Taxation of Chargeable Gains Act 1992

[F1 Periods of share ownership not to count where there is a change of activity by the company U.K.

Textual Amendments

F1 Sch. A1 inserted (with effect in accordance with s. 121(4) of the amending Act) by Finance Act 1998 (c. 36), s. 121(2), Sch. 20

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

(a) there is a disposal of an asset consisting of shares in a close company; and

(b) the period beginning with the relevant time and ending with the time of the disposal includes at least one relevant change of activity involving that company.

(2) So much of the period after 5th April 1998 for which the asset had been held at the time of its disposal as falls before the time, or latest time, in that period when there was a relevant change of activity involving the close company shall not count for the purposes of taper relief.

(3) Where—

(a) a close company or any of its 51 per cent. subsidiaries has at any time begun to carry on a trade, and

(b) immediately before that time, neither that company nor any of its 51 per cent. subsidiaries was carrying on a trade,

a relevant change of activity involving the close company shall be taken to have occurred at that time.

(4) For the purposes of this paragraph where—

(a) at the time of the disposal of the shares, the close company was carrying on a business of holding investments, and

(b) there has been any occasion falling within—

(i) the period of twelve months ending with that time, or

(ii) the period of twelve months ending with any earlier time after the relevant time,

when the close company was not carrying on that business or when the size of that business was small by comparison with its size at the end of that period,

a relevant change of activity involving the close company shall be taken to have occurred immediately after the latest such occasion before the time of the disposal.

(5) For the purposes of sub-paragraph (4) above the size of any business at any time shall be determined by assuming it to correspond to the aggregate of the amounts and values given by way of consideration for the assets held at that time for the purposes of the business.

(6) In determining for the purposes of this paragraph whether a close company is at any time carrying on a business of holding investments, and in determining for those purposes the size at any time of such a business—

(a) all the activities of a close company and of all its 51 per cent. subsidiaries shall be taken together as if they were all being carried on by the close company; and

(b) the activities that are included in a business of holding investments shall be taken not to include—

(i) holding shares in a 51 per cent. subsidiary of the company holding the shares;

(ii) making loans to an associated company or to a participator in the company making the loan or in an associated company; or

(iii) placing money on deposit.

(7) In this paragraph—

(a) references to a company’s carrying on a trade, or to beginning to carry one on, do not include references to its carrying on or beginning to carry on a trade that is merely incidental to any non-trading activities carried on by that company or another company in the same group of companies; and

(b) references to a business of holding investments include references to a business of making investments.

(8) For the purposes of this paragraph a company is to be treated as another’s associated company at any time if at that time, or at another time within one year previously—

(a) one of them has had control of the other; or

(b) both have been under the control of the same person or persons.

(9) In this paragraph—

• “51 per cent. subsidiary”, in relation to another company, means a company which, in accordance with section 170(7), is an effective 51 per cent. subsidiary of the other company for the purposes of sections 170 to 181; and

• “participator”, in relation to a company, has the meaning given by section 417(1) of the Taxes Act.

(10) In this paragraph “the relevant time”, in relation to the disposal of an asset consisting of shares in a company, means the beginning of the period after 5th April 1998 for which that asset had been held at the time of its disposal.]