Finance Bill

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Session 2007 - 08
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Finance Bill

Finance Bill (Volume I)
Schedule 2 — Capital gains tax reform
115

36
In section 228(8) (relief for employee share ownership trusts), for “meanings
given by paragraph 22 of Schedule A1” substitute “same meaning as in
section 165 (see section 165A)”.
37
In section 241(3A) (furnished holiday lettings), omit “Schedule A1 (taper
relief),”.
5
38
In section 253(14)(b) (relief for loans to traders), for “meaning given by
paragraph 22 of Schedule A1” substitute “same meaning as in section 165
(see section 165A)”.
39
Omit section 261C(2)(a) (treating trading loss etc as CGT loss: meaning of
“the maximum amount”).
10
40
In section 279(2)(a) (foreign assets: delayed remittances), omit “(before the
application of any taper relief)”.
41
In section 279A(7)(b) (deferred unascertainable consideration: election for
treatment of loss), for “any amounts that fall to be brought into account for
that year under section 2(4)(b) by virtue of section 2(5)(b),” substitute “the
15
total amount of chargeable gains treated as accruing in that year by virtue of
section 87 or 89(2) (read, where appropriate, with section 10A),”.
42
In section 279B(1) (provisions supplementary to section 279A), for
paragraph (b) substitute—
“(b)
the person would be so chargeable if—
20
(i)
chargeable gains accrued to the person in the year,
and
(ii)
the amount calculated under section 2(2) for the year
in relation to the person exceeded the exempt amount
for the year (within the meaning of section 3).”
25
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.
30
(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
35
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).
40
      (5)
Omit subsection (10).
44
Omit section 284B(1) (provisions supplementary to section 284A).
45
Omit Schedule A1 (taper relief).

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Schedule 2 — Capital gains tax reform
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46
Schedule 4C (transfers of value: attribution of gains to beneficiaries) is
amended as follows.
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”.
5
      (3)
Omit sub-paragraph (1A).
48
Omit paragraph 11 (taper relief).
49
Omit Schedule 5BA (application of taper relief to enterprise investment
scheme).
50
Omit paragraph 15 of Schedule 7D (enterprise management incentives).
10
51
In paragraph 45D(7) of Schedule 26 to FA 2002 (derivative contracts), for the
words after “(6)” substitute ““holding company” and “trading company”
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),
15
omit the second sentence.
53
Omit section 185G(3)(c) of FA 2004 (disposal by person holding taxable
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—
20
(a)
in FA 1998—
(i)
section 121(1) and (2),
(ii)
section 140(5),
(iii)
Schedule 20, and
(iv)
paragraphs 2, 4, 6(3) and (4), 7 and 9 of Schedule 21,
25
(b)
in FA 1999—
(i)
section 72, and
(ii)
Schedule 7,
(c)
sections 66 and 67 of FA 2000,
(d)
in FA 2001—
30
(i)
section 78, and
(ii)
Schedule 26,
(e)
in FA 2002—
(i)
sections 46 and 47,
(ii)
paragraph 5(13) of Schedule 9,
35
(iii)
Schedule 10, and
(iv)
paragraphs 2(2) and 4 to 6 of Schedule 11,
(f)
in FA 2003—
(i)
section 160, and
(ii)
paragraph 5 of Schedule 29,
40
(g)
in Schedule 21 to FA 2004—
(i)
paragraphs 3(4) and 8, and
(ii)
in paragraph 10, in sub-paragraph (4), “, 8(2)” and sub-
paragraph (6),

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Schedule 2 — Capital gains tax reform
117

(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
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
5
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
any subsequent tax year.
Abolition of “kink” test
10
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)—
(a)
for “Subject to the following provisions of this section, in” substitute
“In”, and
15
(b)
for “him” substitute “that person”.
      (3)
After that subsection insert—
“(2A)
For the purposes of corporation tax, subsection (2) above has effect
subject to subsections (3) to (8) below (and see also subsections (9)
and (10)).”
20
      (4)
In subsection (3)(d), for the words after “any of” substitute “the no gain/no
loss provisions.”
      (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—
25
(a)
paragraph (a),
(b)
in paragraph (aa), “in the case of an election for the purposes of
corporation tax,”, and
(c)
in paragraph (b), “in either case”.
      (8)
In subsection (7), for “him” substitute “that person”.
30
      (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
corporation tax”.
59
After that section insert—
“35A
Disposal of asset acquired on no gain/no loss disposal
35
(1)
This section applies for the purposes of capital gains tax in relation
to a disposal of an asset if—
(a)
the person making the disposal acquired the asset after 31
March 1982 and before 6 April 2008,

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Schedule 2 — Capital gains tax reform
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(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
enactment, neither a gain nor a loss accrued to the person
making the disposal, and
5
(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).”
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/
10
no loss provisions”.
61
In section 73(1) (death of life tenant: exclusion of chargeable gain), for “6th
April 1965” substitute “31 March 1982”.
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
15
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
provisions”—
(a)
sections 58, 73, 139, 140A, 140E, 171, 211, 215, 216, 217A, 218
20
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;
(d)
section 130(3) of the Transport Act 1985;
(e)
section 486(8) of the Taxes Act;
25
(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;
(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
30
and Redress Act 2007.”
64    (1)
Schedule 2 (assets held on 6 April 1965) is amended as follows.
      (2)
Omit paragraph 1(3).
      (3)
In paragraph 4—
(a)
omit sub-paragraph (6),
35
(b)
in sub-paragraph (8), for “him” substitute “the person”,
(c)
in sub-paragraph (9)—
(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”,
40
(d)
in sub-paragraph (10)(a), for “he” (in both places) substitute “the
person”, and
(e)
in sub-paragraph (11), omit—
(i)
paragraph (a),
(ii)
in paragraph (b), “in the case of an election for the purposes
45
of corporation tax,”, and

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Schedule 2 — Capital gains tax reform
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(iii)
in paragraph (c), “in either case,”.
      (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
5
(c)
in paragraph (c), “in either case,”.
      (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)—
10
(i)
for “Where—” substitute “For the purposes of corporation
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”.
15
      (3)
In paragraph 2(1) and (3), omit “58 or”.
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)
20
and 109(2)(a)” substitute “section 104(1)”.
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.
25
      (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
30
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—
35
(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
40
(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)—

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Schedule 2 — Capital gains tax reform
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(i)
paragraph 2(3) of Schedule 7, and
(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,
5
(i)
paragraph 14(3) of Schedule 9 to FA 2007, and
(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.
10
Abolition of “halving relief”
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”.
15
74    (1)
Schedule 4 (deferred charges on pre-31 March 1982 gains) is amended as
follows.
      (2)
Before paragraph 1 insert—
“Application of Schedule
A1
This Schedule applies only for the purposes of corporation tax.”
20
      (3)
In paragraph 2(5), omit—
(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)),”.
      (5)
In paragraph 9(1), omit—
25
(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”.
75
In consequence of paragraph 74, omit paragraph 43 of Schedule 21 to FA
30
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.
Abolition of indexation allowance
35
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.”

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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
5
the disposal occurs”.
      (3)
Omit subsection (1A).
81    (1)
Section 145 (call options: indexation allowance) is amended as follows.
      (2)
In subsection (1), omit “(subject to subsection (1A) below)”.
      (3)
Omit subsection (1A).
10
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
15
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
20
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
(b)
sections 107 to 114 in the case of corporation tax.”
      (3)
In subsection (3), omit “, 110A”.
25
      (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
the securities constituting or forming part of the section 104 holding
which were held by the person making the disposal on 31 March
30
1982.”
      (5)
In subsection (5), omit “, 110A”.
86
In section 105 (disposal on or before day of acquisition), after subsection (2)
insert—
“(3)
None of the securities which, by virtue of this section, are identified
35
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)
is amended as follows.