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Finance Bill
Schedule 1 — Rates of capital gains tax

 

Schedules

Schedule 1

Section 2

 

Rates of capital gains tax

Amendments of TCGA 1992

1          

TCGA 1992 is amended as follows.

5

2          

For section 4 (rate of capital gains tax) substitute—

“4      

Rates of capital gains tax

(1)   

This section makes provision about the rates at which capital gains

tax is charged, but is subject to section 169N (rate in case of claim for

entrepreneurs’ relief).

10

(2)   

Subject to the following provisions of this section, the rate of capital

gains tax in respect of gains accruing to a person in a tax year is 18%.

(3)   

The rate of capital gains tax in respect of gains accruing to—

(a)   

the trustees of a settlement, or

(b)   

the personal representatives of a deceased person,

15

   

in a tax year is 28%.

(4)   

If income tax is chargeable at the higher rate or the dividend upper

rate in respect of any part of the income of an individual for a tax

year, the rate of capital gains tax in respect of gains accruing to the

individual in the year is 28%.

20

(5)   

If no income tax is chargeable at the higher rate or the dividend

upper rate in respect of the income of an individual for a tax year, but

the amount on which the individual is chargeable to capital gains tax

exceeds the unused part of the individual’s basic rate band, the rate

of capital gains tax on the excess is 28%.

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(6)   

For the purposes of subsection (5), gains which are chargeable to

capital gains tax at the rate in section 169N(3) are to be treated as

forming the lowest part of the amount on which an individual is

chargeable to capital gains tax.

(7)   

The reference in subsection (5) to the unused part of an individual’s

30

basic rate band is a reference to the amount by which the basic rate

limit exceeds the individual’s Step 3 income.

(8)   

For the purposes of this section, “the Step 3 income” of an individual

means the individual’s net income less allowances deducted at Step

3 of the calculation in section 23 of ITA 2007 for the purpose of

35

calculating the individual’s income tax liability.

 

 

Finance Bill
Schedule 1 — Rates of capital gains tax

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(9)   

Section 989 of ITA 2007 (the definitions) applies for the purposes of

this section as it applies for income tax purposes.

4A      

Section 4: special cases

(1)   

Subsection (2) applies if for a tax year—

(a)   

a person is entitled, by virtue of section 539 of ITTOIA 2005

5

(gains from contracts for life insurance etc), to relief by

reference to the amount of a deficiency, or

(b)   

the residuary income of an estate is treated, by virtue of

section 669(1) and (2) of that Act (reduction in residuary

income: inheritance tax on accrued income), as reduced so as

10

to reduce a person’s income by any amount for the purposes

of extra liability.

(2)   

Section 4(7) is to have effect as if the person’s Step 3 income for the

year were reduced by the amount of the deficiency mentioned in

subsection (1)(a) or the amount mentioned in subsection (1)(b) (as the

15

case may be).

(3)   

Subsections (4) and (5) apply if, by virtue of section 465 of ITTOIA

2005 (gains from contracts for life insurance etc), a person’s total

income for a tax year is deemed to include any amount or amounts.

(4)   

Section 4(7) is to have effect as if the person’s Step 3 income for the

20

year included not the whole of the amount or amounts concerned but

only the annual equivalent within the meaning of section 536(1) of

that Act or the total annual equivalent within the meaning of section

537 of that Act (as the case may be).

(5)   

If—

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(a)   

relief is given under section 535 of that Act, and

(b)   

the calculation under section 536(1) or 537 of that Act (as the

case may be) does not involve the higher rate of income tax,

   

section 4(4) and (5) are to have effect as if no income tax were

chargeable at the higher rate or the dividend upper rate in respect of

30

the person’s income.”

3          

After section 4A (as substituted by paragraph 2) insert—

“4B     

Deduction of losses etc in most beneficial way

(1)   

This section applies if the gains accruing to a person in a tax year are

(apart from this section) chargeable to capital gains tax at different

35

rates.

(2)   

Allowable losses may be deducted from those gains, and the exempt

amount under section 3 may be used in respect of those gains, in such

way as is most beneficial to that person.

(3)   

Subsection (2) is subject to any enactment which contains a limitation

40

on the gains from which allowable losses may be deducted.”

4          

In section 169H (introduction to entrepreneurs’ relief), in subsection (1), for

“relief from capital gains tax” substitute “for a lower rate of capital gains

tax”.

5     (1)  

Section 169N (amount of relief: general) is amended as follows.

45

 
 

Finance Bill
Schedule 1 — Rates of capital gains tax

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      (2)  

For subsections (2) to (4) substitute—

“(2)   

The resulting amount is to be treated for 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.

(3)   

The rate of capital gains tax in respect of that gain is 10%, but this is

5

subject to subsections (4) to (4B).

(4)   

Subsections (4A) and (4B) apply if the aggregate of—

(a)   

the gain mentioned in subsection (2), and

(b)   

the total of so much of each amount resulting under

subsection (1) by virtue of its operation in relation to earlier

10

relevant qualifying business disposals (if any) as was—

(i)   

charged at the rate in subsection (3), or

(ii)   

subject to reduction under subsection (2) of this

section as originally enacted,

   

exceeds £5 million.

15

(4A)   

The rate in subsection (3) is to apply only to so much (if any) of the

gain mentioned in subsection (2) as (when added to the total

mentioned in subsection (4)(b)) does not exceed £5 million.

(4B)   

Section 4 (rates of capital gains tax) is to apply to so much of the gain

mentioned in subsection (2) as is not subject to the rate in subsection

20

(3).”

      (3)  

In subsection (7), for “subsection (3)” substitute “subsection (4)”.

6          

In section 169O (amount of relief: special provision for certain trust

disposals), in subsection (3), omit “with no reduction under subsection (2) of

that section”.

25

7          

In section 169P (amount of relief: special provision for certain associated

disposals), in subsection (3), omit “with no reduction under subsection (2) of

that section”.

8          

For section 169R (reorganisations involving acquisition of qualifying

corporate bonds) substitute—

30

“169R   

Reorganisations involving acquisition of qualifying corporate bonds

(1)   

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

would (apart from this section) have effect to produce a chargeable

gain for an individual by reason of a relevant transaction.

(2)   

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

35

relief may be made as if the relevant transaction involved a disposal

of the old asset; and if such a claim is made section 116(10) does not

apply.

(3)   

An election under this section must be made—

(a)   

if the relevant transaction, so far as it relates to the old asset,

40

would (apart from section 116(10)) involve a disposal of trust

business assets, jointly by the trustees and the qualifying

beneficiary, and

(b)   

otherwise, by the individual.

 
 

Finance Bill
Schedule 1 — Rates of capital gains tax

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(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

relevant transaction takes place.

(5)   

In this section, “old asset” and “relevant transaction” have the

meaning given by section 116.”

5

9     (1)  

Paragraph 1 of Schedule 5B (enterprise investment scheme: re-investment)

is amended as follows.

      (2)  

After sub-paragraph (5) insert—

“(5A)   

The reference in sub-paragraph (1)(b) to a gain accruing in

accordance with section 169N does not include such a gain so far as

10

it is chargeable to capital gains tax at the rate in section 169N(3).”

Amendments of FA 2008

10         

In Schedule 3 to FA 2008 (entrepreneurs’ relief), in paragraph 7

(transitionals: reorganisations)—

(a)   

in sub-paragraph (5), for “section 169N(1) to (3)” substitute “section

15

169N(1) and (2)”;

(b)   

after sub-paragraph (7) insert—

   “(7A)  

Section 169N(3) to (4B) is to apply to the deemed

chargeable gain found in accordance with sub-paragraphs

(5) to (7).”

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11         

In paragraph 8 of that Schedule (transitionals: EIS and VCT)—

(a)   

in sub-paragraph (7), for “section 169N(1) to (3)” substitute “section

169N(1) and (2)”;

(b)   

after sub-paragraph (9) insert—

   “(9A)  

Section 169N(3) to (4B) is to apply to the amount treated as

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accruing in accordance with sub-paragraphs (7) to (9).”

Commencement

12         

The amendment made by paragraph 2 has effect in relation to gains accruing

on or after 23 June 2010.

13         

The amendment made by paragraph 3 has effect in relation to the tax year

30

2010-11 and subsequent tax years.

14         

The amendments made by paragraphs 4 to 7 and 9 have effect in relation to

qualifying business disposals occurring on or after 23 June 2010.

15         

The amendment made by paragraph 8 has effect in relation to relevant

transactions occurring on or after 23 June 2010.

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16         

The amendment made by paragraph 10 has effect if the first relevant

disposal occurs on or after 23 June 2010.

17         

The amendment made by paragraph 11 has effect if the first relevant

chargeable event occurs on or after 23 June 2010.

 
 

Finance Bill
Schedule 1 — Rates of capital gains tax

10

 

Transitionals

18         

In relation to the tax year 2010-11—

(a)   

the reference in section 4(2), (3) and (4) of TCGA 1992 (as substituted

by paragraph 2) to gains accruing in a tax year, and

(b)   

the reference in section 4(5) of that Act (as so substituted) to the

5

amount on which the individual is chargeable to capital gains tax,

           

do not include gains accruing before 23 June 2010.

19         

Gains treated as accruing to an individual under section 10A of TCGA 1992

(temporary non-residents) in the tax year 2010-11 are to be treated for the

purposes of this Schedule as accruing before 23 June 2010.

10

20    (1)  

Chargeable gains treated as accruing to an individual under section 12(2) of

TCGA 1992 (non-UK domiciled individuals to whom remittance basis

applies) in the tax year 2010-11 are to be treated for the purposes of this

Schedule as accruing on the day the related foreign chargeable gains are

remitted.

15

      (2)  

For the purposes of sub-paragraph (1), foreign chargeable gains under

section 809J of ITA 2007 (section 809I: order of remittances) in the tax year

2010-11 are to be treated as remitted before 23 June 2010.

21         

Chargeable gains treated as accruing to a settlor under section 86(4)(a) of

TCGA 1992 (attribution of gains to settlors with interest in non-resident or

20

dual resident settlements) in the tax year 2010-11 are to be treated for the

purposes of this Schedule as accruing before 23 June 2010.

22    (1)  

This paragraph makes provision, for the purposes of this Schedule, in

relation to—

(a)   

chargeable gains treated as accruing to a beneficiary of a settlement

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under section 87(2) of TCGA 1992 (non-UK resident settlements:

attribution of gains to beneficiaries) in the tax year 2010-11,

(b)   

chargeable gains treated as accruing to a beneficiary of a settlement

under section 89(2) of that Act (migrant settlements etc) in that tax

year, and

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(c)   

chargeable gains treated as accruing to a beneficiary of a relevant

settlement under paragraph 8(1) of Schedule 4C to that Act

(attribution of Schedule 4C gains to beneficiaries) in that tax year.

      (2)  

Such of the chargeable gains within sub-paragraph (1)(a), (b) or (c) as result

from the matching of capital payments received before 23 June 2010 are to be

35

treated as accruing before that date.

      (3)  

Such of the chargeable gains within sub-paragraph (1)(a), (b) or (c) as result

from the matching of capital payments received on or after that date are to

be treated as accruing on or after that date.

      (4)  

The reference in sub-paragraph (1)(b) to section 89(2) of TCGA 1992 is to be

40

read as including a reference to that section as applied by section 90(6)(a) of

that Act (transfers between settlements).

 
 

 
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