the

40

original shares; and if such a claim is made section 127 does not

apply.

(3)   

An election under this section must be made—

(a)   

if the reorganisation would (apart from section 127) involve a

disposal of trust business assets, jointly by the trustees and

45

the qualifying beneficiary, and

(b)   

otherwise, by the individual.

 
 

Finance Bill
Schedule 3 — Entrepreneurs’ relief

127

 

(4)   

An election under this section must be made on or before the first

anniversary of the 31 January following the tax year in which the

reorganisation takes place.

(5)   

The references in this section to a reorganisation (within the meaning

of section 126) includes an exchange of shares or securities which is

5

treated as such a reorganisation by virtue of section 135 or 136.

169R    

Reorganisations involving acquisition of qualifying corporate bonds

(1)   

This section applies where the calculation under section 116(10)(a)

has effect to produce a chargeable gain for an individual by reason of

a relevant transaction.

10

(2)   

This Chapter has effect as if—

(a)   

(despite section 116(10)) the relevant transaction were a

disposal, and

(b)   

the disposal were a disposal of business assets consisting of

the old asset made by the individual at the time of the

15

relevant transaction.

(3)   

Where the disposal would be a material disposal of business assets

and entrepreneurs’ relief is claimed in respect of it—

(a)   

the amount resulting under section 169N(1) is to be taken to

be the amount of the chargeable gain produced by the

20

calculation under section 116(10)(a), and

(b)   

accordingly, the amount arrived at under section 169N(1) to

(3) (or a corresponding part of it) is the amount deemed to

accrue by virtue of section 116(10)(b) on a disposal of the

whole or part of the new asset.

25

(4)   

In this section “new asset”, “old asset” and “relevant transaction”

have the meaning given by section 116.

169S    

Interpretation of Chapter

(1)   

For the purposes of this Chapter “a business” means anything

which—

30

(a)   

is a trade, profession or vocation, and

(b)   

is conducted on a commercial basis and with a view to the

realisation of profits.

(2)   

References in this Chapter to a disposal of an interest in shares in a

company include a disposal of an interest in shares treated as made

35

by virtue of section 122.

(3)   

For the purposes of this Chapter “personal company”, in relation to

an individual, means a company—

(a)   

at least 5% of the ordinary share capital of which is held by

the individual, and

40

(b)   

at least 5% of the voting rights in which are exercisable by the

individual by virtue of that holding.

(4)   

For the purposes of subsection (3) if the individual holds any shares

in the company jointly or in common with one or more other

persons, the individual is to be treated as sole holder of so many of

45

 
 

Finance Bill
Schedule 3 — Entrepreneurs’ relief

128

 

them as is proportionate to the value of the individual’s share (and

as able to exercise voting rights by virtue of that holding).

(5)   

In this Chapter—

“disposal associated with a relevant material disposal” has the

meaning given by section 169K,

5

“disposal of business assets” has the meaning given by section

169I(2),

“disposal of trust business assets” has the meaning given by

section 169J,

“employment” has the meaning given by section 4 of ITEPA

10

2003,

“entrepreneurs’ relief” has the meaning given by section

169H(1),

“holding company” has the same meaning as in section 165 (see

section 165A),

15

“material disposal of business assets” has the meaning given by

section 169I,

“office” has the meaning given by section 5(3) of ITEPA 2003,

“ordinary share capital” has the same meaning as in the Income

Tax Acts (see section 989 of ITA 2007),

20

“qualifying business disposal” has the meaning given by

section 169H(2),

“relevant business asset” has the meaning given by section

169L,

“rent”, in relation to an asset, includes any form of consideration

25

given for the use of the asset,

“securities”, in relation to a company, includes any debentures

of the company which are deemed by subsection (6) of

section 251 to be securities for the purposes of that section,

“settlement business assets” has the meaning given by section

30

169J(2),

“trade” has the same meaning as in the Income Tax Acts (see

section 989 of ITA 2007), and

“trading company” and “trading group” have the same

meaning as in section 165 (see section 165A).”

35

Other amendments

3          

In section 241(3A) (furnished holiday lettings), after the entry relating to

section 165 insert—

“section 169R(1) (entrepreneurs’ relief),”.

4          

In paragraph 1(1)(b) of Schedule 5B (enterprise investment scheme: re-

40

investment), after “164FA,” insert “section 169N,”.

Commencement

5          

The amendments made by this Schedule have effect in relation to disposals,

reorganisations (within the meaning of section 169Q) and relevant

transactions (within the meaning of section 116 of TCGA 1992) taking place

45

on or after 6 April 2008.

 
 

Finance Bill
Schedule 3 — Entrepreneurs’ relief

129

 

Transitionals: reorganisations

6     (1)  

This paragraph applies where, by virtue of section 116(10)(b), a chargeable

gain is deemed to accrue to an individual on a disposal made on or after 6

April 2008 (a “relevant disposal”) by reason of a relevant transaction to

which the individual was a party taking place before that date.

5

      (2)  

Subject as follows, Chapter 3 of Part 5 (as inserted by this Schedule) has

effect as if—

(a)   

(despite section 116(10)) the relevant transaction were a disposal of

the old asset made by the individual,

(b)   

that Chapter applied in relation to that disposal (even though made

10

before 6 April 2008), and

(c)   

for the purposes of the time limit for making a claim for

entrepreneurs’ relief, that disposal were made at the time of the first

relevant disposal.

      (3)  

In sub-paragraph (2) “the first relevant disposal” means the first disposal

15

made on or after 6 April 2008 on which a chargeable gain is deemed to accrue

to the individual by reason of the relevant transaction.

      (4)  

Where entrepreneurs’ relief is claimed by virtue of this paragraph—

(a)   

the amount of the chargeable gain produced by the calculation under

section 116(10)(a), reduced by

20

(b)   

any amount deemed to accrue under section 116(10)(b) and (12)

before 6 April 2008 by reason of the relevant transaction,

           

is to be treated as constituting the amount resulting under section 169N(1).

      (5)  

Accordingly (but subject as follows), the amount of the chargeable gain

which is deemed to accrue by virtue of section 116(10)(b) on the relevant

25

disposal is that arrived at under section 169N(1) to (3) (in accordance with

sub-paragraph (4)).

      (6)  

The amount of the chargeable gain which is deemed to accrue by virtue of

section 116(10)(b) on the relevant disposal is the amount specified in sub-

paragraph (7)—

30

(a)   

except in a case within paragraph (b), where the relevant disposal is

not a disposal of the whole of the new asset, and

(b)   

in a case in which part of the new asset was disposed of before 6

April 2008, where the relevant disposal is not a disposal of the whole

of the part not so disposed of.

35

      (7)  

The amount referred to in sub-paragraph (6) is the appropriate proportion

of the amount in sub-paragraph (5); and “the appropriate proportion” means

the proportion of the new asset, or of so much of the new asset as was not

disposed of before 6 April 2008, which is disposed of on the relevant

disposal.

40

      (8)  

In this paragraph—

“new asset”,

“old asset”, and

“relevant transaction”,

           

have the meaning given by section 116.

45

      (9)  

References in this paragraph to any provision are to be read as they would

be if this paragraph formed part of TCGA 1992.

 
 

Finance Bill
Schedule 3 — Entrepreneurs’ relief

130

 

Transitionals: EIS and VCT

7     (1)  

This paragraph applies where there is a relevant chargeable event in a case

in which the original gain would, apart from Schedule 5B (enterprise

investment scheme) or Schedule 5C (venture capital trusts), have accrued

before 6 April 2008.

5

      (2)  

“Relevant chargeable event” means a chargeable event under—

(a)   

paragraph 3(1) of Schedule 5B, or

(b)   

paragraph 3(1) of Schedule 5C,

           

which occurs on or after 6 April 2008 in relation to any of the relevant shares

held by the investor immediately before the first relevant chargeable event.

10

      (3)  

In this paragraph “the first relevant chargeable event” means the first

relevant chargeable event in the case.

      (4)  

The following provisions apply if—

(a)   

the relevant disposal would have been a material disposal of

business assets had Chapter 3 of Part 5 applied in relation to it (even

15

though made before 6 April 2008), and

(b)   

a claim is made on or before the first anniversary of the 31 January

following the tax year in which the first relevant chargeable event

occurs.

      (5)  

In this paragraph “the relevant disposal” means—

20

(a)   

where the original gain would have accrued in accordance with

section 164F or 164FA, paragraphs 4 and 5 of Schedule 5B or

paragraphs 4 and 5 of Schedule 5C (the “original gain event”), the

relevant underlying disposal, and

(b)   

otherwise, the disposal on which the original gain would have

25

accrued (“the original gain disposal”).

      (6)  

In sub-paragraph (5)(a) “the relevant underlying disposal” means the

disposal (not being a disposal within paragraph 3 of Schedule 5B or 5C) by

virtue of which Schedule 5B or 5C has effect.

      (7)  

Subject as follows, the amount treated as accruing on the relevant chargeable

30

event in respect of the original gain event or original gain disposal is the

amount which would be arrived at under section 169N(1) to (3) if—

(a)   

the relevant chargeable event were a qualifying business disposal

(within the meaning of Chapter 3 of Part 5), and

(b)   

the relevant proportion of the postponed gain constituted the

35

amount resulting under section 169N(1);

           

and “the relevant proportion” means the proportion of the relevant shares

which is held by the investor immediately before the first relevant

chargeable event.

      (8)  

The amount treated as accruing on the relevant chargeable event in respect

40

of the original gain event or original gain disposal is that specified in sub-

paragraph (9) where the relevant chargeable event is not a chargeable event

in relation to all the relevant shares held by the investor immediately before

the first relevant chargeable event.

      (9)  

The amount referred to in sub-paragraph (8) is the appropriate proportion

45

of the amount in sub-paragraph (7); and “the appropriate proportion” means

the proportion of the relevant shares held by the investor immediately

 
 

Finance Bill
Schedule 4 — Inheritance tax: transfer of nil-rate band etc

131

 

before the first relevant chargeable event as respects which the relevant

chargeable event is a chargeable event.

     (10)  

In this paragraph—

“chargeable event” is to be construed in accordance with paragraph 3

of Schedule 5B or paragraph 3 of Schedule 5C,

5

“investor” has the same meaning as in paragraph 1 of Schedule 5B or

paragraph 1 of Schedule 5C,

“the original gain” has the same meaning as in paragraph 1 of Schedule

5B or paragraph 1 of Schedule 5C, and

“the postponed gain” means so much of the original gain as is treated

10

by paragraph 2(2)(a) of Schedule 5B or paragraph 2(2)(a) of Schedule

5C as not having accrued at the accrual time,

“relevant shares” has the same meaning as in Schedule 5B or Schedule

5C.

     (11)  

References in this paragraph to any provision are to be read as they would

15

be if this paragraph formed part of TCGA 1992.

Schedule 4

Section 8

 

Inheritance tax: transfer of nil-rate band etc

Amendments of IHTA 1984

1          

IHTA 1984 is amended as follows.

20

2          

After section 8 insert—

“8A     

Transfer of unused nil-rate band between spouses and civil partners

(1)   

This section applies where—

(a)   

immediately before the death of a person (a “deceased

person”), the deceased person had a spouse or civil partner

25

(“the survivor”), and

(b)   

the deceased person had unused nil-rate band on death.

(2)   

A person has unused nil-rate band on death if—equation: greaterthan[char[M],times[char[V],char[T]]]

   

where—

M is the maximum amount that could be transferred by a

30

chargeable transfer made (under section 4 above) on the

person’s death if it were to be wholly chargeable to tax at the

rate of nil per cent. (assuming, if necessary, that the value of

the person’s estate were sufficient but otherwise having

regard to the circumstances of the person); and

35

VT is the value actually transferred by the chargeable transfer

so made (or nil if no chargeable transfer is so made).

(3)   

Where a claim is made under this section, the nil-rate band

maximum at the time of the survivor’s death is to be treated for the

purposes of the charge to tax on the death of the survivor as

40

increased by the percentage specified in subsection (4) below (but

subject to subsection (5) and section 8C below).

 
 

 
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