Finance Act 1989

2 After section 126 there shall be inserted—

“126A Section 126 relief: gifts to non-residents.

“126A (1) Section 126(3) above shall not apply where the transferee is an individualis neither resident nor ordinarily resident in the United Kingdom.

(2) Section 126(3) above shall not apply where the transferee is an individualor a company if that individual or company—

(a) though resident or ordinarily resident in the United Kingdom, is regardedfor the purposes of any double taxation arrangements having effect by virtueof section 788 of the Taxes Act 1988 as resident in a territory outside theUnited Kingdom, and

(b) by virtue of the arrangements would not be liable in the United Kingdomto tax on a gain arising on a disposal of the asset occurring immediatelyafter its acquisition.

126B Section 126 relief: gifts to foreign-controlled companies.

126B (1) Section 126(3) above shall not apply where the transferee is a companywhich is within subsection (2) below.

(2) A company is within this subsection if it is controlled by a person who,or by persons each of whom,—

(a) is neither resident nor ordinarily resident in the United Kingdom, and

(b) is connected with the person making the disposal.

(3) For the purposes of subsection (2) above, a person who (either alone orwith others) controls a company by virtue of holding assets relating to thator any other company and who is resident or ordinarily resident in the UnitedKingdom shall be regarded as neither resident nor ordinarily resident thereif—

(a) he is regarded for the purposes of any double taxation arrangements havingeffect by virtue of section 788 of the Taxes Act 1988 as resident in aterritory outside the United kingdom, and

(b) by virtue of the arrangements he would not be liable in the United Kingdomto tax on a gain arising on a disposal of the assets.

126C Section 126 relief: emigration of controlling trustees.

126C (a) relief under section 126 above is given in respect of a disposal of anasset to a company which is controlled by the trustees of a settlement (“therelevant disposal”),

(b) at the time of the relevant disposal the person making it is connectedwith the trustees, and

(c) at a time when the company has not disposed of the asset and the trusteeshave not ceased to control the company, they become neither resident norordinarily resident in the United Kingdom.

(2) Where this subsection applies then, subject to the following provisionsof this section, a chargeable gain shall be deemed to have accrued to thetrustees immediately before the time mentioned in subsection (1)(c) above, andits amount shall be equal to the held-over gain (within the meaning of sectin126 above) on the relevant disposal.

(3) For the purposes of paragraph (c) of subsection (1) above, the companyshall be taken to have disposed of an asset before the time referred to inthat paragraph only if it has made a disposal or disposals in connection withwhich the whole of the held-over gain on the relevant disposal was representedby reductions made in accordance with section 126(3) above; and where thecompany has made a disposal in connection with which part of that gain was sorepresented, the amount of chargeable gain deemed by virtue of this sectionto accrue to the trustees shall be correspondingly reduced.

(4) The disposals by the company that are to be taken into account undersubsection (3) above shall not include any disposal to which section 273 ofthe Taxes Act 1970 (transfers within a group) applies; but where the companydisposes of an asset by a disposal to which that section applies, the firstsubsequent disposal of the asset by another member of the group which is adisposal to which that section does not apply shall be taken into accountunder subsection (3) above as if it had been made by the company.

(5) Where an amount of tax assessed on trustees by virtue of this section isnot paid within the period of twelve months beginning with the date when thetax becomes payable then, subject to subsection (6) below, the transferor maybe assessed and charged (in the name of the trustees) to all or any part ofthat tax.

(6) No assessment shall be made under subsection (5) above more than six yearsafter the end of the year in which the relevant disposal was made.

(7) Where the transferor pays an amount of tax in pursuance of subsection (5)above, he shall be entitled to recover a corresponding sum from the trustees.

(8) Gains on disposals made after a chargeable gain has under this sectionbeen deemed to accrue by reference to a held-over gain shall be computedwithout any reduction under section 126(3)(b) above in respect of thatheld-over gain.

(9) Section 126B(3) above shall apply for the purposes of subsection (1)(c)above as it applies for the purposes of section 126B(2).”