Finance Act 1976

Dispositions that are not transfers of value

89 Dispositions allowable for income tax or conferring retirement benefits

(1) A disposition made by any person is not a transfer of value if it is allowable in computing that person's profits or gains for the purposes of income tax or corporation tax or would be so allowable if those profits or gains were sufficient and fell to be so computed.

(2) Without prejudice to subsection (1) above, a disposition made by any person is not a transfer of value if—

(a) it is a contribution to a retirement benefits scheme which is approved by the Board for the purposes of Chapter II of Part II of the [1970 c. 24.] Finance Act 1970 (occupational pension schemes) and provides benefits in respect of service which is or includes service as an employee (as defined in that Chapter) of that person ; or

(b) it is made so as to provide—

(i) benefits on or after retirement for a person not connected with him who is or has been in his employ; or

(ii) benefits on or after the death of such a person for his widow or dependants,

and does not result in the recipient receiving benefits which, having regard to their form and amount, are greater than what could be provided under a scheme approved as aforesaid.

(3) Where a person makes dispositions of the kinds described in both paragraph (a) and paragraph (b) of subsection (2) above in respect of service by the same person, they shall be regarded as satisfying the conditions of that subsection only to the extent to which the benefits they provide do not exceed what could be provided by a disposition of the kind described in either of those paragraphs.

(4) For the purposes of subsection (2)(b) above, the right to occupy a dwelling rent-free or at a rent less than might be expected to be obtained in a transaction at arm's length between persons not connected with each other shall be regarded as equivalent to a pension at a rate equal to the rent or additional rent that might be expected to be obtained as aforesaid.

(5) Where a disposition satisfies the conditions of the preceding provisions of this section to a limited extent only, so much of it as satisfies them and so much of it as does not satisfy them shall be treated as separate dispositions.

(6) Paragraph 9 of Schedule 6 to the [1975 c. 7.] Finance Act 1975 (which is superseded by subsection (1) above) shall cease to have effect.

(7) This section applies to dispositions before as well as after the passing of this Act.

90 Dispositions on trust for benefit of employees

(1) Subject to subsection (3) below, a disposition of property made to trustees by a close company whereby the property is to be held on trusts of the description specified in paragraph 17(1) of Schedule 5 to the Finance Act 1975 is not a transfer of value if the persons for whose benefit the trusts permit the property to be applied include all or most of either—

(a) the persons employed by or holding office with the company; or

(b) the persons employed by or holding office with the company or any one or more subsidiaries of the company.

(2) Subject to subsection (3) below, a disposition of property made to trustees by an individual beneficially entitled to shares in a company whereby the property is to be held on trusts of the said description is not a transfer of value if—

(a) the property consists of all the shares and securities of the company to which he is beneficially entitled; and

(b) immediately after the disposition there are no shares or securities of the company to which his spouse is beneficially entitled; and

(c) as a result of the disposition and of any other dispositions made on the same occasion, the trustees—

(i) hold all or substantially all of the ordinary shares in the company, and

(ii) have powers of voting on all questions affecting the company as a whole which if exercised would yield a majority of the votes capable of being exercised thereon; and

(d) the persons for whose benefit the trusts permit the property to be applied include all or most of the persons employed by or holding office with the company.

(3) Subject to subsection (4) below, subsections (1) and (2) above do not apply if the trusts permit any of the property to be applied at any time (whether during any such period as is referred to in the said paragraph 17(1) or later) for the benefit of—

(a) a person who is a participator in the company making the disposition or, as the case may be, the company whose shares are disposed of ; or

(b) any other person who is a participator in any close company that has made a disposition whereby property became comprised in the same settlement, being a disposition which but for this section would have been a transfer of value ; or

(c) any other person who has been a participator in any such company as is mentioned in paragraph (a) or (b) above at any time after, or during the ten years before, the disposition made by that company or, as the case may be, the disposition of its shares ; or

(d) any person who is connected with any person within paragraph (a), (b) or (c) above.

(4) The participators in a company who are referred to in subsection (3) above do not include any participator who on a winding-up of the company would not be entitled to 5 per cent. or more of its assets ; and in determining whether the trusts permit property to be applied as mentioned in that subsection, no account shall be taken of any power to make a payment which is the income of any person for any of the purposes of income tax, or would be the income for any of those purposes of a person not resident in the United Kingdom if he were so resident.

(5) In this section—

• " close company " and " participator " have the same meanings as in section 39 of the [1975 c. 7.] Finance Act 1975 ;

• " ordinary shares " means shares which carry either—

  (a)

  a right to dividends not restricted to dividends at a fixed rate, or

  (b)

  a right to conversion into shares carrying such a right as is mentioned in paragraph (a) above;

• " subsidiary " has the same meaning as in the [1948 c. 38.] Companies Act 1948 ; and references in subsections (3) and (4) above to a participator in a company shall, in the case of a company which is not a close company, be construed as references to a person who would be a participator in the company if it were a close company.

(6) This section applies to dispositions made after 6th April 1976.

91 Waiver of remuneration

(1) Subject to subsection (2) below, the waiver or repayment of an amount of remuneration shall not be a transfer of value if, apart from the waiver or repayment, that amount would be assessable to income tax under Schedule E.

(2) Where, apart from the waiver or repayment, the amount of the remuneration would be allowable as a deduction in computing for the purposes of income tax or corporation tax the profits or gains or losses of the person by whom it is payable or paid, this section applies only if, by reason of the waiver or repayment, it is not so allowed or is otherwise brought into charge in computing those profits or gains or losses.

(3) This section applies to waivers or repayments before as well as after the passing of this Act.

92 Waiver of dividends

(1) A person who waives any dividend on shares of a company within twelve months before any right to the dividend has accrued does not by reason of the waiver make a transfer of value.

(2) This section applies to waivers before as well as after the passing of this Act.