Income and Corporation Taxes Act 1988

26 The following sections shall be inserted after section 149—

“149A Building societies and life policies

(1) If in the course of or as part of an amalgamation of two or more building societies or a transfer of engagements from one building society to another, there is a disposal of an asset by one society to another, both shall be treated for the purposes of corporation tax on chargeable gains as if the asset were acquired from the one making the disposal for a consideration of such amount as would secure that on the disposal neither a gain nor a loss would accrue to the one making the disposal.

In this subsection “building society” means a building society within the meaning of the Building Societies Act 1986.

(2) Where any investments or other assets are or have been, in accordance with a policy issued in the course of life assurance business carried on by an insurance company, transferred to the policy holder on or after 6th April 1967, the policy holder’s acquisition of the assets and the disposal of them to him shall be deemed to be, for the purposes of this Act, for a consideration equal to the market value of the assets.

In this subsection “life assurance business” and “insurance company” have the same meaning as in Chapter I of Part XII of the Taxes Act 1988.

149B Miscellaneous exemptions

(1) The following gains shall not be chargeable gains—

(a) gains accruing on the disposal of stock—

(i) transferred to accounts in the books of the Bank of England in the name of the Treasury or the National Debt Commissioners in pursuance of any Act of Parliament; or

(ii) belonging to the Crown, in whatever name it may stand in the books of the Bank of England;

(b) any gain accruing to a person from his acquisition and disposal of assets held by him as part of a fund mentioned in section 613(4) of the Taxes Act 1988 (Parliamentary pension funds) or of which income is exempt from income tax under section 614(1) of that Act (social security supplementary schemes);

(c) any gain accruing to a person from his acquisition and disposal of assets held by him as part of a fund mentioned in section 614(4) or paragraph (b), (c), (d), (f) or (g) of section 615(2) of the Taxes Act 1988 (India etc. pension funds) or as part of a fund to which subsection (3) of that section applies (pension funds for overseas employees);

(d) any gain accruing to a person from his acquisition and disposal of assets held by him as part of any fund maintained for the purpose mentioned in subsection (5)(b) of section 620 or subsection (5) of section 621 of the Taxes Act 1988 under a scheme for the time being approved under that subsection;

(e) any gain accruing on the disposal by the trustees of any settled property held on trusts in accordance with directions which are valid and effective under section 9 of the Superannuation and Trust Funds (Validation) Act 1927 (trust funds for the reduction of the National Debt);

(f) any gain accruing to a consular officer or employee, within the meaning of section 322 of the Taxes Act 1988, of any foreign state to which that section applies on the disposal of assets which at the time of the disposal were situated outside the United Kingdom;

(g) any gain accruing to a person from his disposal of investments if, or to such extent as the Board are satisfied that, those investments were held by him or on his behalf for the purposes of a scheme which at the time of the disposal is an exempt approved scheme;

(h) any gain accruing to a person on his disposal of investments held by him for the purposes of an approved personal pension scheme;

(j) any gain accruing to a unit holder on his disposal of units in an authorised unit trust which is also an approved personal pension scheme or is one to which section 592(10) of the Taxes Act 1988 applies.

In this subsection “exempt approved scheme” and “approved personal pension scheme” have the same meanings as in Part XIV of the Taxes Act 1988.

(2) Where a claim is made in that behalf, a gain which accrues to a person on the disposal of investments shall not be a chargeable gain for the purposes of capital gains tax if, or to such extent as the Board are satisfied that, those investments were held by him or on his behalf for the purposes of a fund to which section 608 of the Taxes Act 1988 applies.

A claim under this subsection shall not be allowed unless the Board are satisfied that the terms on which benefits are payable from the fund have not been altered since 5th April 1980.

(3) A local authority, and a local authority association, within the meaning of section 519 of the Taxes Act 1988, shall be exempt from capital gains tax.

(4) Any terminal bonus, or interest or other sum, payable under a certified contractual savings scheme—

(a) in respect of money raised under section 12 of the National Loans Act 1968; or

(b) in respect of shares in a building society,

shall be disregarded for all purposes of the enactments relating to capital gains tax.

This subsection shall be construed as one with section 326 of the Taxes Act 1988.

(5) A signatory to the Operating Agreement made pursuant to the Convention on the International Maritime Satellite Organisation which came into force on 16th July 1979, other than a signatory designated for the purposes of the Agreement by the United Kingdom in accordance with the Convention, shall be exempt from capital gains tax in respect of any payment received by that signatory from the Organisation in accordance with the Agreement.

(6) The following shall, on a claim made in that behalf to the Board, be exempt from tax in respect of all chargeable gains—

(a) the Trustees of the British Museum and the Trustees of the British Museum (Natural History); and

(b) an Association within the meaning of section 508 of the Taxes Act 1988 (scientific research organisations).

(7) The Historic Buildings and Monuments Commission for England, the Trustees of the National Heritage Memorial Fund, the United Kingdom Atomic Energy Authority and the National Radiological Protection Board shall be exempt from tax in respect of chargeable gains; and for the purposes of this subsection gains accruing from investments or deposits held for the purposes of any pension scheme provided and maintained by the United Kingdom Atomic Energy Authority shall be treated as if those gains and investments and deposits belonged to the Authority.

(8) There shall be exempt from tax any chargeable gains accruing to the issue department of the Reserve Bank of India constituted under an Act of the Indian legislature called the Reserve Bank of India Act 1934, or to the issue department of the State Bank of Pakistan constituted under certain orders made under section 9 of the Indian Independence Act 1947.

(9) Any disposal and acquisition made in pursuance of an arrangement mentioned in subsection (1) or (2) of section 129 of the Taxes Act 1988 (stock lending) shall, subject to regulations under subsection (4) of that section, be disregarded for the purposes of capital gains tax.

149C Business expansion schemes

(1) In this section “relief” means relief under Chapter III of Part VII of the Taxes Act 1988, Schedule 5 to the Finance Act 1983 (“the 1983 Act”) or Chapter II of Part IV of the Finance Act 1981 (“the 1981 Act”) and “eligible shares” has the meaning given by section 289(4) of the Taxes Act 1988.

(2) A gain or loss which accrues to an individual on the disposal of any shares issued after 18th March 1986 in respect of which relief has been given and not withdrawn shall not be a chargeable gain or allowable loss for the purposes of capital gains tax.

(3) The sums allowable as deductions from the consideration in the computation for the purposes of capital gains tax of the gain or loss accruing to an individual on the disposal of shares issued before 19th March 1986 in respect of which any relief has been given and not withdrawn shall be determined without regard to that relief, except that where those sums exceed the consideration they shall be reduced by an amount equal to—

(a) the amount of that relief; or

(b) the excess,

whichever is the less, but the foregoing provisions of this subsection shall not apply to a disposal falling within section 44(1) above.

(4) Sections 88 and 89 of the Finance Act 1982 (identification of securities disposed of) shall not apply to shares in respect of which any relief has been given and not withdrawn; and any question—

(a) as to which of any such shares issued to a person at different times a disposal relates; or

(b) whether a disposal relates to such shares or to other shares;

shall for the purposes of capital gains tax be determined as for the purposes of section 299 of the Taxes Act 1988, or section 57 of the Finance Act 1981 if the relief has only been given under that Act.

(5) Where an individual holds shares which form part of the ordinary share capital of a company and the relief has been given (and not withdrawn) in respect of some but not others, then, if there is within the meaning of section 77 above a reorganisation affecting those shares, section 78 shall apply separately to the shares in respect of which the relief has been given (and not withdrawn) and to the other shares (so that shares of each kind are treated as a separate holding of original shares and identified with a separate new holding).

(6) Where section 44 above has applied to any eligible shares disposed of by an individual to his or her spouse (“the transferee”), subsection (2) above shall apply in relation to the subsequent disposal of the shares by the transferee to a third party.

(7) Where section 85 or 86 above would, but for this subsection, apply in relation to eligible shares in respect of which an individual has been given relief, that section shall apply only if the relief is withdrawn.

(8) Sections 78 to 81 above shall not apply in relation to any shares in respect of which relief (other than relief under the 1981 Act) has been given and which form part of a company’s ordinary share capital if—

(a) there is, by virtue of any such allotment for payment as is mentioned in section 77(2)(a) above, a reorganisation occurring after 18th March 1986 affecting those shares; and

(b) immediately following the reorganisation, the relief has not been withdrawn in respect of those shares or relief has been given in respect of the allotted shares and not withdrawn.

(9) Where relief is reduced by virtue of subsection (2) of section 305 of the Taxes Act 1988—

(a) the sums allowable as deductions from the consideration in the computation, for the purposes of capital gains tax, of the gain or loss accruing to an individual on the disposal, after 18th March 1986, of any of the allotted shares or debentures shall be taken to include the amount of the reduction apportioned between the allotted shares or (as the case may be) debentures in such a way as appears to the inspector, or on appeal to the Commissioners concerned, to be just and reasonable; and

(b) the sums so allowable on the disposal (in circumstances in which subsections (2) to (7) above do not apply) of any of the shares referred to in section 305(2)(a) shall be taken to be reduced by the amount mentioned in paragraph (a) above, similarly apportioned between those shares.

(10) There shall be made all such adjustments of capital gains tax, whether by way of assessment or by way of discharge or repayment of tax, as may be required in consequence of the relief being given or withdrawn.

149D Personal equity plans

(1) The Treasury may make regulations providing that an individual who invests under a plan shall be entitled to relief from capital gains tax in respect of the investments.

(2) Subsections (2) to (5) of section 333 of the Taxes Act 1988 (personal equity plans) shall apply in relation to regulations under subsection (1) above as they apply in relation to regulations under subsection (1) of that section but with the substitution for any reference to income tax of a reference to capital gains tax.

(3) Regulations under this section shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of the House of Commons.”.