House of Commons portcullis
House of Commons
Session 2007 - 08
Internet Publications
Other Bills before Parliament

Finance Bill


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

122

 

      (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

holding.”

5

      (3)  

In subsection (6), before “securities” (in each place) insert “relevant”.

      (4)  

Omit subsection (7).

      (5)  

Omit subsection (8).

      (6)  

For subsection (10) substitute—

“(10)   

In this section—

10

“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

of ITA 2007 (accrued income profits),

15

(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

Taxes Act.”

20

      (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

the end “for corporation tax”.

25

90    (1)  

Section 109 (pre-April 1982 share pools) is amended as follows.

      (2)  

In subsection (1), for “This” substitute “For the purposes of corporation tax,

this”.

      (3)  

In the heading, for “Pre-April” substitute “Corporation tax: pre-April”.

91         

For the heading of section 110 substitute “Indexation for section 104

30

holdings for corporation tax”.

92         

Omit section 110A (indexation for section 104 holdings: CGT).

93         

In the heading of section 112 (parallel pooling regulations), insert at the end

: corporation tax”.

94    (1)  

Section 113 (calls on shares) is amended as follows.

35

      (2)  

Before subsection (1) insert—

“(A1)   

This section has effect for the purposes of corporation tax.”

      (3)  

In the heading, insert at the end “: corporation tax”.

95    (1)  

Section 114 (consideration for options) is amended as follows.

 
 

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

123

 

      (2)  

Before subsection (1) insert—

“(A1)   

This section has effect for the purposes of corporation tax.”

      (3)  

In the heading, insert at the end “: corporation tax”.

96         

In FA 1998, omit—

(a)   

section 123(1) and (2), and

5

(b)   

section 125(2) and (3).

97         

Chapter 6 of Part 4 of ITA 2007 (losses on disposals of shares) is amended as

follows.

98    (1)  

Section 147 (limits on share loss relief) is amended as follows.

      (2)  

In subsection (1)(b)—

10

(a)   

in sub-paragraph (i), omit “or a 1982 holding” and “or” at the end,

and

(b)   

for sub-paragraph (ii) substitute—

“(ii)   

at a time earlier than the time of the disposal

but after 5 April 2008 formed part of a section

15

104 holding, or

(iii)   

at a time earlier than that time and than 6

April 2008 formed part of an old section 104

holding or a 1982 holding, and”.

      (3)  

In subsection (7)—

20

(a)   

in the definition of “section 104 holding” after “1992” insert “and “old

section 104 holding” is a holding that was a section 104 holding

within the meaning of that provision as it applied in relation to

disposals before 6 April 2008”, and

(b)   

in the definition of “1982 holding”, insert at the end “as it applied in

25

relation to disposals before 6 April 2008”.

99    (1)  

Section 148 (disposal of shares forming part of mixed holding) is amended

as follows.

      (2)  

In subsection (3)(a)(ii), omit “or a 1982 holding”.

      (3)  

In subsection (5), omit “or 1982”.

30

      (4)  

In subsection (9), for “and “1982 holding” have” substitute “has”.

100        

The amendments made by paragraphs 84 to 99 have effect in relation to

disposals on or after 6 April 2008.

Meaning of “tax year”

101   (1)  

Section 288 of TCGA 1992 (interpretation) is amended as follows.

35

      (2)  

In subsection (1), for the definition of “year of assessment” substitute—

““year of assessment” means tax year;”.

      (3)  

After that subsection insert—

“(1ZA)   

In this Act and other enactments relating to capital gains tax “tax

year” means a year beginning on 6 April and ending on the following

40

5 April; and “the tax year 2008-09” means the tax year beginning on

 
 

Finance Bill (Volume I)
Schedule 3 — Entrepreneurs’ relief

124

 

6 April 2008 (and any corresponding expression in which two years

are similarly mentioned is to be read in the same way).”

102        

In consequence of the amendments made by paragraph 101, omit—

(a)   

the definition of “tax year” in section 41(1) of FA 2005, and

(b)   

paragraph 342(2)(i) of Schedule 1 to ITA 2007.

5

Schedule 3

Section 7

 

Entrepreneurs’ relief

Introduction

1          

TCGA 1992 is amended as follows.

Main provisions

10

2          

In Part 5 (transfer of business assets), after section 169G insert—

“Chapter 3

Entrepreneurs’ relief

169H    

Introduction

(1)   

This Chapter provides relief from capital gains tax in respect of

15

qualifying business disposals (to be known as “entrepreneurs’

relief”).

(2)   

The following are qualifying business disposals—

(a)   

a material disposal of business assets: see section 169I,

(b)   

a disposal of trust business assets: see section 169J, and

20

(c)   

a disposal associated with a relevant material disposal: see

section 169K.

(3)   

But in the case of certain qualifying business disposals,

entrepreneurs’ relief is given only in respect of disposals of relevant

business assets comprised in the qualifying business disposal: see

25

section 169L.

(4)   

Section 169M makes provision requiring the making of a claim for

entrepreneurs’ relief.

(5)   

Sections 169N to 169P make provision as to the amount of

entrepreneurs’ relief.

30

(6)   

Section 169Q and 169R make provision about reorganisations.

(7)   

Section 169S contains interpretative provisions for the purposes of

this Chapter.

169I    

Material disposal of business assets

(1)   

There is a material disposal of business assets where—

35

(a)   

an individual makes a disposal of business assets (see

subsection (2)), and

 
 

Finance Bill (Volume I)
Schedule 3 — Entrepreneurs’ relief

125

 

(b)   

the disposal of business assets is a material disposal (see

subsections (3) to (7)).

(2)   

For the purposes of this Chapter a disposal of business assets is—

(a)   

a disposal of the whole or part of a business,

(b)   

a disposal of (or of interests in) one or more assets in use, at

5

the time at which a business ceases to be carried on, for the

purposes of the business, or

(c)   

a disposal of one or more assets consisting of (or of interests

in) shares in or securities of a company.

(3)   

A disposal within paragraph (a) of subsection (2) is a material

10

disposal if the business is owned by the individual throughout the

period of 1 year ending with the date of the disposal.

(4)   

A disposal within paragraph (b) of that subsection is a material

disposal if—

(a)   

the business is owned by the individual throughout the

15

period of 1 year ending with the date on which the business

ceases to be carried on, and

(b)   

that date is within the period of 3 years ending with the date

of the disposal.

(5)   

A disposal within paragraph (c) of subsection (2) is a material

20

disposal if condition A or B is met.

(6)   

Condition A is that, throughout the period of 1 year ending with the

date of the disposal—

(a)   

the company is the individual’s personal company and is

either a trading company or the holding company of a

25

trading group, and

(b)   

the individual is an officer or employee of the company or (if

the company is a member of a trading group) of one or more

companies which are members of the trading group.

(7)   

Condition B is that the conditions in paragraphs (a) and (b) of

30

subsection (6) are met throughout the period of 1 year ending with

the date on which the company—

(a)   

ceases to be a trading company without continuing to be or

becoming a member of a trading group, or

(b)   

ceases to be a member of a trading group without continuing

35

to be or becoming a trading company,

   

and that date is within the period of 3 years ending with the date of

the disposal.

(8)   

For the purposes of this section—

(a)   

an individual who disposes of (or of interests in) assets used

40

for the purposes of a business carried on by the individual on

entering into a partnership which is to carry on the business

is to be treated as disposing of a part of the business,

(b)   

the disposal by an individual of the whole or part of the

individual’s interest in the assets of a partnership is to be

45

treated as a disposal by the individual of the whole or part of

the business carried on by the partnership, and

 
 

Finance Bill (Volume I)
Schedule 3 — Entrepreneurs’ relief

126

 

(c)   

at any time when a business is carried on by a partnership,

the business is to be treated as owned by each individual who

is at that time a member of the partnership.

169J    

Disposal of trust business assets

(1)   

There is a disposal of trust business assets where—

5

(a)   

the trustees of a settlement make a disposal of settlement

business assets (see subsection (2)),

(b)   

there is an individual who is a qualifying beneficiary (see

subsection (3)), and

(c)   

the relevant condition is met (see subsections (4) and (5)).

10

(2)   

In this Chapter “settlement business assets” means—

(a)   

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

of a company, or

(b)   

assets (or interests in assets) used or previously used for the

purposes of a business,

15

   

which are part of the settled property.

(3)   

An individual is a qualifying beneficiary if the individual has, under

the settlement, an interest in possession (otherwise than for a fixed

term) in—

(a)   

the whole of the settled property, or

20

(b)   

a part of it which consists of or includes the settlement

business assets disposed of.

(4)   

In relation to a disposal of settlement business assets within

paragraph (a) of subsection (2) the relevant condition is that,

throughout a period of 1 year ending not earlier than 3 years before

25

the date of the disposal—

(a)   

the company is the qualifying beneficiary’s personal

company and is either a trading company or the holding

company of a trading group, and

(b)   

the qualifying beneficiary is an officer or employee of the

30

company or (if the company is a member of a group of

companies) of one or more companies which are members of

the trading group.

(5)   

In relation to a disposal of settlement business assets within

paragraph (b) of that subsection, the relevant condition is that—

35

(a)   

the settlement business assets are used for the purposes of the

business carried on by the qualifying beneficiary throughout

the period of 1 year ending not earlier than 3 years before the

date of the disposal, and

(b)   

the qualifying beneficiary ceases to carry on the business on

40

the date of the disposal or within the period of three years

before that date.

(6)   

In subsection (5)—

(a)   

the reference to a business carried on by the qualifying

beneficiary includes a business carried on by a partnership of

45

which the qualifying beneficiary is a member, and

(b)   

the reference to the qualifying beneficiary ceasing to carry on

the business includes the qualifying beneficiary ceasing to be

 
 

Finance Bill (Volume I)
Schedule 3 — Entrepreneurs’ relief

127

 

a member of the partnership or the partnership ceasing to

carry on the business.

169K    

Disposal associated with relevant material disposal

(1)   

There is a disposal associated with a relevant material disposal if

conditions A, B and C are met.

5

(2)   

Condition A is that an individual makes a material disposal of

business assets which consists of—

(a)   

the disposal of the whole or part of the individual’s interest

in the assets of a partnership, or

(b)   

the disposal of (or of interests in) shares in or securities of a

10

company.

(3)   

Condition B is that the individual makes the disposal as part of the

withdrawal of the individual from participation in the business

carried on by the partnership or by the company or (if the company

is a member of a trading group) a company which is a member of the

15

trading group.

(4)   

Condition C is that, throughout the period of 1 year ending with the

earlier of—

(a)   

the date of the material disposal of business assets, and

(b)   

the cessation of the business of the partnership or company,

20

   

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

the purposes of the business.

(5)   

For the purposes of this Chapter the disposal mentioned in

Condition B is the disposal associated with a relevant material

disposal.

25

169L    

Relevant business assets

(1)   

If a qualifying business disposal is one which does not consist of the

disposal of (or of interests in) shares in or securities of a company,

entrepreneurs’ relief is given only in respect of the disposal of

relevant business assets comprised in the qualifying business

30

disposal.

(2)   

In this Chapter “relevant business assets” means assets (including

goodwill) which are, or are interests in, assets to which subsection (3)

applies, other than excluded assets (see subsection (4) below).

(3)   

This subsection applies to assets which—

35

(a)   

in the case of a material disposal of business assets, are assets

used for the purposes of a business carried on by the

individual or a partnership of which the individual is a

member,

(b)   

in the case of a disposal of trust business assets, are assets

40

used for the purposes of a business carried on by the

qualifying beneficiary or a partnership of which the

qualifying beneficiary is a member, or

(c)   

in the case of a disposal associated with a relevant material

disposal, are assets used for the purposes of a business

45

carried on by the partnership or company.

 
 

Finance Bill (Volume I)
Schedule 3 — Entrepreneurs’ relief

128

 

(4)   

The following are excluded assets—

(a)   

shares and securities, and

(b)   

assets, other than shares or securities, which are held as

investments.

169M    

Relief to be claimed

5

(1)   

Entrepreneurs’ relief is to be given only on the making of a claim.

(2)   

A claim for entrepreneurs’ relief in respect of a qualifying business

disposal must be made—

(a)   

in the case of a disposal of trust business assets, jointly by the

trustees and the qualifying beneficiary, and

10

(b)   

otherwise, by the individual.

(3)   

A claim for entrepreneurs’ relief in respect of a qualifying business

disposal must be made on or before the first anniversary of the 31

January following the tax year in which the qualifying business

disposal is made.

15

(4)   

A claim for entrepreneurs’ relief in respect of a qualifying business

disposal may only be made if the amount resulting under section

169N(1) is a positive amount.

169N    

Amount of relief: general

(1)   

Where a claim is made in respect of a qualifying business disposal—

20

(a)   

the relevant gains (see subsection (5)) are to be aggregated,

and

(b)   

any relevant losses (see subsection (6)) are to be aggregated

and deducted from the aggregate arrived at under paragraph

(a).

25

(2)   

The resulting amount is to be reduced by 4/9ths.

(3)   

But if the aggregate of—

(a)   

the amount resulting under subsection (1), and

(b)   

the total of the amounts resulting under that subsection by

virtue of its operation in relation to earlier relevant qualifying

30

business disposals (if any),

   

exceeds £1 million, the reduction is to be made in respect of only so

much (if any) of the amount resulting under subsection (1) as (when

added to that total) does not exceed £1 million.

(4)   

The amount arrived at under subsections (1) to (3) is to be treated for

35

the purposes of this Act as a chargeable gain accruing at the time of

the disposal to the individual or trustees by whom the claim is made.

(5)   

In subsection (1)(a) “relevant gains” means—

(a)   

if the qualifying business disposal is of (or of interests in)

shares in or securities of a company (or both), the gains

40

accruing on the disposal (computed in accordance with the

provisions of this Act fixing the amount of chargeable gains),

and

(b)   

otherwise, the gains accruing on the disposal of any relevant

business assets comprised in the qualifying business disposal

45

(so computed).

 
 

 
previous section contents continue
 
House of Commons home page Houses of Parliament home page House of Lords home page search page enquiries

© Parliamentary copyright 2008
Revised 23 June 2008