Income and Corporation Taxes Act 1988

312 Interpretation of Chapter III. U.K.

(1) M1 In this Chapter—

• [F1 “arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable;]

• “associate” has the meaning given in subsections (3) and (4) of section 417 except that in those subsections “relative” shall not include a brother or sister;

• F2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• [F3 “bonus shares” means shares which are issued otherwise than for payment (whether in cash or otherwise);]

• “control”, except in sections [F4 289(9),][F5 291B(4) [F6 , 293(8)(b)] and 308(2)], shall be construed in accordance with section 416(2) to (6);

• “debenture” has the meaning given by section 744 of the M2 Companies Act 1985;

• [F7 F2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

• F2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• “director” shall be construed in accordance with section 417(5);

• [F8 “eligible for relief” has the meaning given by section 289(1),

• “eligible shares” has the meaning given by section 289(7),]

• F2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• F9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• F2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• F10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• F2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• F2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• F2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• “ordinary shares” means shares forming part of a company’s ordinary share capital;

• [F11 “the period of restriction”, in relation to any eligible shares issued by a company, means the period—

  (a)

  beginning one year before the shares are issued, and

  (b)

  ending immediately before the termination date relating to the shares;]

• F9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• [F12 [F13 'relief’ means relief under this Chapter;

• [F14 “research and development” has the meaning given by section 837A;]

• [F15 “qualifying 90% subsidiary”, in relation to any company, is to be construed in accordance with section 289(9) to (13);]

• F16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

• “subsidiary”, in relation to any company (except in the expression “51 per cent. subsidiary” or where otherwise defined), means a subsidiary of that company of a kind which that company may hold under section 308,

• “51 per cent. subsidiary”, in relation to any company, means (except in the case of references to a company which is a 51 per cent. subsidiary on a particular date or at a particular time) a company which is a 51 per cent. subsidiary of that company at any time in the relevant period (applying subsection (1A)(a) below),]

• [F17 “termination date” in relation to any eligible shares issued by a company, means the third anniversary of the issue date or if—

  (a)

  [F18 the money raised by the issue was raised wholly or mainly] for the purpose of a qualifying business activity falling within section 289(2)(a) (company meeting trading activities requirement by reason of the company or a [F19 qualifying 90% subsidiary of the company] carrying on or preparing to carry on a qualifying trade), and

  (b)

  [F20 neither the company nor any of its qualifying 90% subsidiaries had] begun to carry on the trade in question on the issue date,

  the third anniversary of the date on which [F21 the company or any qualifying 90% subsidiary of the company] begins to carry on that trade; and]

• [F22 “unquoted company” means a company none of whose shares, stocks, debentures or other securities are marketed to the general public,

F2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

[F23 [F24 (1A) In any provision of this Chapter “relevant period”, in relation to any eligible shares issued by a company, means whichever of the following periods is applied for the purposes of that provision—

(a) the period beginning either—

(i) with the incorporation of the company, or

(ii) if the company was incorporated more than two years before the date on which the shares were issued, two years before that date,

and ending immediately before the termination date relating to the shares, and

(b) the period beginning with the issue of the shares and ending immediately before the termination date relating to them.]

[F25 (1ZA) In determining, for the purposes of the definition of “termination date” in subsection (1) above, when a qualifying trade is begun to be carried on by a qualifying 90% subsidiary of a company there shall be disregarded any carrying on of the trade by it before it became such a subsidiary of the company.]

(1B) For the purposes of the definition of “unquoted company” in subsection (1) above, shares, stocks, debentures or other securities are marketed to the general public if they are—

(a) listed on a recognised stock exchange,

(b) listed on a designated exchange in a country outside the United Kingdom, or

(c) F26 . . . dealt in outside the United Kingdom by such means as may be designated.

(1C) In subsection (1B) above “designated” means designated by an order made by the Board for the purposes of that subsection; and an order made for the purposes of paragraph (b) of that subsection may designate an exchange by name, or by reference to any class or description of exchanges, including a class or description framed by reference to any authority or approval given in a country outside the United Kingdom.

(1D) Section 828(1) does not apply to an order made for the purposes of subsection (1B) above.

(1E) Where a company is an unquoted company at the time when any shares are issued [F27 (“the relevant time”)], it shall not be treated for the purposes of this Chapter as ceasing to be an unquoted company in relation to those shares at any subsequent time by reason only that any shares, stocks, debentures or other securities of the company are at that time—

[F28 (a) listed on a stock exchange that is a recognised stock exchange by virtue of an order made under section 841, or

(b) listed on an exchange, or dealt in by any means, designated by an order made for the purposes of subsection (1B) above,

if the order was made after the relevant time.]]

(2) M3 Section 839 applies for the purposes of this Chapter other than [F29 section 291, section 291A(1), (4) and (5) and section 291B].

[F30 (2A) References in this Chapter to a company being in administration or receivership shall be construed as follows—

[F31 (a) references to a company being “in administration” are to a company being in administration within the meaning of Schedule B1 to the Insolvency Act 1986, or to there being in force in relation to it—

(i) an administration order under Part III of the Insolvency (Northern Ireland) Order 1989, or

(ii) any corresponding order under the law of a country or territory outside the United Kingdom;]

(b) references to a company being “in receivership” are to there being in force in relation to it—

(i) an order for the appointment of an administrative receiver, a receiver and manager or a receiver under Chapter I or II of Part III of the M4 Insolvency Act 1986 or Part IV of the M5 Insolvency (Northern Ireland) Order 1989, or

(ii) any corresponding order under the law of a country or territory outside the United Kingdom.]

(3) References in this Chapter to a disposal of shares include references to a disposal of an interest or right in or over the shares and an individual shall be treated for the purposes of this Chapter as disposing of any shares which he is treated by virtue of section [F32 [F33 136] of the 1992 Act] as exchanging for other shares.

[F34 (4) In this Chapter—

(a) references in any provision to the reduction of any relief attributable to any shares include a reference—

(i) to the reduction of the relief to nil, and

(ii) where no relief has yet been given, to the reduction of the amount which apart from that provision would be the relief, and

(b) references to the withdrawal of any relief, in respect of any shares, are to the withdrawal of the relief attributable to those shares or, in a case where no relief has yet been given, to ceasing to be eligible for relief in respect of those shares.

[F35 (4A) In this Chapter references (however expressed) to an issue of eligible shares in any company are to any eligible shares in the company that are of the same class and are issued on the same day.

(4B) For the purposes of this Chapter shares in a company shall not be treated as being of the same class unless they would be so treated if dealt with on the Stock Exchange.]

(5) For the purposes of this Chapter, the market value at any time of any asset shall be taken to be the price which it might reasonably be expected to fetch on a sale at that time in the open market free from any interest or right which exists by way of security in or over it.]

(6) References in this Chapter to relief given to an individual in respect of eligible shares, and to the withdrawal of such relief, include respectively references to relief given to him in respect of those shares at any time after he has disposed of them and references to the withdrawal of such relief at any such time.

F36 (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F36 (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F1 S. 312(1): definition of "arrangements" inserted (with effect as mentioned in Sch. 17 para. 14(2)(3) of the amending Act) by Finance Act 2000 (c. 17), Sch. 17 para. 14(1)(a)

F2 S. 312(1): definitions repealed (with effect in accordance with Sch. 15 para. 40(2) of the repealing Act) by Finance Act 2001 (c. 9), Sch. 33 Pt. 2(3), Note 6

F3 S. 312(1): definition of "bonus shares" inserted (with effect in accordance with Sch. 18 para. 21 of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 11(2)(a)

F4 S. 312(1): words in definition of "control" inserted (with effect in accordance with Sch. 18 para. 21 of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 11(2)(b)

F5 S. 312(1): words in definition of "control" substituted (with effect as mentioned in s. 137(1)(2) of the amending Act) by Finance Act 1994 (c. 9), Sch. 15 para. 27(a)(i)

F6 S. 312(1): words in definition of "control" inserted (with effect as mentioned in Sch. 17 para. 14(2)(3) of the amending Act) by Finance Act 2000 (c. 17), Sch. 17 para. 14(1)(b)

F7 S. 312(1): definition of "the designated period" inserted (with effect as mentioned in Sch. 17 para. 8 of the amending Act) by Finance Act 2000 (c. 17), Sch. 17 para. 6(2)

F8 S. 312(1): definitions of "eligible for relief" and "eligible shares" inserted (with effect as mentioned in s. 137(1)(2) of the amending Act) by Finance Act 1994 (c. 9), Sch. 15 para. 27(a)(ii)

F9 S. 312(1): definitions of "fixed-rate preference share capital" and "the relevant period" repealed (with effect as mentioned in s. 137(1)(2), Sch. 26 Pt. 5(17) Note of the repealing Act) by Finance Act 1994 (c. 9), Sch. 15 para. 27(a)(iii)(iv), Sch. 26 Pt. 5(17)

F10 S. 312(1): definition of "new consideration" repealed (with effect as mentioned in s. 74(3), Sch. 27 Pt. 3(14) Note 4 of the repealing Act) by Finance Act 1998 (c. 36), Sch. 13 para. 23(1)(a), Sch. 27 Pt. 3(14)

F11 S. 312(1): definition of "the period of restriction" inserted (with effect in accordance with Sch. 15 para. 40(2) of the amending Act) by Finance Act 2001 (c. 9), Sch. 15 para. 24

F12 S. 312(1): definitions of "relief", "subsidiary" and "51 per cent. subsidiary" substituted for "the relief" and "relief" (with effect as mentioned in s. 137(1)(2) of the amending Act) by Finance Act 1994 (c. 9), Sch. 15 para. 27(a)(v)

F13 S. 312(1): definitions of "relief", "research and development" and "the seven year period" substituted for definitions of "research and development" and "relief" (with effect as mentioned in s. 74(3) of the amending Act) by Finance Act 1998 (c. 36), Sch. 13 para. 23(1)(b)

F14 S. 312(1): definition of "research and development" substituted (with effect as mentioned in Sch. 17 para. 15(2) of the amending Act) by Finance Act 2000 (c. 17), Sch. 17 para. 15(1) (with Sch. 15 para. 15(3))

F15 S. 312(1): definition of "qualifying 90% subsidiary" inserted (with effect in accordance with Sch. 18 para. 21 of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 11(2)(c)

F16 S. 312(1): definition of "the seven year period" repealed (with effect as mentioned in Sch. 17 para. 8 of the repealing Act) by Finance Act 2000 (c. 17), Sch. 40 Pt. 2(5), Note 4

F17 S. 312(1): definition of "termination date" substituted for word (with effect as mentioned in Sch. 17 para. 8 of the amending Act) by Finance Act 2000 (c. 17), Sch. 17 para. 6(3)

F18 S. 312(1): words in para. (a) of definition of "termination date" substituted (with effect in accordance with Sch. 18 para. 21 of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 11(2)(d)(i)

F19 S. 312(1): words in para. (a) of definition of "termination date" substituted (with effect in accordance with Sch. 18 para. 21 of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 11(2)(d)(ii)

F20 S. 312(1): words in para. (b) of definition of "termination date" substituted (with effect in accordance with Sch. 18 para. 21 of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 11(2)(d)(iii)

F21 S. 312(1): words in definition of "termination date" substituted (with effect in accordance with Sch. 18 para. 21 of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 11(2)(d)(iv)

F22 S. 312(1): definition of "unquoted company" substituted (with effect as mentioned in s. 137(1)(2) of the amending Act) by Finance Act 1994 (c. 9), Sch. 15 para. 27(a)(vi)

F23 S. 312(1A)-(1E) inserted (with effect as mentioned in s. 137(1)(2) of the amending Act) by Finance Act 1994 (c. 9), Sch. 15 para. 27(b)

F24 S. 312(1A) substituted (with effect as mentioned in Sch. 17 para. 8 of the amending Act) by Finance Act 2000 (c. 17), Sch. 17 para. 6(4)

F25 S. 312(1ZA) inserted (with effect in accordance with Sch. 18 para. 21 of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 11(3)

F26 Words in s. 312(1B)(c) repealed (with effect as mentioned in s. 74(3), Sch. 27 Pt. 3(14) Note 4 of the repealing Act) by Finance Act 1998 (c. 36), Sch. 13 para. 23(3), Sch. 27 Pt. 3(14)

F27 Words in s. 312(1E) inserted (with effect in accordance with Sch. 15 para. 40(2) of the amending Act) by Finance Act 2001 (c. 9), Sch. 15 para. 13(a)

F28 Words in s. 312(1E) substituted (with effect in accordance with Sch. 15 para. 40(2) of the amending Act) by Finance Act 2001 (c. 9), Sch. 15 para. 13(b)

F29 Words in s. 312(2) substituted (with effect as mentioned in s. 74(3) of the amending Act) by Finance Act 1998 (c. 36), Sch. 13 para. 23(4)

F30 S. 312(2A) inserted (with effect as mentioned in Sch. 17 para. 12 of the amending Act) by Finance Act 2000 (c. 17), Sch. 17 para. 9(4)

F31 S. 312(2A)(a) substituted (15.9.2003) by The Enterprise Act 2002 (Insolvency) Order 2003 (S.I. 2003/2096), art. 1(1), Sch. para. 18 (with art. 6)

F32 Words in s. 312(3)(5)(b) substituted (6.3.1992 with effect as mentioned in s. 289(1)(2) of the amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch. 10 para. 14(18) (with ss. 60, 101(1), 171, 201(3)).

F33 Words in s. 312(3) substituted (with effect in accordance with Sch. 9 paras. 7, 8(1) of the amending Act) by Finance Act 2002 (c. 23), Sch. 9 para. 4(3)

F34 S. 312(4)(5) substituted (with effect as mentioned in s. 137(1)(2) of the amending Act) by Finance Act 1994 (c. 9), Sch. 15 para. 27(d)

F35 S. 312(4A)(4B) inserted (with effect as mentioned in s. 74(3) of the amending Act) by Finance Act 1998 (c. 36), Sch. 13 para. 23(5)

F36 S. 312(7)(8) repealed (with effect in accordance with Sch. 15 para. 40(2) of the repealing Act) by Finance Act 2001 (c. 9), Sch. 33 Pt. 2(3), Note 6

Modifications etc. (not altering text)

C1 S. 312(2A) applied by Income Tax (Earnings and Pensions) Act 2003 (c. 1), Sch. 5 para. 11(10) (as inserted (with effect in accordance with s. 96(6) of the 2004 amending Act) by Finance Act 2004 (c. 12), s. 96(4)(f))

Marginal Citations

M1 Source-1981 s.67; 1983 Sch.5 20(1), (2); 1985 s.44(6); 1986 Sch.9 21(1), (2)

M2 1985 c. 6.

M3 Source-1981 s.67(2)-(4); 1983 Sch.5 20(1)

M4 1986 c. 45.

M5 S.I. 1989/2405 (N.I. 19).