Finance Bill

House of Commons

Session 2007 - 08
Internet Publications
Other Bills before Parliament

Finance Bill

Finance Bill (Volume I)
Schedule 3 — Entrepreneurs’ relief
129

(6)
In subsection (1)(b) “relevant losses” means—
(a)
if the qualifying business disposal is of (or of interests in)
shares in or securities of a company (or both), any losses
accruing on the disposal (computed in accordance with the
provisions of this Act fixing the amount of allowable losses,
5
on the assumption that notice has been given under section
16(2A) in respect of them), and
(b)
otherwise, any losses accruing on the disposal of any relevant
business assets comprised in the qualifying business disposal
(so computed, on that assumption).
10
(7)
In subsection (3) “earlier relevant qualifying business disposals”
means—
(a)
where the qualifying business disposal is made by an
individual, earlier qualifying business disposals made by the
individual and earlier disposals of trust business assets in
15
respect of which the individual is the qualifying beneficiary,
and
(b)
where the qualifying business disposal is a disposal of trust
business assets in respect of which an individual is the
qualifying beneficiary, earlier disposals of trust business
20
assets in respect of which that individual is the qualifying
beneficiary and earlier qualifying business disposals made
by that individual.
(8)
If, on the same day, there is both a disposal of trust business assets in
respect of which an individual is the qualifying beneficiary and a
25
qualifying business disposal by the individual, this section applies as
if the disposal of trust business assets were later.
(9)
Any gain or loss taken into account under subsection (1) is not to be
taken into account under this Act as a chargeable gain or an
allowable loss.
30
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—
35
(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
40
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.
45
(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—

Finance Bill (Volume I)
Schedule 3 — Entrepreneurs’ relief
130

(a)
the qualifying beneficiary’s interest in the income of the part
of the settled property comprising the shares or securities (or
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
5
the qualifying beneficiary) who then have interests in
possession in that part of the settled property.
(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).
10
(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
disposal and—
(a)
in the case of a disposal of settlement business assets within
paragraph (a) of subsection (2) of section 169J, throughout
15
which the conditions in paragraphs (a) and (b) of subsection
(4) of that section are met, and
(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.
20
169P
Amount of relief: special provision for certain associated disposals
(1)
This section applies where, on a disposal associated with a relevant
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
25
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.
(4)
The conditions referred to in subsection (1) are—
30
(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
disposed of are in use for the purposes of the business for that
35
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
individual’s personal company) for only part of the period in
40
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
for the purposes of the business, their availability is
45
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—

Finance Bill (Volume I)
Schedule 3 — Entrepreneurs’ relief
131

(a)
in a case within paragraph (a) of subsection (4), the length of
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,
5
(c)
in a case within paragraph (c) of that subsection, the length of
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
10
which any rent paid is less than the amount which would be
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),
15
and
(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’
20
relief may be made as if the reorganisation involved a disposal of the
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
25
disposal of trust business assets, jointly by the trustees and
the qualifying beneficiary, and
(b)
otherwise, by the individual.
(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
30
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
treated as such a reorganisation by virtue of section 135 or 136.
169R
Reorganisations involving acquisition of qualifying corporate bonds
35
(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.
(2)
This Chapter has effect as if—
(a)
(despite section 116(10)) the relevant transaction were a
40
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
relevant transaction.
(3)
Where the disposal would be a material disposal of business assets
45
and entrepreneurs’ relief is claimed in respect of it—

Finance Bill (Volume I)
Schedule 3 — Entrepreneurs’ relief
132

(a)
the amount resulting under section 169N(1) is to be taken to
be the amount of the chargeable gain produced by the
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
5
accrue by virtue of section 116(10)(b) on a disposal of the
whole or part of the new asset.
(4)
In this section “new asset”, “old asset” and “relevant transaction”
have the meaning given by section 116.
169S
Interpretation of Chapter
10
(1)
For the purposes of this Chapter “a business” means anything
which—
(a)
is a trade, profession or vocation, and
(b)
is conducted on a commercial basis and with a view to the
realisation of profits.
15
(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
by virtue of section 122.
(3)
For the purposes of this Chapter “personal company”, in relation to
an individual, means a company—
20
(a)
at least 5% of the ordinary share capital of which is held by
the individual, and
(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
25
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
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—
30
“disposal associated with a relevant material disposal” has the
meaning given by section 169K,
“disposal of business assets” has the meaning given by section
169I(2),
“disposal of trust business assets” has the meaning given by
35
section 169J,
“employment” has the meaning given by section 4 of ITEPA
2003,
“entrepreneurs’ relief” has the meaning given by section
169H(1),
40
“holding company” has the same meaning as in section 165 (see
section 165A),
“material disposal of business assets” has the meaning given by
section 169I,
“office” has the meaning given by section 5(3) of ITEPA 2003,
45
“ordinary share capital” has the same meaning as in the Income
Tax Acts (see section 989 of ITA 2007),

Finance Bill (Volume I)
Schedule 3 — Entrepreneurs’ relief
133

“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
5
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
10
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).”
15
Other amendments
3
In section 241(3A) (furnished holiday lettings), after the entry relating to
section 165 insert—
“section 169S(1) (entrepreneurs’ relief),”.
4
In paragraph 1(1)(b) of Schedule 5B (enterprise investment scheme: re-
20
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 of TCGA 1992) and
relevant transactions (within the meaning of section 116 of TCGA 1992)
25
taking place on or after 6 April 2008.
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
30
which the individual was a party taking place before that date.
      (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,
35
(b)
that Chapter applied in relation to that disposal (even though made
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.
40
      (3)
In sub-paragraph (2) “the first relevant disposal” means the first disposal
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—

Finance Bill (Volume I)
Schedule 3 — Entrepreneurs’ relief
134

(a)
the amount of the chargeable gain produced by the calculation under
section 116(10)(a), reduced by
(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
      (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
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
10
section 116(10)(b) on the relevant disposal is the amount specified in sub-
paragraph (7)—
(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
15
April 2008, where the relevant disposal is not a disposal of the whole
of the part not so disposed of.
      (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
20
disposed of before 6 April 2008, which is disposed of on the relevant
disposal.
      (8)
In this paragraph—
“new asset”,
“old asset”, and
25
“relevant transaction”,

have the meaning given by section 116.
      (9)
References in this paragraph to any provision are to be read as they would
be if this paragraph formed part of TCGA 1992.
Transitionals: EIS and VCT
30
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.
      (2)
“Relevant chargeable event” means a chargeable event under—
35
(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.
      (3)
In this paragraph “the first relevant chargeable event” means the first
40
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
though made before 6 April 2008), and
45

Finance Bill (Volume I)
Schedule 3 — Entrepreneurs’ relief
135

(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—
(a)
where the original gain would have accrued in accordance with
5
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
accrued (“the original gain disposal”).
10
      (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
event in respect of the original gain event or original gain disposal is the
15
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
amount resulting under section 169N(1);
20

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
of the original gain event or original gain disposal is that specified in sub-
25
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
of the amount in sub-paragraph (7); and “the appropriate proportion” means
30
the proportion of the relevant shares held by the investor immediately
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
35
of Schedule 5B or paragraph 3 of Schedule 5C,
“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,
40
“the postponed gain” means so much of the original gain as is treated
by paragraph 2(2)(a) of Schedule 5B or paragraph 2(2)(a) of Schedule
5C as not having accrued at the accrual time, and
“relevant shares” has the same meaning as in Schedule 5B or Schedule
5C.
45
     (11)
References in this paragraph to any provision are to be read as they would
be if this paragraph formed part of TCGA 1992.