Taxation of Chargeable Gains Act 1992

[F1 SCHEDULE 5B U.K. Enterprise investment scheme: re-investment

Textual Amendments

F1 Sch. 5B inserted (with effect in accordance with Sch. 13 para. 4(4) of the amending Act) by Finance Act 1995 (c. 4), Sch. 13 para. 4(3)

Application of Schedule U.K.

1 (1) This Schedule applies where— U.K.

(a) there would (apart from paragraph 2(2)(a) below) be a chargeable gain (“the original gain”) accruing to an individual (“the investor”) at any time (“the accrual time”) on or after 29th November 1994;

(b) the gain is one accruing either on the disposal by the investor of any asset or in accordance with [F2 section 164F or 164FA,] [F3 section 169N,] paragraphs 4 and 5 below or paragraphs 4 and 5 of Schedule 5C;

(c) the investor makes a qualifying investment; and

(d) the investor is resident or ordinarily resident in the United Kingdom at the accrual time and the time when he makes the qualifying investment and is not, in relation to the qualifying investment, a person to whom sub-paragraph (4) below applies.

[F4 (2) The investor makes a qualifying investment for the purposes of this Schedule if—

(a) eligible shares in a company for which he has subscribed F5 ... are issued to him at a qualifying time and, where that time is before the accrual time, the shares are still held by the investor at the accrual time,

[F6 (aza) he subscribed for the shares (other than any of them which are bonus shares) wholly in cash,]

(b) the company is a qualifying company in relation to the shares,

(c) at the time when they are issued the shares [F7 (other than any of them which are bonus shares) are fully paid up],

(d) the shares are subscribed for, and issued, for bona fide commercial purposes and not as part of arrangements the main purpose or one of the main purposes of which is the avoidance of tax,

[F8 (da) the total amount of relevant investments made in the company in the year ending with the date the shares are issued does not exceed £2 million,]

(e) the requirements of section 289(1A) of the Taxes Act [F9 (read with section 289(1B) to (1E) of that Act)][F10 , or the requirements of section 183 of ITA 2007,] are satisfied in relation to the company,

(f) [F11 the shares (other than any of them which are bonus shares)] are issued in order to raise money for the purpose of a qualifying business activity, and

[F12 [F13 (g) at least 80 per cent. of the money raised by the issue of—

(i) the shares, and

(ii) all other eligible shares (if any) in the company of the same class which are issued on the same day,

is employed wholly for the purpose of that activity not later than the time mentioned in section 289(3) of the Taxes Act [F14 or section 175(3) of ITA 2007], and]

(h) all of the money so raised is employed wholly for that purpose not later than 12 months after that time,]

and for the purposes of this Schedule, the [F15 conditions in paragraphs (g) and (h) above do] not fail to be satisfied by reason only of the fact that an amount of money which is not significant is employed for another purpose.

(3) In sub-paragraph (2) above “a qualifying time”, in relation to any shares subscribed for by the investor, means—

(a) any time in the period beginning one year before and ending three years after the accrual time, or

(b) any such time before the beginning of that period or after it ends as the Board may by notice allow.]

(4) This sub-paragraph applies to the investor in relation to a qualifying investment if—

(a) though resident or ordinarily resident in the United Kingdom at the time when he makes the investment, he is regarded for the purposes of any double taxation relief arrangements as resident in a territory outside the United Kingdom, and

(b) were section 150A to be disregarded, the arrangements would have the effect that he would not be liable in the United Kingdom to tax on a gain arising on a disposal, immediately after their acquisition, of the shares acquired in making that investment.

[F16 (5) Shares are not fully paid up for the purposes of sub-paragraph (2)(c) above if there is any undertaking to pay cash to any person at a future date in respect of the acquisition of the shares.]

[F17 (6) Section 173A(3) and (4) of ITA 2007 (meaning of “relevant investment”) apply for the purposes of sub-paragraph (2)(da).

(7) In sub-paragraph (2)(da), the reference to relevant investments made in the company includes relevant investments made in a company that is, or has at any time in the year mentioned there been, a subsidiary of the company (whether or not it was such a subsidiary when the investment was made).]

Textual Amendments

F2 Words in Sch. 5B para. 1(1)(b) inserted (with effect in accordance with s. 74(3) of the amending Act) by Finance Act 1998 (c. 36), Sch. 13 para. 27(1)

F3 Words in Sch. 5B para. 1(1)(b) inserted (with effect in accordance with Sch. 3 para. 5 of the amending Act) by Finance Act 2008 (c. 9), Sch. 3 para. 4

F4 Sch. 5B para. 1(2)(3) substituted (with effect in accordance with s. 74(3) of the amending Act) by Finance Act 1998 (c. 36), Sch. 13 para. 27(2)

F5 Words in Sch. 5B para. 1(2)(a) repealed (with effect in accordance with Sch. 18 para. 21 of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 13(1)(a), Sch. 42 Pt. 2(13)

F6 Sch. 5B para. 1(2)(aza) inserted (with effect in accordance with Sch. 18 para. 21 of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 13(1)(b)

F7 Words in Sch. 5B para. 1(2)(c) substituted (with effect in accordance with Sch. 18 para. 21 of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 13(1)(c)

F8 Sch. 5B para. 1(2)(da) inserted (19.7.2007) by Finance Act 2007 (c. 11), Sch. 16 para. 7(2)(a)

F9 Words in Sch. 5B para. 1(2)(e) inserted (with effect in accordance with Sch. 18 para. 21 of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 13(1)(d)

F10 Words in Sch. 5B para. 1(2)(e) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(2)(a) (with Sch. 2)

F11 Words in Sch. 5B para. 1(2)(f) substituted (with effect in accordance with Sch. 18 para. 21 of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 13(1)(e)

F12 Sch. 5B para. 1(2)(g)(h) substituted for Sch. 5B para. 1(2)(g) (11.5.2001) by Finance Act 2001 (c. 9), Sch. 15 para. 26(a) (with Sch. 3)

F13 Sch. 5B para. 1(2)(g) substituted (with effect in accordance with Sch. 18 para. 21 of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 13(1)(f)

F14 Words in Sch. 5B para. 1(2)(g) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(2)(b) (with Sch. 2)

F15 Words in Sch. 5B para. 1(2) substituted (11.5.2001) by Finance Act 2001 (c. 9), Sch. 15 para. 26(b) (with Sch. 3)

F16 Sch. 5B para. 1(5) inserted (with effect in accordance with Sch. 18 para. 21 of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 13(2)

F17 Sch. 5B para. 1(6)(7) inserted (19.7.2007) by Finance Act 2007 (c. 11), Sch. 16 para. 7(2)(b)

[F18 Failure of conditions of application U.K.

Textual Amendments

F18 Sch. 5B para. 1A and cross-heading inserted (with effect in accordance with s. 74(3) of the amending Act) by Finance Act 1998 (c. 36), Sch. 13 para. 28

1A (1) If the condition in sub-paragraph (2)(b) [F19 or (2)(da)] of paragraph 1 above is not satisfied in consequence of an event occurring after the issue of eligible shares, the shares [F20 mentioned in sub-paragraph (2)(a) of that paragraph] shall be treated for the purposes of this Schedule as ceasing to be eligible shares on the date of the event. U.K.

(2) If the condition in sub-paragraph (2)(e) of that paragraph is not satisfied in consequence of an event occurring after the issue of eligible shares, the shares [F21 mentioned in sub-paragraph (2)(a) of that paragraph] shall be treated for the purposes of this Schedule as ceasing to be eligible shares on the date of the event.

(3) If the condition in sub-paragraph (2)(f) of that paragraph is not satisfied in relation to [F22 the shares mentioned in sub-paragraph (2)(a) of that paragraph,] the shares shall be treated for the purposes of this Schedule as never having been eligible shares.

(4) If the condition in sub-paragraph (2)(g) [F23 or (h)] of that paragraph is not satisfied in relation to [F24 the issue of eligible shares, the shares mentioned in sub-paragraph (2)(a) of that paragraph] shall be treated for the purposes of this Schedule—

(a) if the claim under this Schedule is made after the time mentioned in [F25 sub-paragraph (4A) below], as never having been eligible shares; and

(b) if that claim is made before that time, as ceasing to be eligible shares at that time.

[F26 (4A) The time referred to in sub-paragraph (4) above is—

(a) in a case relating to the condition in sub-paragraph (2)(g) of paragraph 1 above, the time mentioned in section 289(3) of the Taxes Act [F27 or section 175(3) of ITA 2007], and

(b) in a case relating to the condition in sub-paragraph (2)(h) of that paragraph, the time 12 months after that time.]

(5) None of the preceding sub-paragraphs applies unless—

(a) the company has given notice under paragraph 16(2) or (4) below[F28 , section 310(2) of the Taxes Act or section 241(3) of ITA 2007]; or

(b) an inspector has given notice to the company stating that, by reason of the matter mentioned in that sub-paragraph, the shares [F29 mentioned in paragraph 1(2)(a) above] should, in his opinion, be treated for the purposes of this Schedule as never having been or, as the case may be, as ceasing to be eligible shares.

(6) The giving of notice by an inspector under sub-paragraph (5) above shall be taken, for the purposes of the provisions of the Management Act relating to appeals against decisions on claims, to be a decision refusing a claim made by the company.

(7) Where any issue has been determined on an appeal brought by virtue of section 307(1B) of the Taxes Act [F30 or section 236(1) of ITA 2007] (appeal against notice that relief was not due), the determination shall be conclusive for the purposes of any appeal brought by virtue of sub-paragraph (6) above on which that issue arises.]

Textual Amendments

F19 Words in Sch. 5B para. 1A(1) inserted (19.7.2007) by Finance Act 2007 (c. 11), Sch. 16 para. 7(3)

F20 Words in Sch. 5B para. 1A(1) inserted (with effect in accordance with Sch. 18 para. 21 of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 14(a)

F21 Words in Sch. 5B para. 1A(2) inserted (with effect in accordance with Sch. 18 para. 21 of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 14(b)

F22 Words in Sch. 5B para. 1A(3) substituted (with effect in accordance with Sch. 18 para. 21 of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 14(c)

F23 Words in Sch. 5B para. 1A(4) inserted (11.5.2001) by Finance Act 2001 (c. 9), Sch. 15 para. 27(1)(a) (with Sch. 3)

F24 Words in Sch. 5B para. 1A(4) substituted (with effect in accordance with Sch. 18 para. 21 of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 14(d)

F25 Words in Sch. 5B para. 1A(4)(a) substituted (11.5.2001) by Finance Act 2001 (c. 9), Sch. 15 para. 27(1)(b) (with Sch. 3)

F26 Sch. 5B para. 1A(4A) inserted (11.5.2001) by Finance Act 2001 (c. 9), Sch. 15 para. 27(2) (with Sch. 3)

F27 Words in Sch. 5B para. 1A(4A)(a) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(3)(a) (with Sch. 2)

F28 Words in Sch. 5B para. 1A(5)(a) substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(3)(b) (with Sch. 2)

F29 Words in Sch. 5B para. 1A(5)(b) inserted (with effect in accordance with Sch. 18 para. 21 of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 14(e)

F30 Words in Sch. 5B para. 1A(7) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(3)(c) (with Sch. 2)

Postponement of original gain U.K.

2 (1) On the making of a claim by the investor for the purposes of this Schedule, so much of the investor’s unused qualifying expenditure on [F31 the relevant shares] as— U.K.

(a) is specified in the claim, and

(b) does not exceed so much of the original gain as is unmatched,

shall be set against a corresponding amount of the original gain.

(2) Where an amount of qualifying expenditure on [F32 the relevant shares] is set under this Schedule against the whole or part of the original gain—

(a) so much of that gain as is equal to that amount shall be treated as not having accrued at the accrual time; but

(b) paragraphs 4 and 5 below shall apply for determining the gain that is to be treated as accruing on the occurrence of any chargeable event in relation to any of [F33 the relevant shares].

(3) For the purposes of this Schedule—

[F34 (a) the investor’s qualifying expenditure on [F32 the relevant shares] is the amount subscribed by him for the shares; and]

(b) that expenditure is unused to the extent that it has not already been set under this Schedule against the whole or any part of a chargeable gain.

(4) For the purposes of this paragraph the original gain is unmatched, in relation to any qualifying expenditure on [F35 the relevant shares], to the extent that it has not had any other expenditure set against it under this Schedule F36 ... .

Textual Amendments

F31 Words in Sch. 5B para. 2(1) substituted (with effect in accordance with s. 73(2) of the amending Act) by Finance Act 1999 (c. 16), Sch. 8 para. 4(a)

F32 Words in Sch. 5B para. 2(2)(3) substituted (with effect in accordance with s. 73(2) of the amending Act) by Finance Act 1999 (c. 16), Sch. 8 para. 4(b)

F33 Words in Sch. 5B para. 2(2)(b) substituted (with effect in accordance with s. 73(2) of the amending Act) by Finance Act 1999 (c. 16), Sch. 8 para. 4(c)

F34 Sch. 5B para. 2(3)(a) substituted (with effect in accordance with s. 74(3) of the amending Act) by Finance Act 1998 (c. 36), Sch. 13 para. 29

F35 Words in Sch. 5B para. 2(4) substituted (with effect in accordance with s. 73(2) of the amending Act) by Finance Act 1999 (c. 16), Sch. 8 para. 4(a)

F36 Words in Sch. 5B para. 2(4) repealed (with effect in accordance with Sch. 19 para. 7 of the amending Act) by Finance Act 2004 (c. 12), Sch. 19 para. 6(2), Sch. 42 Pt. 2(13)

Chargeable events U.K.

3 (1) Subject to the following provisions of this paragraph, there is for the purposes of this Schedule a chargeable event in relation to [F37 any of the relevant shares] if, after the making of the qualifying investment— U.K.

(a) the investor disposes of those shares otherwise than by way of a disposal within marriage [F38 or civil partnership];

(b) those shares are disposed of, otherwise than by way of a disposal to the investor, by a person who acquired them on a disposal made by the investor within marriage [F38 or civil partnership];

(c) the investor becomes a non-resident while holding those shares and [F39 before the termination date relating to those shares];

(d) a person who acquired those shares on a disposal within marriage [F38 or civil partnership] becomes a non-resident while holding those shares and [F39 before the termination date relating to those shares]; [F40 or

(e) those shares cease (or are treated for the purposes of this Schedule as ceasing) to be eligible shares.]

F41 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) For the purposes of this Schedule there shall not be a chargeable event by virtue of sub-paragraph (1)(c) or (d) above in relation to any shares if—

(a) the reason why the person in question becomes a non-resident is that he works in an employment or office all the duties of which are performed outside the United Kingdom, and

(b) he again becomes resident or ordinarily resident in the United Kingdom within the period of three years from the time when he became a non-resident, without having meanwhile disposed of any of those shares;

and accordingly no assessment shall be made by virtue of sub-paragraph (1)(c) or (d) above before the end of that period in a case where the condition in paragraph (a) above is satisfied and the condition in paragraph (b) above may be satisfied.

(4) For the purposes of sub-paragraph (3) above a person shall be taken to have disposed of any shares if and only if there has been such a disposal as would have been a chargeable event in relation to those shares if the person making the disposal had been resident in the United Kingdom.

(5) Where in any case—

(a) the investor or a person who has acquired [F42 any of the relevant shares] on a disposal within marriage [F38 or civil partnership] dies, and

(b) an event occurs at or after the time of the death which (apart from this sub-paragraph) would be a chargeable event in relation to [F42 any of the relevant shares] held by the deceased immediately before his death,

that event shall not be a chargeable event in relation to the shares so held.

[F43 (6) Any reference in the following provisions of this Schedule to a chargeable event falling within a particular paragraph of sub-paragraph (1) above is a reference to a chargeable event arising for the purposes of this Schedule by virtue of that paragraph.]

Textual Amendments

F37 Words in Sch. 5B para. 3(1) substituted (with effect in accordance with s. 73(2) of the amending Act) by Finance Act 1999 (c. 16), Sch. 8 para. 4(d)

F38 Words in Sch. 5B para. 3 inserted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 127

F39 Words in Sch. 5B para. 3(1)(c)(d) substituted (11.5.2001) by Finance Act 2001 (c. 9), Sch. 15 para. 29 (with Sch. 3)

F40 Sch. 5B para. 3(1)(e) and preceding word substituted for Sch. 5B para. 3(1)(e)(f) (with effect in accordance with s. 74(3) of the amending Act) by Finance Act 1998 (c. 36), Sch. 13 para. 30(1)(b)

F41 Sch. 5B para. 3(2) repealed (with effect in accordance with s. 74(3) of the amending Act) by Finance Act 1998 (c. 36), Sch. 13 para. 30(2), Sch. 27 Pt. III(14)

F42 Words in Sch. 5B para. 3(5)(a)(b) substituted (with effect in accordance with s. 73(2) of the amending Act) by Finance Act 1999 (c. 16), Sch. 8 para. 4(d)

F43 Sch. 5B para. 3(6) inserted (with effect in accordance with s. 74(3) of the amending Act) by Finance Act 1998 (c. 36), Sch. 13 para. 30(3)

Gain accruing on chargeable event U.K.

4 (1) On the occurrence of a chargeable event in relation to [F44 any of the relevant shares] in relation to which there has not been a previous chargeable event— U.K.

(a) a chargeable gain shall be treated as accruing at the time of the event; and

[F45 (b) the amount of the gain shall be equal to so much of the deferred gain as is attributable to the shares in relation to which the chargeable event occurs.]

[F46 (2) Any question for the purposes of capital gains tax as to whether any shares to which a disposal (including a disposal within marriage [F47 or civil partnership]) relates are shares to which deferral relief is attributable shall be determined in accordance with sub-paragraphs (3) and (4) below.

(3) Where shares of any class in a company have been acquired by an individual on different days, any disposal by him of shares of that class shall be treated as relating to those acquired on an earlier day rather than to those acquired on a later day.

(4) Where shares of any class in a company have been acquired by an individual on the same day, any of those shares disposed of by him shall be treated as disposed of in the following order, namely—

(a) first any to which neither deferral relief nor relief under Chapter III of Part VII of the Taxes Act [F48 or Part 5 of ITA 2007] is attributable;

(b) next any to which deferral relief, but not relief under that Chapter [F48 or that Part], is attributable;

(c) next any to which relief under that Chapter [F48 or that Part], but not deferral relief, is attributable; and

(d) finally any to which both deferral relief and relief under that Chapter [F48 or that Part] are attributable.

(4A) The following, namely—

(a) any shares to which deferral relief, but not relief under Chapter III of Part VII of the Taxes Act [F49 or Part 5 of ITA 2007], is attributable and which were disposed of to an individual by a disposal within marriage [F47 or civil partnership], and

(b) any shares to which relief under that Chapter [F49 or that Part] is attributable and which were transferred to an individual as mentioned in section 304 of [F50 the Taxes Act or section 245 of ITA 2007],

shall be treated for the purposes of sub-paragraphs (3) and (4) above as acquired by him on the day on which they were issued.

(4B) Chapter I of Part IV of this Act has effect subject to sub-paragraphs (2) to (4A) above.

(4C) Sections 104, 105 and 106A shall not apply to shares to which deferral relief, but not relief under Chapter III of Part VII of the Taxes Act [F51 or Part 5 of ITA 2007], is attributable.]

(5) Where at the time of a chargeable event [F52 any of the relevant shares] are treated for the purposes of this Act as represented by assets which consist of or include assets other than those shares—

[F53 (a) so much of the deferred gain as is attributable to those shares shall be treated, in determining for the purposes of this paragraph the amount of the deferred gain to be treated as attributable to each of those assets, as apportioned in such manner as may be just and reasonable between those assets; and]

(b) as between different assets treated as representing [F54 the same shares], [F55 sub-paragraphs (3) to (4A) above] shall apply with the necessary modifications in relation to those assets as they would apply in relation to the shares.

[F56 (6) In order to determine, for the purposes of this paragraph, the amount of the deferred gain attributable to any shares, a proportionate part of the amount of the gain shall be attributed to each of the relevant shares held, immediately before the occurrence of the chargeable event in question, by the investor or a person who has acquired any of the relevant shares from the investor on a disposal within marriage [F47 or civil partnership].

(7) In this paragraph “the deferred gain” means—

(a) the amount of the original gain against which expenditure has been set under this Schedule, less

(b) the amount of any gain treated as accruing under this paragraph previously as a result of a disposal of any of the relevant shares.]

Textual Amendments

F44 Words in Sch. 5B para. 4(1) substituted (with effect in accordance with s. 73(2) of the amending Act) by Finance Act 1999 (c. 16), Sch. 8 para. 4(e)

F45 Sch. 5B para. 4(1)(b) substituted (with effect in accordance with s. 73(2) of the amending Act) by Finance Act 1999 (c. 16), Sch. 8 para. 2(1)

F46 Sch. 5B para. 4(2)-(4C) substituted for Sch. 5B para. 4(2)-(4) (with effect in accordance with Sch. 13 para. 31(3) of the amending Act) by Finance Act 1998 (c. 36), Sch. 13 para. 31(1)

F47 Words in Sch. 5B para. 4 inserted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 127

F48 Words in Sch. 5B para. 4(4) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(4)(a) (with Sch. 2)

F49 Words in Sch. 5B para. 4(4A) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(4)(b) (with Sch. 2)

F50 Words in Sch. 5B para. 4(4A)(b) substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(4)(b) (with Sch. 2)

F51 Words in Sch. 5B para. 4(4C) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(4)(c) (with Sch. 2)

F52 Words in Sch. 5B para. 4(5) substituted (with effect in accordance with s. 73(2) of the amending Act) by Finance Act 1999 (c. 16), Sch. 8 para. 4(e)

F53 Sch. 5B para. 4(5)(a) substituted (with effect in accordance with s. 73(2) of the amending Act) by Finance Act 1999 (c. 16), Sch. 8 para. 2(2)

F54 Words in Sch. 5B para. 4(5)(b) substituted (with effect in accordance with s. 73(2) of the amending Act) by Finance Act 1999 (c. 16), Sch. 8 para. 4(f)

F55 Words in Sch. 5B para. 4(5)(b) substituted (with effect in accordance with Sch. 13 para. 31(3) of the amending Act) by Finance Act 1998 (c. 36), Sch. 13 para. 31(2)

F56 Sch. 5B para. 4(6)(7) inserted (with effect in accordance with s. 73(2) of the amending Act) by Finance Act 1999 (c. 16), Sch. 8 para. 2(3)

Person to whom gain accrues U.K.

5 (1) The chargeable gain which accrues, in accordance with paragraph 4 above, on the occurrence in relation to [F57 any of the relevant shares] of a chargeable event shall be treated as accruing, as the case may be— U.K.

(a) to the person who makes the disposal,

(b) to the person who becomes a non-resident, [F58 or

(c) to the person who holds the shares in question when they cease (or are treated for the purposes of this Schedule as ceasing) to be eligible shares.]

(2) Where—

(a) sub-paragraph (1) above provides for the holding of shares at a particular time to be what identifies the person to whom any chargeable gain accrues, and

(b) at that time, some of those shares are held by the investor and others are held by a person to whom the investor has transferred them by a disposal within marriage [F59 or civil partnership],

the amount of the chargeable gain accruing by virtue of paragraph 4 above shall be computed separately in relation to the investor and that person without reference to the shares held by the other.

Textual Amendments

F57 Words in Sch. 5B para. 5(1) substituted (with effect in accordance with s. 73(2) of the amending Act) by Finance Act 1999 (c. 16), Sch. 8 para. 4(g)

F58 Sch. 5B para. 5(1)(c) and preceding word substituted for Sch. 5B para. 5(1)(c)(d) (with effect in accordance with s. 74(3) of the amending Act) by Finance Act 1998 (c. 36), Sch. 13 para. 32

F59 Words in Sch. 5B para. 5 inserted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 127

[F60 Claims U.K.

Textual Amendments

F60 Sch. 5B para. 6 and cross-heading substituted (with effect in accordance with s. 74(3) of the amending Act) by Finance Act 1998 (c. 36), Sch. 13 para. 33

6 (1) Subject to sub-paragraph (2) below, section 306 of the Taxes Act [F61 or sections 202(1), 203(1) and 204 to 207 of ITA 2007] shall apply in relation to a claim under this Schedule in respect of [F62 the relevant shares] as it applies in relation to a claim for relief under Chapter III of Part VII of [F63 the Taxes Act or Part 5 of ITA 2007 in respect of eligible or relevant shares]. U.K.

(2) [F64 Section 306], as it so applies, shall have effect as if—

(a) any reference to the conditions for the relief were a reference to the conditions for the application of this Schedule;

(b) in subsection (1), the words “(or treated by section 289B(5) as so issued)" were omitted; and

(c) subsections (7) to (9) were omitted.

[F65 (3) Sections 202(1), 203(1) and 204 to 207 of ITA 2007, as they so apply, shall have effect as if any reference to the requirements for the relief were a reference to the conditions for the application of this Schedule.]]

Textual Amendments

F61 Words in Sch. 5B para. 6(1) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(5)(a) (with Sch. 2)

F62 Words in Sch. 5B para. 6(1) substituted (with effect in accordance with s. 73(2) of the amending Act) by Finance Act 1999 (c. 16), Sch. 8 para. 4(h)

F63 Words in Sch. 5B para. 6(1) substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(5)(a) (with Sch. 2)

F64 Words in Sch. 5B para. 6(2) substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(5)(b) (with Sch. 2)

F65 Sch. 5B para. 6(3) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(5)(c) (with Sch. 2)

[F66 Reorganisations U.K.

Textual Amendments

F66 Sch. 5B paras. 7-9 and cross-headings inserted (with effect in accordance with s. 74(3) of the amending Act) by Finance Act 1998 (c. 36), Sch. 13 para. 34

7 (1) Where an individual holds shares which form part of the ordinary share capital of a company and include shares of more than one of the following kinds, namely— U.K.

(a) shares to which deferral relief and relief under Chapter III of Part VII of the Taxes Act [F67 or Part 5 of ITA 2007] are attributable,

(b) shares to which deferral relief but not relief under that Chapter [F68 or that Part] is attributable, and

(c) shares to which deferral relief is not attributable,

then, if there is within the meaning of section 126 a reorganisation affecting those shares, section 127 shall apply (subject to the following provisions of this paragraph) separately to shares falling within paragraph (a), (b) or (c) above (so that shares of each kind are treated as a separate holding of original shares and identified with a separate new holding).

(2) Where—

(a) an individual holds shares (“the existing holding") which form part of the ordinary share capital of a company,

(b) there is, by virtue of any such allotment for payment as is mentioned in section 126(2)(a), a reorganisation affecting the existing holding, and

(c) immediately following the reorganisation, the existing holding or the allotted shares are shares to which deferral relief is attributable,

sections 127 to 130 shall not apply in relation to the existing holding.

Textual Amendments

F67 Words in Sch. 5B para. 7(1)(a) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(6)(a) (with Sch. 2)

F68 Words in Sch. 5B para. 7(1)(b) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(6)(b) (with Sch. 2)

Acquisition of share capital by new company U.K.

8 (1) This paragraph applies where— U.K.

(a) a company (“the new company") in which the only issued shares are subscriber shares acquires all the shares (“old shares") in another company (“the old company");

(b) the consideration for the old shares consists wholly of the issue of shares (“new shares") in the new company;

(c) the consideration for new shares of each description consists wholly of old shares of the corresponding description;

(d) new shares of each description are issued to the holders of old shares of the corresponding description in respect of and in proportion to their holdings;

(e) at some time before the issue of the new shares—

(i) the old company issued eligible shares; and

(ii) a certificate in relation to those eligible shares was issued by that company for the purposes of [F69 section 306(2) of the Taxes Act or section 203(1) of ITA 2007] (as applied by paragraph 6 above) and in accordance with [F69 section 306 of the Taxes Act or sections 204 and 205 of ITA 2007] (as so applied); and

(f) by virtue of section 127 as applied by section 135(3), the exchange of shares is not treated as involving a disposal of the old shares or an acquisition of the new shares.

(2) For the purposes of this Schedule, deferral relief attributable to any old shares shall be attributable instead to the new shares for which they are exchanged.

(3) Where, in the case of any new shares held by an individual to which deferral relief becomes so attributable, the old shares for which they are exchanged were subscribed for by and issued to the individual, this Schedule shall have effect as if—

(a) the new shares had been subscribed for by him at the time when, and for the amount for which, the old shares were subscribed for by him;

(b) the new shares had been issued to him by the new company at the time when the old shares were issued to him by the old company; and

(c) the claim under this Schedule made in respect of the old shares had been made in respect of the new shares.

(4) Where, in the case of any new shares held by an individual to which deferral relief becomes so attributable, the old shares for which they are exchanged were acquired by the individual on a disposal within marriage [F70 or civil partnership], this Schedule shall have effect as if—

(a) the new shares had been subscribed for at the time when, and for the amount for which, the old shares were subscribed for;

(b) the new shares had been issued by the new company at the time when the old shares were issued by the old company; and

(c) the claim under this Schedule made in respect of the old shares had been made in respect of the new shares.

(5) Where deferral relief becomes so attributable to any new shares—

(a) this Schedule shall have effect as if anything which, under paragraph 1A(5) above, paragraph 16 below or section 306(2) of the Taxes Act [F71 or section 203(1) of ITA 2007] as applied by paragraph 6 above has been done, or is required to be done, by or in relation to the old company had been done, or were required to be done, by or in relation to the new company; and

(b) any appeal brought by the old company against a notice under paragraph 1A(5)(b) may be prosecuted by the new company as if it had been brought by that company.

(6) For the purposes of this paragraph old shares and new shares are of a corresponding description if, on the assumption that they were shares in the same company, they would be of the same class and carry the same rights; and in sub-paragraph (1) above references to shares, except in the expressions “eligible shares” and “subscriber shares”, include references to securities.

(7) Nothing in section 293(8) of the Taxes Act [F72 or section 185 of ITA 2007], as applied by the definition of “qualifying company" in paragraph 19(1) below, shall apply in relation to such an exchange of shares, or shares and securities, as is mentioned in sub-paragraph (1) above or arrangements with a view to such an exchange.

Textual Amendments

F69 Words in Sch. 5B para. 8(1)(e)(ii) substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(7)(a) (with Sch. 2)

F70 Words in Sch. 5B para. 8 inserted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 127

F71 Words in Sch. 5B para. 8(5)(a) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(7)(b) (with Sch. 2)

F72 Words in Sch. 5B para. 8(7) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(7)(c) (with Sch. 2)

Other reconstructions and amalgamations U.K.

9 (1) Subject to sub-paragraphs (2) and (3) below, sections 135 and 136 shall not apply in respect of shares to which deferral relief, but not relief under Chapter III of Part VII of the Taxes Act [F73 or Part 5 of ITA 2007], is attributable. U.K.

(2) Sub-paragraph (1) above shall not have effect to disapply section 135 or 136 where—

(a) the new holding consists of new ordinary shares (“the new shares") carrying no present or future preferential right to dividends or to a company’s assets on its winding up and no present or future right to be redeemed,

(b) the new shares are issued after the end of the relevant period, and

(c) the condition in sub-paragraph (4) below is satisfied.

(3) Sub-paragraph (1) above shall not have effect to disapply section 135 where shares to which deferral relief, but not relief under Chapter III of Part VII of the Taxes Act [F74 or Part 5 of ITA 2007], is attributable are exchanged for other shares in such circumstances as are mentioned in paragraph 8(1) above.

(4) The condition is that at some time before the issue of the new shares—

(a) the company issuing them issued eligible shares, and

(b) a certificate in relation to those eligible shares was issued by the company for the purposes of [F75 section 306(2) of the Taxes Act or section 203(1) of ITA 2007] (as applied by paragraph 6 above) and in accordance with [F75 section 306 of the Taxes Act or sections 204 and 205 of ITA 2007] (as so applied).

(5) In sub-paragraph (2) above “new holding” shall be construed in accordance with sections 126, 127, 135 and 136.]

Textual Amendments

F73 Words in Sch. 5B para. 9(1) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(8)(a) (with Sch. 2)

F74 Words in Sch. 5B para. 9(3) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(8)(b) (with Sch. 2)

F75 Words in Sch. 5B para. 9(4)(b) substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(8)(c) (with Sch. 2)

[F76 Re-investment in same company etc. U.K.

Textual Amendments

F76 Sch. 5B paras. 10-15 and cross-headings inserted (with effect in accordance with s. 74(3) of the amending Act) by Finance Act 1998 (c. 36), Sch. 13 para. 35

10 (1) An individual to whom any eligible shares in a qualifying company are issued shall not be regarded for the purposes of this Schedule as making a qualifying investment if, where the asset disposed of consisted of shares in or [F77 securities] of any company (“the initial holding"), the qualifying company— U.K.

(a) is the company in which the initial holding subsisted; or

(b) is a company that was, at the time of the disposal of the initial holding, or is, at the time of the issue of the eligible shares, a member of the same group of companies as the company in which the initial holding subsisted.

(2) Where—

(a) any eligible shares in a qualifying company (“the acquired holding") are issued to an individual,

(b) an amount of qualifying expenditure on those shares has been set under this Schedule against the whole or part of any chargeable gain (the “postponed gain"), and

(c) after the issue of those shares, eligible shares in a relevant company are issued to him,

he shall not be regarded in relation to the issue to him of the shares in the relevant company as making a qualifying investment for the purposes of this Schedule.

(3) For the purposes of sub-paragraph (2) above a company is a relevant company if—

(a) where that individual has disposed of any of the acquired holding, it is the company in which the acquired holding has subsisted or a company which was a member of the same group of companies as that company at any time since the acquisition of the acquired holding;

(b) it is a company in relation to the disposal of any shares in which there has been a claim under this Schedule such that, without that claim, there would have been no postponed gain in relation to the acquired holding; or

(c) it is a company which, at the time of the disposal or acquisition to which the claim relates, was a member of the same group of companies as a company falling within paragraph (b) above.

[F78 (4) In this paragraph “group of companies” means a company which has one or more 51 per cent. subsidiaries, together with those subsidiaries.]

Textual Amendments

F77 Word in Sch. 5B para. 10(1) substituted (with effect in accordance with Sch. 18 para. 15(2) of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 15(1)(a)

F78 Sch. 5B para. 10(4) inserted (with effect in accordance with Sch. 18 para. 15(2)(3) of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 15(1)(b)

Pre-arranged exits U.K.

11 (1) Where an individual subscribes for eligible shares (“the shares") in a company, the shares shall be treated as not being eligible shares for the purposes of this Schedule if the relevant arrangements include— U.K.

(a) arrangements with a view to the subsequent repurchase, exchange or other disposal of the shares or of other shares in or securities of the same company;

(b) arrangements for or with a view to the cessation of any trade which is being or is to be or may be carried on by the company or a person connected with the company;

(c) arrangements for the disposal of, or of a substantial amount of, the assets of the company or of a person connected with the company;

(d) arrangements the main purpose of which, or one of the main purposes of which, is (by means of any insurance, indemnity or guarantee or otherwise) to provide partial or complete protection for persons investing in shares in that company against what would otherwise be the risks attached to making the investment.

(2) The arrangements referred to in sub-paragraph (1)(a) above do not include any arrangements with a view to such an exchange of shares, or shares and securities, as is mentioned in paragraph 8(1) above.

(3) The arrangements referred to in sub-paragraph (1)(b) and (c) above do not include any arrangements applicable only on the winding up of a company except in a case where—

(a) the relevant arrangements include arrangements for the company to be wound up; or

(b) the company is wound up otherwise than for bona fide commercial reasons.

(4) The arrangements referred to in sub-paragraph (1)(d) above do not include any arrangements which are confined to the provision—

(a) for the company itself, or

(b) in the case of a company which is a parent company of a trading group, for the company itself, for the company itself and one or more of its subsidiaries or for one or more of its subsidiaries,

of any such protection against the risks arising in the course of carrying on its business as it might reasonably be expected so to provide in normal commercial circumstances.

(5) The reference in sub-paragraph (4) above to the parent company of a trading group

[F79 (a)] shall be construed in accordance with the provision contained for the purposes of section 293 of the Taxes Act in that section[F80 , or

(b) is a reference to a company that meets the trading requirement in section 181(2)(b) of ITA 2007.]

(6) In this paragraph “the relevant arrangements” means—

(a) the arrangements under which the shares are issued to the individual; and

(b) any arrangements made before the issue of the shares to him in relation to or in connection with that issue.

Textual Amendments

F79 Word in Sch. 5B para. 11(5) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(9)(a) (with Sch. 2)

F80 Sch. 5B para. 11(5)(b) and preceding word inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(9)(b) (with Sch. 2)

Put options and call options U.K.

12 (1) Sub-paragraph (2) below applies where an individual subscribes for eligible shares (“the shares") in a company and— U.K.

(a) an option, the exercise of which would bind the grantor to purchase such shares, is granted to the individual during the relevant period; or

(b) an option, the exercise of which would bind the individual to sell such shares, is granted by the individual during the relevant period.

(2) The shares to which the option relates shall be treated for the purposes of this Schedule—

(a) if the option is granted on or before the date of the issue of the shares, as never having been eligible shares; and

(b) if the option is granted after that date, as ceasing to be eligible shares on the date when the option is granted.

(3) The shares to which the option relates shall be taken to be those which, if—

(a) the option were exercised immediately after the grant, and

(b) any shares in the company acquired by the individual after the grant were disposed of immediately after being acquired,

would be treated for the purposes of this Schedule as disposed of in pursuance of the option.

(4) Nothing in this paragraph shall prejudice the operation of paragraph 11 above.

(5) An individual who acquires any eligible shares on a disposal within marriage [F81 or civil partnership] shall be treated for the purposes of this paragraph and paragraphs 13 to 15 below as if he subscribed for those shares.

Textual Amendments

F81 Words in Sch. 5B para. 12 inserted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 127

Value received by investor U.K.

13 (1) Where an individual who subscribes for eligible shares (“the shares") in a company receives any value [F82 (other than insignificant value)] from the company at any time in the [F83 period of restriction], the shares shall be treated as follows for the purposes of this Schedule— U.K.

(a) if the individual receives the value on or before the date of the issue of the shares, as never having been eligible shares; and

(b) if the individual receives the value after that date, as ceasing to be eligible shares on the date when the value is received.

[F84 (1A) This paragraph is subject to paragraph 13B below.

(1B) Where—

(a) the individual who subscribes for the shares receives value (“the relevant receipt”) from the company during the period of restriction,

(b) the individual has received from the company one or more receipts of insignificant value at a time or times—

(i) during that period, but

(ii) not later than the time of the relevant receipt, and

(c) the aggregate amount of the value of the receipts within paragraphs (a) and (b) above is not an amount of insignificant value,

the individual shall be treated for the purposes of this Schedule as if the relevant receipt had been a receipt of an amount of value equal to the aggregate amount.

For this purpose a receipt does not fall within paragraph (b) above if it has previously been aggregated under this sub-paragraph.]

(2) For the purposes of this paragraph an individual receives value from the company if the company—

(a) repays, redeems or repurchases any of its share capital or securities which belong to the individual or makes any payment to him for giving up his right to any of the company’s share capital or any security on its cancellation or extinguishment;

(b) repays, in pursuance of any arrangements for or in connection with the acquisition of the shares, any debt owed to the individual other than a debt which was incurred by the company—

(i) on or after the date [F85 of issue of the shares]; and

(ii) otherwise than in consideration of the extinguishment of a debt incurred before that date;

(c) makes to the individual any payment for giving up his right to any debt on its extinguishment;

(d) releases or waives any liability of the individual to the company or discharges, or undertakes to discharge, any liability of his to a third person;

(e) makes a loan or advance to the individual which has not been repaid in full before the issue of the shares;

(f) provides a benefit or facility for the individual;

(g) disposes of an asset to the individual for no consideration or for a consideration which is or the value of which is less than the market value of the asset;

(h) acquires an asset from the individual for a consideration which is or the value of which is more than the market value of the asset; or

(i) makes any payment to the individual other than a qualifying payment.

(3) For the purposes of sub-paragraph (2)(e) above there shall be treated as if it were a loan made by the company to the individual—

(a) the amount of any debt (other than an ordinary trade debt) incurred by the individual to the company; and

(b) the amount of any debt due from the individual to a third person which has been assigned to the company.

F86 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) For the purposes of this paragraph an individual also receives value from the company if any person who would, for the purposes of section 291 of the Taxes Act [F87 or Chapter 2 of Part 5 of ITA 2007], be treated as connected with the company—

(a) purchases any of its share capital or securities which belong to the individual; or

(b) makes any payment to him for giving up any right in relation to any of the company’s share capital or securities.

(6) Where an individual’s disposal of shares in a company gives rise to a chargeable event falling within paragraph 3(1)(a) or (b) above, the individual shall not be treated for the purposes of this paragraph as receiving value from the company in respect of the disposal.

(7) In this paragraph “qualifying payment” means—

(a) the payment by any company of such remuneration for service as an officer or employee of that company as may be reasonable in relation to the duties of that office or employment;

(b) any payment or reimbursement by any company of travelling or other expenses wholly, exclusively and necessarily incurred by the individual to whom the payment is made in the performance of duties as an officer or emplyee of that company;

(c) the payment by any company of any interest which represents no more than a reasonable commercial return on money lent to that company;

(d) the payment by any company of any dividend or other distribution which does not exceed a normal return on any investment in shares in or other securities of that company;

(e) any payment for the supply of goods which does not exceed their market value;

(f) any payment for the acquisition of an asset which does not exceed its market value;

(g) the payment by any company, as rent for any property occupied by the company, of an amount not exceeding a reasonable and commercial rent for the property;

(h) any reasonable and necessary remuneration which—

(i) is paid by any company for services rendered to that company in the course of a trade or profession [F88 carried on wholly or partly in the United Kingdom]; and

(ii) is taken into account [F89 in calculating for tax purposes the profits of that trade or profession];

(i) a payment in discharge of an ordinary trade debt.

(8) For the purposes of this paragraph a company shall be treated as having released or waived a liability if the liability is not discharged within 12 months of the time when it ought to have been discharged.

(9) In this paragraph—

(a) references to a debt or liability do not, in relation to a company, include references to any debt or liability which would be discharged by the making by that company of a qualifying payment; and

(b) references to a benefit or facility do not include references to any benefit or facility provided in circumstances such that, if a payment had been made of an amount equal to its value, that payment would be a qualifying payment.

(10) In this paragraph [F90 and paragraph 13A(1) below]—

(a) any reference to a payment or disposal to an individual includes a reference to a payment or disposal made to him indirectly or to his order or for his benefit;

(b) any reference to an individual includes a reference to an associate of his; and

(c) any reference to a company includes a reference to a person who at any time in the relevant period is connected with the company, whether or not he is so connected at the material time.

(11) In this paragraph “ordinary trade debt” means any debt for goods or services supplied in the ordinary course of a trade or business where any credit given—

(a) does not exceed six months; and

(b) is not longer than that normally given to customers of the person carrying on the trade or business.

[F91 (12) In paragraphs 13A to 13C below (except paragraph 13C(4))—

(a) references to “the shares” shall be construed in accordance with sub-paragraph (1) above, and

(b) references to “the period of restriction” shall be construed as references to the period of restriction relating to the shares.]

Textual Amendments

F82 Words in Sch. 5B para. 13(1) inserted (11.5.2001) by Finance Act 2001 (c. 9), Sch. 15 para. 30(1) (with Sch. 3)

F83 Words in Sch. 5B para. 13(1) substituted (11.5.2001) by Finance Act 2001 (c. 9), Sch. 15 para. 30(2) (with Sch. 3)

F84 Sch. 5B para. 13(1A)(1B) inserted (11.5.2001) by Finance Act 2001 (c. 9), Sch. 15 para. 30(3) (with Sch. 3)

F85 Words in Sch. 5B para. 13(2)(b)(i) substituted (with effect in accordance with Sch. 18 para. 16(2)(3) of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 16(1)

F86 Sch. 5B para. 13(4) repealed (with effect in accordance with Sch. 33 Pt. 2(3) Note 6 of the amending Act) by Finance Act 2001 (c. 9), Sch. 15 para. 30(4), Sch. 33 Pt. 2(3) (with Sch. 3)

F87 Words in Sch. 5B para. 13(5) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(10) (with Sch. 2)

F88 Words in Sch. 5B para. 13(7)(b)(i) inserted (with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 450(a) (with Sch. 2)

F89 Words in Sch. 5B para. 13(7)(b)(ii) substituted (with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 450(b) (with Sch. 2)

F90 Words in Sch. 5B para. 13(10) inserted (11.5.2001) by Finance Act 2001 (c. 9), Sch. 15 para. 30(5) (with Sch. 3)

F91 Sch. 5B para. 13(12) inserted (11.5.2001) by Finance Act 2001 (c. 9), Sch. 15 para. 30(6) (with Sch. 3)

[F92 Provision supplemental to paragraph 13 U.K.

Textual Amendments

F92 Sch. 5B paras. 13A-13C and cross-headings inserted (11.5.2001) by Finance Act 2001 (c. 9), Sch. 15 para. 31 (with Sch. 3)

13A (1) For the purposes of paragraph 13 above, the value received by the individual in question is— U.K.

(a) in a case within sub-paragraph (2)(a), (b) or (c) of that paragraph, the amount received by the individual or, if greater, the market value of the share capital, securities or debt in question;

(b) in a case within sub-paragraph (2)(d) of that paragraph, the amount of the liability;

(c) in a case within sub-paragraph (2)(e) of that paragraph, the amount of the loan or advance reduced by the amount of any repayment made before the issue of the shares;

(d) in a case within sub-paragraph (2)(f) of that paragraph, the cost to the company of providing the benefit or facility less any consideration given for it by the individual;

(e) in a case within sub-paragraph (2)(g) or (h) of that paragraph, the difference between the market value of the asset and the consideration (if any) given for it;

(f) in a case within sub-paragraph (2)(i) of that paragraph, the amount of the payment;

(g) in a case within sub-paragraph (5) of that paragraph, the amount received by the individual or, if greater, the market value of the share capital or securities in question.

(2) In this paragraph and paragraph 13 above references to a receipt of insignificant value (however expressed) are references to a receipt of an amount of insignificant value.

This is subject to sub-paragraph (4) below.

(3) For the purposes of this paragraph and paragraph 13 above “an amount of insignificant value” means an amount of value which—

(a) does not exceed £1,000, or

(b) if it exceeds that amount, is insignificant in relation to the total amount of expenditure on the shares which is set under this Schedule against a corresponding total amount of the whole or any part of any chargeable gains.

(4) For the purposes of paragraph 13 above, if, at any time in the period—

(a) beginning one year before the shares are issued, and

(b) expiring at the end of the issue date,

arrangements are in existence which provide for the individual who subscribes for the shares to receive or to be entitled to receive, at any time in the period of restriction, any value from the company that issued the shares, no amount of value received by the individual shall be treated as a receipt of insignificant value.

(5) In sub-paragraph (4) above—

(a) any reference to the individual includes a reference to any person who, at any time in the period of restriction, is an associate of his (whether or not he is such an associate at the material time), and

(b) the reference to the company includes a reference to any person who, at any time in the period of restriction, is connected with the company (whether or not that person is so connected at the material time).

Receipt of replacement value U.K.

13B (1) Where— U.K.

(a) by reason of a receipt of value within sub-paragraph (2) (other than paragraph (b)) or sub-paragraph (5) of paragraph 13 above (“the original value”), the shares would, in the absence of this paragraph, be treated as never having been eligible shares or as ceasing to be eligible shares on the date when the value is received,

(b) the original supplier receives value (“the replacement value”) from the original recipient by reason of a qualifying receipt, and

(c) the amount of the replacement value is not less than the amount of the original value,

the receipt of the original value shall be disregarded for the purposes of paragraph 13 above.

(2) This paragraph is subject to paragraph 13C below.

(3) For the purposes of this paragraph and paragraph 13C below—

• “the original recipient” means the person who receives the original value, and

• “the original supplier” means the person from whom that value was received.

(4) A receipt of the replacement value is a qualifying receipt for the purposes of sub-paragraph (1) above if it arises—

(a) by reason of the original recipient doing one or more of the following—

(i) making a payment to the original supplier, other than a payment which falls within paragraph (c) below or to which sub-paragraph (5) below applies;

(ii) acquiring any asset from the original supplier for a consideration the amount or value of which is more than the market value of the asset;

(iii) disposing of any asset to the original supplier for no consideration or for a consideration the amount or value of which is less than the market value of the asset;

(b) where the receipt of the original value was within paragraph 13(2)(d) above, by reason of an event the effect of which is to reverse the event which constituted the receipt of the original value; or

(c) where the receipt of the original value was within paragraph 13(5) above, by reason of the original recipient repurchasing the share capital or securities in question, or (as the case may be) reacquiring the right in question, for a consideration the amount or value of which is not less than the amount of the original value.

(5) This sub-paragraph applies to—

(a) any payment for any goods, services or facilities, provided (whether in the course of a trade or otherwise) by—

(i) the original supplier, or

(ii) any other person who, at any time in the period of restriction, is an associate of, or connected with, that supplier (whether or not that person is such an associate, or so connected, at the material time),

which is reasonable in relation to the market value of those goods, services or facilities;

(b) any payment of any interest which represents no more than a reasonable commercial return on money lent to—

(i) the original recipient, or

(ii) any person who, at any time in the period of restriction, is an associate of his (whether or not he is such an associate at the material time);

(c) any payment for the acquisition of an asset which does not exceed its market value;

(d) any payment, as rent for any property occupied by—

(i) the original recipient, or

(ii) any person who, at any time in the period of restriction, is an associate of his (whether or not he is such an associate at the material time),

of an amount not exceeding a reasonable and commercial rent for the property;

(e) any payment in discharge of an ordinary trade debt (within the meaning of paragraph 13(11) above); and

(f) any payment for shares in or securities of any company in circumstances that do not fall within sub-paragraph (4)(a)(ii) above.

(6) For the purposes of this paragraph, the amount of the replacement value is—

(a) in a case within paragraph (a) of sub-paragraph (4) above, the aggregate of—

(i) the amount of any payment within sub-paragraph (i) of that paragraph, and

(ii) the difference between the market value of any asset within sub-paragraph (ii) or (iii) of that paragraph and the amount or value of the consideration (if any) received for it,

(b) in a case within sub-paragraph (4)(b) above, the same as the amount of the original value, and

(c) in a case within sub-paragraph (4)(c) above, the amount or value of the consideration received by the original supplier,

and paragraph 13A(1) above applies for the purposes of determining the amount of the original value.

(7) In this paragraph any reference to a payment to a person (however expressed) includes a reference to a payment made to him indirectly or to his order or for his benefit.

Provision supplemental to paragraph 13B U.K.

13C (1) The receipt of the replacement value by the original supplier shall be disregarded for the purposes of paragraph 13B above, as it applies in relation to the shares, to the extent to which that receipt has previously been set (under that paragraph) against any receipts of value which are, in consequence, disregarded for the purposes of paragraph 13 above as that paragraph applies in relation to those shares or any other shares subscribed for by the individual in question (“the individual”). U.K.

(2) The receipt of the replacement value by the original supplier (“the event”) shall also be disregarded for the purposes of paragraph 13B above if—

(a) the event occurs before the start of the period of restriction, or

(b) in a case where the event occurs after the time the original recipient receives the original value, it does not occur as soon after that time as is reasonably practicable in the circumstances, or

(c) where an appeal has been brought by the individual against an assessment made by virtue of paragraph 3(1)(e) above by reason of that receipt, the event occurs more than 60 days after the appeal has been finally determined.

But nothing in paragraph 13B above or this paragraph requires the replacement value to be received after the original value.

(3) [F93 This sub-paragraph] applies where—

(a) the receipt of the replacement value by the original supplier is a qualifying receipt for the purposes of paragraph 13B(1) above, and

(b) the event which gives rise to the receipt is (or includes) a subscription for shares by—

(i) the individual, or

(ii) any person who, at any time in the period of restriction, is an associate of the individual, whether or not he is such an associate at the material time.

(4) Where this sub-paragraph applies, the person who subscribes for the shares shall not—

(a) be eligible for any relief under Chapter 3 of Part 7 of the Taxes Act (enterprise investment scheme: income tax relief) in relation to those shares or any other shares in the same issue, or

(b) by virtue of his subscription for those shares or any other shares in the same issue, be treated as making a qualifying investment for the purposes of this Schedule.

[F94 (4) Where either of the following applies—

(a) sub-paragraph (3) above, and

(b) section 223(3) of ITA 2007 (which makes corresponding provision in relation to EIS relief under Part 5 of that Act),

the person who subscribes for the shares shall not by virtue of his subscription for those shares or any other shares in the same issue be treated as making a qualifying investment for the purposes of this Schedule.]

(5) In this paragraph “the original value” and “the replacement value” shall be construed in accordance with paragraph 13B above.]

Textual Amendments

F93 Words in Sch. 5B para. 13C(3) substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(11)(a) (with Sch. 2)

F94 Sch. 5B para. 13C(4) substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(11)(b) (with Sch. 2)

Value received by other persons U.K.

14 (1) Sub-paragraph (2) below applies where an individual subscribes for eligible shares (“the shares") in a company and at any time in the [F95 period of restriction] the company or any subsidiary— U.K.

(a) repays, redeems or repurchases any of its share capital which belongs to any member other than the individual or [F96 a person] falling within sub-paragraph (3) below, or

(b) makes any payment (directly or indirectly) to any such member, or to his order or for his benefit, for the giving up of his right to any of the share capital of the company or subsidiary on its cancellation or extinguishment.

[F97 This is subject to [F98 paragraphs 14AA and 14A] below.]

(2) The shares shall be treated for the purposes of this Schedule—

(a) if the repayment, redemption, repurchase or payment in question is made or effected on or before the date of the issue of the shares, as never having been eligible shares; and

(b) if it is made or effected after that date, as ceasing to be eligible shares on the date when it is made or effected.

(3) [F99 A person] falls within this sub-paragraph if the repayment, redemption, repurchase or payment in question—

(a) gives rise to a qualifying chargeable event in respect of him, or

(b) causes any relief under Chapter III of Part VII of the Taxes Act [F100 or Part 5 of ITA 2007] attributable to his shares in the company to be withdrawn or reduced by virtue of section 299 or 300(2)(a) of [F101 the Taxes Act or section 209 or 216(2)(a) of ITA 2007], [F102 or

(c) causes any investment relief [F103 attributable to shares held by that person] (within the meaning of Schedule 15 to the Finance Act 2000) to be withdrawn or reduced by virtue of paragraph 46 (disposal of shares) or 49(1)(a) (repayment etc. of share capital or securities) of that Schedule]

[F104 or it would have the effect mentioned in paragraph (a), (b) or (c) above were it not a receipt of insignificant value for the purposes of paragraph 13 above, section 300 of the Taxes Act [F105 or 214 of ITA 2007] or paragraph 47 of Schedule 15 to the Finance Act 2000, as the case may be].

(4) In sub-paragraph (3) above “qualifying chargeable event” means—

(a) a chargeable event falling within paragraph 3(1)(a) or (b) above; or

(b) a chargeable event falling within paragraph 3(1)(e) above by virtue of sub-paragraph (1)(b) of paragraph 13 above (as it applies by virtue of sub-paragraph (2)(a) of that paragraph).

(5) Where—

(a) a company issues share capital (“the original shares") of nominal value equal to the authorised minimum [F106 (within the meaning of the Companies Act 2006) for the purposes of complying with the requirements of section 761 of that Act (public company: requirement as to minimum share capital);] and

(b) after the registrar of companies has issued the company with a certificate under [F107 section 761], it issues eligible shares,

the preceding provisions of this paragraph shall not apply in relation to any redemption of any of the original shares within 12 months of the date on which those shares were issued.

F108 (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) References in this paragraph [F109 and [F110 paragraphs 14AA and 14A] below] to a subsidiary of a company are references to a company which at any time in the relevant period is a 51 per cent. subsidiary of the first mentioned company, whether or not it is such a subsidiary at the time of the repayment, redemption, repurchase or payment in question.

Textual Amendments

F95 Words in Sch. 5B para. 14(1) substituted (11.5.2001) by Finance Act 2001 (c. 9), Sch. 15 para. 32(1)(a) (with Sch. 3)

F96 Words in Sch. 5B para. 14(1)(a) substituted (with effect in accordance with s. 63(4) of the amending Act) by Finance Act 2000 (c. 17), Sch. 16 para. 4(2)(a)

F97 Words in Sch. 5B para. 14(1) inserted (with effect in accordance with s. 63(4) of the amending Act) by Finance Act 2000 (c. 17), Sch. 16 para. 4(2)(b)

F98 Words in Sch. 5B para. 14(1) substituted (11.5.2001) by Finance Act 2001 (c. 9), Sch. 15 para. 32(1)(b) (with Sch. 3)

F99 Words in Sch. 5B para. 14(3) substituted (with effect in accordance with s. 63(4) of the amending Act) by Finance Act 2000 (c. 17), Sch. 16 para. 4(2)(c)

F100 Words in Sch. 5B para. 14(3)(b) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(12)(a) (with Sch. 2)

F101 Words in Sch. 5B para. 14(3)(b) substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(12)(b) (with Sch. 2)

F102 Sch. 5B para. 14(3)(c) and preceding word inserted (with effect in accordance with s. 63(4) of the amending Act) by Finance Act 2000 (c. 17), Sch. 16 para. 4(2)(d)

F103 Words in Sch. 5B para. 14(3)(c) inserted (11.5.2001) by Finance Act 2001 (c. 9), Sch. 15 para. 32(2)(a) (with Sch. 3)

F104 Words in Sch. 5B para. 14(3) inserted (11.5.2001) by Finance Act 2001 (c. 9), Sch. 15 para. 32(2)(b) (with Sch. 3)

F105 Words in Sch. 5B para. 14(3) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(12)(c) (with Sch. 2)

F106 Words in Sch. 5B para. 14(5)(a) substituted (6.4.2008) by The Companies Act 2006 (Consequential Amendments) (Taxes and National Insurance) Order 2008 (S.I. 2008/954), arts. 1(1), 18(2)(a) (with art. 4)

F107 Words in Sch. 5B para. 14(5)(b) substituted (6.4.2008) by The Companies Act 2006 (Consequential Amendments) (Taxes and National Insurance) Order 2008 (S.I. 2008/954), arts. 1(1), 18(2)(b) (with art. 4)

F108 Sch. 5B para. 14(6) repealed (6.4.2008) by The Companies Act 2006 (Consequential Amendments) (Taxes and National Insurance) Order 2008 (S.I. 2008/954), arts. 1(1), 18(3), Sch. (with art. 4)

F109 Words in Sch. 5B para. 14(7) inserted (11.5.2001) by Finance Act 2001 (c. 9), Sch. 15 para. 32(3) (with Sch. 3)

F110 Words in Sch. 5B para. 14(7) substituted (with effect in accordance with Sch. 18 para. 17(2) of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 17(1)

[F111 Insignificant repayments disregarded for purposes of paragraph 14 U.K.

Textual Amendments

F111 Sch. 5B para. 14AA and cross-heading inserted (11.5.2001) by Finance Act 2001 (c. 9), Sch. 15 para. 33 (with Sch. 3)

14AA (1) Any repayment shall be disregarded for the purposes of paragraph 14 above if whichever is the greater of— U.K.

(a) the market value of the shares to which it relates (“the target shares”) immediately before the event occurs, and

(b) the amount received by the member in question,

is insignificant in relation to the market value of the remaining issued share capital of the company in question (or, as the case may be, subsidiary in question) immediately after the event occurs.

This is subject to sub-paragraph (4) below.

(2) For the purposes of this paragraph “repayment” means a repayment, redemption, repurchase or payment mentioned in paragraph 14(1) above.

(3) For the purposes of sub-paragraph (1) above it shall be assumed that the target shares are cancelled at the time the repayment is made.

(4) Where an individual subscribes for eligible shares in a company, sub-paragraph (1) above does not apply to prevent paragraph 14(2) above having effect in relation to the shares if, at a relevant time, arrangements are in existence that provide—

(a) for a repayment by the company or any subsidiary of the company (whether or not it is such a subsidiary at the time the arrangements are made), or

(b) for anyone to be entitled to such a repayment,

at any time in the period of restriction.

(5) For the purposes of sub-paragraph (4) above “a relevant time” means any time in the period—

(a) beginning one year before the eligible shares were issued, and

(b) expiring at the end of the issue date.]

[F112 Certain receipts to be disregarded for purposes of paragraph 14 U.K.

Textual Amendments

F112 Sch. 5B para. 14A and cross-heading inserted (with effect in accordance with s. 63(4) of the amending Act) by Finance Act 2000 (c. 17), Sch. 16 para. 4(3)

14A (1) Sub-paragraph (4) below applies where, by reason of a repayment, any investment relief which is attributable under Schedule 15 to the Finance Act 2000 to any shares is withdrawn under paragraph 56(2) of that Schedule. U.K.

[F113 (2) For the purposes of this paragraph “repayment” has the meaning given in paragraph 14AA(2) above.]

(3) For the purposes of sub-paragraph (4) below “the relevant amount” is the amount determined by the formula—

Where—

X is the amount of the repayment, and

Y is the aggregate amount of the investment relief withdrawn by reason of the repayment.

(4) Where the relevant amount does not exceed £1,000, the repayment shall be disregarded for the purposes of paragraph 14 above, unless repayment arrangements are in existence at any time in the period—

(a) beginning one year before the shares mentioned in sub-paragraph (1) above are issued, and

(b) expiring at the end of the issue date of those shares.

(5) For this purpose “repayment arrangements” means arrangements which provide—

(a) for a repayment by the company that issued the shares (“the issuing company”) or any subsidiary of that company, or

(b) for anyone to be entitled to such a repayment,

at any time.

(6) Sub-paragraph (5)(a) above applies in relation to a subsidiary of the issuing company whether or not it was such a subsidiary—

F114 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) when the arrangements were made.

F115 (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8) In this paragraph—

(a) “investment relief” has the same meaning as in [F116 Schedule 15 to the Finance Act 2000 (corporate venturing scheme)]; and

(b) references to the withdrawal of investment relief include its reduction.]

Textual Amendments

F113 Sch. 5B para. 14A(2) substituted (11.5.2001) by Finance Act 2001 (c. 9), Sch. 15 para. 34(a) (with Sch. 3)

F114 Sch. 5B para. 14A(6)(a) repealed (with effect in accordance with Sch. 18 para. 18(2) to the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 18(1), Sch. 42 Pt. 2(13)

F115 Sch. 5B para. 14A(7) repealed (with effect in accordance with Sch. 33 Pt. 2(3) Note 6 to the amending Act) by Finance Act 2001 (c. 9), Sch. 15 para. 34(b), Sch. 33 Pt. 2(3) (with Sch. 3)

F116 Words in Sch. 5B para. 14A(8)(a) substituted (11.5.2001) by Finance Act 2001 (c. 9), Sch. 15 para. 34(c) (with Sch. 3)

Investment-linked loans U.K.

15 (1) Where at any time in the relevant period an investment-linked loan is made by any person to an individual who subscribes for eligible shares (“the shares") in a company, the shares shall be treated for the purposes of this Schedule— U.K.

(a) if the loan is made on or before the date of the issue of the shares, as never having been eligible shares; and

(b) if the loan is made after that date, as ceasing to be eligible shares on the date when the loan is made.

(2) A loan made by any person to an individual is an investment-linked loan for the purposes of this paragraph if the loan is one which would not have been made, or would not have been made on the same terms, if the individual had not subscribed for the shares or had not been proposing to do so.

(3) References in this paragraph to the making by any person of a loan to an individual include references—

(a) to the giving by that person of any credit to that individual; and

(b) to the assignment or assignation to that person of any debt due from that individual.

(4) In this paragraph any reference to an individual includes a reference to an associate of his.]

[F117 Information U.K.

Textual Amendments

F117 Sch. 5B paras. 16-19 and cross-headings inserted (with effect in accordance with s. 74(3) of the amending Act) by Finance Act 1998 (c. 36), Sch. 13 para. 36

16 (1) Where, in relation to [F118 any of the relevant shares] held by an individual— U.K.

(a) a chargeable event falling within paragraph 3(1)(a) or (b) above occurs at any time [F119 before the termination date relating to those shares],

(b) a chargeable event falling within paragraph 3(1)(c) or (d) above occurs, or

(c) a chargeable event falling within paragraph 3(1)(e) above occurs by virtue of paragraph 12(2)(b), 13(1)(b) or 15(1)(b) above,

the individual shall within 60 days of his coming to know of the event give a notice to the inspector containing particulars of the circumstances giving rise to the event.

(2) Where, in relation to [F118 any of the relevant shares] in a company, a chargeable event falling within paragraph 3(1)(e) above occurs by virtue of paragraph 1A(1) or (2), 13(1)(b) or 14(2)(b) above—

(a) the company, and

(b) any person connected with the company who has knowledge of that matter,

shall within 60 days of the event or, in the case of a person within paragraph (b) above, of his coming to know of it, give a notice to the inspector containing particulars of the circumstances giving rise to the event.

[F120 (2A) In determining, for the purposes of sub-paragraph (1) or (2) above, whether a chargeable event falling within paragraph 3(1)(e) above has occurred by virtue of paragraph 13(1)(b) above, the effect of paragraph 13B above shall be disregarded.]

(3) A chargeable event falling within paragraph 3(1)(e) above which, but for paragraph 1A(5) above, would occur at any time by virtue of paragraph 1A(1) or (2) above shall be treated for the purposes of sub-paragraph (2) above as occurring at that time.

[F121 (3A) Where—

(a) a person is required to give a notice under sub-paragraph (1) or (2) above in respect of a chargeable event which occurs by virtue of paragraph 13(1)(b) above or would occur by virtue of that paragraph but for the operation of paragraph 13B above, and

(b) that person has knowledge of the replacement value received (or expected to be received) from the original recipient by the original supplier by reason of a qualifying receipt,

the notice shall include particulars of that receipt of the replacement value (or expected receipt).

In this sub-paragraph “the replacement value”, “the original recipient”, “the original supplier” and “qualifying receipt” shall be construed in accordance with paragraph 13B above.]

(4) Where a company has issued a certificate under section 306(2) of the Taxes Act [F122 or section 203(1) of ITA 2007] (as applied by paragraph 6 above) in respect of any eligible shares in the company, and the condition in paragraph 1(2)(g) above is not satisfied in relation to the shares—

(a) the company, and

(b) any person connected with the company who has knowledge of that matter,

shall within 60 days of the time mentioned in section 289(3) of the Taxes Act [F123 or section 175(3) of ITA 2007] or, in the case of a person within paragraph (b) above, of his coming to know that the condition is not satisfied, give notice to the inspector setting out the particulars of the case.

[F124 (4A) Sub-paragraph (4) above shall apply in relation to the condition in paragraph 1(2)(h) above as it applies in relation to the condition in paragraph 1(2)(g) above, except that the reference to the time mentioned in section 289(3) of the Taxes Act [F125 or section 175(3) of ITA 2007] shall be read as a reference to the time 12 months after that time.]

(5) [F126 If the inspector has reason to believe—

(a) that a person has not given a notice which he is required to give—

(i) under sub-paragraph (1) or (2) above in respect of any chargeable event, or

(ii) under sub-paragraph (4) above in respect of any particular case, or

(b) that a person has given or received value (within the meaning of paragraph 13(2) or (5) above) which, but for the fact that the amount given or received was an amount of insignificant value (within the meaning of paragraph 13A(3) above), would have triggered a requirement to give a notice under sub-paragraph (1) or (2) above, or

(c) that a person has made or received any repayment (within the meaning of paragraph 14AA(2) above) which, but for the fact that it falls to be disregarded for the purposes of paragraph 14 above by virtue of paragraph 14AA(1) above, would have triggered a requirement to give a notice under sub-paragraph (2) above,]

the inspector may by notice require that person to furnish him within such time (not being less than 60 days) as may be specified in the notice with such information relating to the event or case as the inspector may reasonably require for the purposes of this Schedule.

(6) Where a claim is made under this Schedule in respect of shares in a company and the inspector has reason to believe that it may not be well founded by reason of any such arrangements as are mentioned in paragraphs 1(2)(d) or 11(1) above, or section [F127 289(1D) or (9)(e), 289A(8)(b) or (8A), 293(4B), (6) or (8) or 308(2)(e), (3), (3A) or (4)] of the Taxes Act [F128 or section 176(4)(b) or (5)(b), 182(2) or (4), 183(6), 185(1), 190(1)(e) or 191(2)(c), (3), (4) or (5) of ITA 2007], he may by notice require any person concerned to furnish him within such time (not being less than 60 days) as may be specified in the notice with—

(a) a declaration in writing stating whether or not, according to the information which that person has or can reasonably obtain, any such arrangements exist or have existed;

(b) such other information as the inspector may reasonably require for the purposes of the provision in question and as that person has or can reasonably obtain.

(7) For the purposes of sub-paragraph (6) above, the persons who are persons concerned are—

(a) in relation to paragraph 1(2)(d) above [F129 or section 293(4B) or (6) of the Taxes Act] [F130 or section 182(2) or (4) of ITA 2007], the claimant, the company and any person controlling the company;

[F131 (aa) in relation to section 289(1D), 289A(8)(b) or (8A) or 308(3), (3A) or (4) of the Taxes Act [F132 or section 176(4)(b) or (5)(b), 183(6) or 191(3), (4) or (5) of ITA 2007], the claimant, the company, any other company in question and any person controlling the company or any other company in question;]

(b) in relation to paragraph 11(1) above, the claimant, the company and any person connected with the company; and

(c) in relation to section [F133 289(9)(e),] 293(8) or 308(2)(e) of the Taxes Act [F134 or section 185(1), 190(1)(e) or 191(2)(c) of ITA 2007], the company and any person controlling the company;

and for those purposes the references in paragraphs [F135 (a), (aa)] and (b) above to the claimant include references to any person to whom the claimant appears to have made a disposal within marriage [F136 or civil partnership] of any of the shares in question.

[F137 (7A) The references in sub-paragraphs (6) and (7) above to subsections (3), (3A) and (4) of section 308 of the Taxes Act [F138 and subsections (3), (4) and (5) of section 191 of ITA 2007] are to be read as including those provisions as applied by section 289(10) and (11) of [F139 the Taxes Act or section 190(2) of ITA 2007].]

(8) Where deferral relief is attributable to shares in a company—

(a) any person who receives from the company any payment or asset which may constitute value received (by him or another) for the purposes of paragraph 13 above, and

(b) any person on whose behalf such a payment or asset is received,

shall, if so required by the inspector, state whether the payment or asset received by him or on his behalf is received on behalf of any person other than himself and, if so, the name and address of that person.

(9) Where a claim has been made under this Schedule in relation to shares in a company, any person who holds or has held shares in the company and any person on whose behalf any such shares are or were held shall, if so required by the inspector, state—

(a) whether the shares which are or were held by him or on his behalf are or were held on behalf of any person other than himself; and

(b) if so, the name and address of that person.

(10) No obligation as to secrecy imposed by statute or otherwise shall preclude the inspector from disclosing to a company that relief has been given or claimed in respect of a particular number or proportion of its shares.

Textual Amendments

F118 Words in Sch. 5B para. 16(1)(2) substituted (with effect in accordance with s. 73(2) of the amending Act) by Finance Act 1999 (c. 16), Sch. 8 para. 4(i)

F119 Words in Sch. 5B para. 16(1)(a) substituted (with effect in accordance with Sch. 15 para. 35(5) of the amending Act) by Finance Act 2001 (c. 9), Sch. 15 para. 35(1) (with Sch. 3)

F120 Sch. 5B para. 16(2A) inserted (with effect in accordance with Sch. 15 para. 35(5) of the amending Act) by Finance Act 2001 (c. 9), Sch. 15 para. 35(2) (with Sch. 3)

F121 Words in Sch. 5B para. 16(3A) substituted (with effect in accordance with Sch. 15 para. 35(5) of the amending Act) by Finance Act 2001 (c. 9), Sch. 15 para. 35(3) (with Sch. 3)

F122 Words in Sch. 5B para. 16(4) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(13)(a)(i) (with Sch. 2)

F123 Words in Sch. 5B para. 16(4) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(13)(a)(ii) (with Sch. 2)

F124 Sch. 5B para. 16(4A) inserted (11.5.2001) by Finance Act 2001 (c. 9), Sch. 15 para. 28 (with Sch. 3)

F125 Words in Sch. 5B para. 16(4A) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(13)(b) (with Sch. 2)

F126 Words in Sch. 5B para. 16(5) substituted (with effect in accordance with Sch. 15 para. 35(5) of the amending Act) by Finance Act 2001 (c. 9), Sch. 15 para. 35(4) (with Sch. 3)

F127 Words in Sch. 5B para. 16(6) substituted (with effect in accordance with Sch. 18 para. 19(2) of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 19(1)(a)

F128 Words in Sch. 5B para. 16(6) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(13)(c) (with Sch. 2)

F129 Words in Sch. 5B para. 16(7)(a) inserted (with effect in accordance with Sch. 18 para. 19(2) of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 19(1)(b)(i)

F130 Words in Sch. 5B para. 16(7)(a) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(13)(d)(i) (with Sch. 2)

F131 Sch. 5B para. 16(7)(aa) inserted (with effect in accordance with Sch. 18 para. 19(2) of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 19(1)(b)(ii)

F132 Words in Sch. 5B para. 16(7)(aa) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(13)(d)(ii) (with Sch. 2)

F133 Word in Sch. 5B para. 16(7)(c) inserted (with effect in accordance with Sch. 18 para. 19(2) of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 19(1)(b)(iii)

F134 Words in Sch. 5B para. 16(7)(c) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(13)(d)(iii) (with Sch. 2)

F135 Words in Sch. 5B para. 16(7) substituted (with effect in accordance with Sch. 18 para. 19(2) of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 19(1)(b)(iv)

F136 Words in Sch. 5B para. 16 inserted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 127

F137 Sch. 5B para. 16(7A) inserted (with effect in accordance with Sch. 18 para. 19(2) of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 19(1)(c)

F138 Words in Sch. 5B para. 16(7A) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(13)(e)(i) (with Sch. 2)

F139 Words in Sch. 5B para. 16(7A) substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(13)(e)(ii) (with Sch. 2)

Trustees: general U.K.

17 (1) Subject to the following provisions of this paragraph, this Schedule shall apply as if— U.K.

(a) any reference to an individual included a reference to the trustees of a settlement, and

(b) in relation to any such trustees, the reference in paragraph 1(1) above to any asset were a reference to any asset comprised in any settled property to which this paragraph applies (a “trust asset").

(2) This paragraph applies—

(a) to any settled property in which the interests of the beneficiaries are not interests in possession, if all the beneficiaries are individuals, and

(b) to any settled property in which the interests of the beneficiaries are interests in possession, if any of the beneficiaries are individuals.

(3) If, at the time of the disposal of the trust asset in a case where this Schedule applies by virtue of this paragraph—

(a) the settled property comprising that asset is property to which this paragraph applies by virtue of sub-paragraph (2)(b) above, but

(b) not all the beneficiaries are individuals,

only the relevant proportion of the gain which would accrue to the trustees on the disposal shall be taken into account for the purposes of this Schedule as it so applies.

(4) This Schedule shall not apply by virtue of this paragraph in a case where, at the time of the disposal of the trust asset, the settled property which comprises that asset is property to which this paragraph applies by virtue of sub-paragraph (2)(a) above unless, immediately after the acquisition of the relevant shares, the settled property comprising the shares is also property to which this paragraph applies by virtue of sub-paragraph (2)(a) above.

(5) This Schedule shall not apply by virtue of this paragraph in a case where, at the time of the disposal of the trust asset, the settled property which comprises that asset is property to which this paragraph applies by virtue of sub-paragraph (2)(b) above unless, immediately after the acquisition of the relevant shares—

(a) the settled property comprising the shares is also property to which this paragraph applies by virtue of sub-paragraph (2)(b) above, and

(b) if not all the beneficiaries are individuals, the relevant proportion is not less than the proportion which was the relevant proportion at the time of the disposal of the trust asset.

(6) If, at any time, in the case of settled property to which this paragraph applies by virtue of sub-paragraph (2)(b) above, both individuals and others have interests in possession, “the relevant proportion" at that time is the proportion which the amount specified in paragraph (a) below bears to the amount specified in paragraph (b) below, that is—

(a) the total amount of the income of the settled property, being income the interests in which are held by beneficiaries who are individuals, and

(b) the total amount of all the income of the settled property.

(7) Where, in the case of any settled property in which any beneficiary holds an interest in possession, one or more beneficiaries (“the relevant beneficiaries") hold interests not in possession, this paragraph shall apply as if—

(a) the interests of the relevant beneficiaries were a single interest in possession, and

(b) that interest were held, where all the relevant beneficiaries are individuals, by an individual and, in any other case, by a person who is not an individual.

(8) In this paragraph references to interests in possession do not include interests for a fixed term and, except in sub-paragraph (1), references to individuals include any charity.

Trustees: anti-avoidance U.K.

18 (1) Paragraphs 13 [F140 to 13C] and 15 above shall have effect in relation to the subscription for shares by the trustees of a settlement as if references to the individual subscribing for the shares were references to— U.K.

(a) those trustees;

(b) any individual or charity by virtue of whose interest, at a relevant time, paragraph 17 above applies to the settled property; or

(c) any associate of such an individual, or any person connected with such a charity.

(2) The relevant times for the purposes of sub-paragraph (1)(b) above are the time when the shares are issued and—

(a) in a case where [F141 sub-paragraph (1) of paragraph 13 above applies, or that sub-paragraph would apply were it not for the fact that the amount of value is an amount of insignificant value for the purposes of that sub-paragraph], the time when the value is received;

[F142 (ab) in a case where paragraph 13(1) above would apply were it not for the operation of paragraph 13B above, the time when the original value (within the meaning of paragraph 13B above) in question is received;]

(b) in a case where paragraph 15 above applies, the time when the loan is made.

Textual Amendments

F140 Words in Sch. 5B para. 18(1) inserted (11.5.2001) by Finance Act 2001 (c. 9), Sch. 15 para. 36(a) (with Sch. 3)

F141 Words in Sch. 5B para. 18(2)(a) substituted (11.5.2001) by Finance Act 2001 (c. 9), Sch. 15 para. 36(b)(i) (with Sch. 3)

F142 Sch. 5B para. 18(2)(ab) inserted (11.5.2001) by Finance Act 2001 (c. 9), Sch. 15 para. 36(b)(ii) (with Sch. 3)

Interpretation U.K.

19 (1) For the purposes of this Schedule— U.K.

• [F143 “51 per cent. subsidiary” has the meaning given by section 838 of the Taxes Act;]

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

• “associate” has the meaning that would be given by subsections (3) and (4) of section 417 of the Taxes Act if in those subsections “relative” did not include a brother or sister;

• [F144 “bonus shares” means shares which are issued otherwise than for payment (whether in cash or otherwise);]

• F145 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• “eligible shares” has the meaning given by section 289(7) of [F146 the Taxes Act or means shares that meet the requirement in section 173 (2) of ITA 2007];

• F147 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• “non-resident” means a person who is neither resident nor ordinarily resident in the United Kingdom;

• “ordinary share capital” has [F148 the meaning given by section 989 of ITA 2007];

• “ordinary shares”, in relation to a company, means shares forming part of its ordinary share capital;

• [F149 “the period of restriction”, in relation to any shares, means the period—

  (a)

  beginning one year before the shares are issued, and

  (b)

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

• “qualifying business activity” has the meaning given by section 289(2) of the Taxes Act [F150 or section 179 of ITA 2007];

• [F151 “qualifying company”, in relation to any eligible shares, means a company which, in relation to those shares, is—

  (a)

  a qualifying company for the purposes of Chapter 3 of Part 7 of the Taxes Act (except that for the purposes of this Schedule the reference in section 293(1B)(b)(i) of that Act to section 304A of that Act shall be read as a reference to paragraph 8 above), or

  (b)

  a qualifying company for the purposes of Part 5 of ITA 2007 (except that for the purposes of this Schedule the reference in section 184(1)(c)(i) of that Act to section 247 of that Act shall be read as a reference to paragraph 8 above).]

• “the relevant period”, in the case of any shares, means the period found by applying section 312(1A)(a) of [F152 the Taxes Act or section 159(2) of ITA 2007] by reference to the company that issued the shares and by reference to the shares;

• F153 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• F147 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• [F154 “termination date”, in relation to any shares, means the date found by applying the definition of “termination date” in section 312(1) of the Taxes Act [F155 or section 256 of ITA 2007] by reference to the company that issued the shares and by reference to the shares.]

[F156 (1A) For the purposes of this Schedule, “the relevant shares”, in relation to a case to which this Schedule applies, means the shares which—

(a) are acquired by the investor in making the qualifying investment, and

(b) where the qualifying investment is made before the time at which the original gain accrues, are still held by the investor at that time.

This is subject to sub-paragraphs (1B) and (1D) below.

(1B) If any corresponding bonus shares in the same company are issued to the investor or any person who has acquired any of the relevant shares from the investor on a disposal within marriage [F157 or civil partnership], this Schedule shall apply as if references to the relevant shares were to all the shares comprising the relevant shares and the bonus shares so issued.

(1C) In sub-paragraph (1B) above “corresponding bonus shares” means bonus shares which—

(a) are issued in respect of the relevant shares; and

(b) are of the same class, and carry the same rights, as those shares.

(1D) If, in circumstances in which paragraph 8 above applies, new shares are issued in exchange for old shares, references in this Schedule to the relevant shares, so far as they relate to the old shares, shall be construed as references to the new shares and not to the old shares.

(1E) In sub-paragraph (1D) above “new shares” and “old shares” have the same meaning as in paragraph 8 above.]

(2) For the purposes of this Schedule, “deferral relief” is attributable to any shares if—

(a) expenditure on the shares has been set under this Schedule against the whole or part of any gain; and

(b) in relation to the shares there has been no chargeable event for the purposes of this Schedule.

(3) In this Schedule—

(a) 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;

(b) references to a disposal within marriage [F157 or civil partnership] are references to any disposal to which section 58 applies; F158 ...

(c) references to Chapter III of Part VII of the Taxes Act or any provision of that Chapter are to that Chapter or provision as it applies in relation to shares issued on or after 1st January 1994[F159 ; and

(d) references to Part 5 of ITA 2007 or any provision of that Part are to a Part or provision that applies only in relation to shares issued on or after 6th April 2007].

(4) For the purposes of this Schedule 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) Notwithstanding anything in section 288(5), shares shall not for the purposes of this Schedule be treated as issued by reason only of being comprised in a letter of allotment or similar instrument.]]

Textual Amendments

F143 Words in Sch. 5B para. 19(1) inserted (with effect in accordance with Sch. 18 para. 20(2) of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 20(1)(a)

F144 Words in Sch. 5B para. 19(1) inserted (with effect in accordance with Sch. 18 para. 20(2) of the amending Act) by Finance Act 2004 (c. 12), Sch. 18 para. 20(1)(b)

F145 Words in Sch. 5B para. 19(1) repealed (with effect in accordance with Sch. 33 Pt. 2(3) Note 6 of the amending Act) by Finance Act 2001 (c. 9), Sch. 33 Pt. 2(3) (with Sch. 3)

F146 Words in Sch. 5B para. 19(1) substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(14)(a) (with Sch. 2)

F147 Words in Sch. 5B para. 19(1) repealed (with effect in accordance with Sch. 40 Pt. II(5) Note 4 of the amending Act) by Finance Act 2000 (c. 17), Sch. 40 Pt. II(5)

F148 Words in Sch. 5B para. 19(1) substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(14)(b) (with Sch. 2)

F149 Words in Sch. 5B para. 19(1) inserted (11.5.2001) by Finance Act 2001 (c. 9), Sch. 15 para. 37(a) (with Sch. 3)

F150 Words in Sch. 5B para. 19(1) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(14)(c) (with Sch. 2)

F151 Words in Sch. 5B para. 19(1) substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(14)(d) (with Sch. 2)

F152 Words in Sch. 5B para. 19(1) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(14)(e) (with Sch. 2)

F153 Words in Sch. 5B para. 19 repealed (with effect in accordance with s. 73(2) of the amending Act) by Finance Act 1999 (c. 16), Sch. 8 para. 3(1), Sch. 20 Pt. III(18)

F154 Words in Sch. 5B para. 19(1) inserted (11.5.2001) by Finance Act 2001 (c. 9), Sch. 15 para. 37(c) (with Sch. 3)

F155 Words in Sch. 5B para. 19(1) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(14)(f) (with Sch. 2)

F156 Sch. 5B para. 19(1A)-(1E) inserted (with effect in accordance with s. 73(2) of the amending Act) by Finance Act 1999 (c. 16), Sch. 8 para. 3(2)

F157 Words in Sch. 5B para. 19 inserted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 127

F158 Word in Sch. 5B para. 19(3) repealed (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(15), Sch. 3 Pt. 1 (with Sch. 2)

F159 Sch. 5B para. 19(3)(d) and preceding word inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 345(15) (with Sch. 2)