PART XIII MISCELLANEOUS SPECIAL PROVISIONS

F1Chapter 5AShare loss relief

Annotations:
Amendments (Textual)
F1

Pt. 13 Ch. 5A created (6.4.2007 with effect in accordance with s. 1034(1) of the affecting Act) by virtue of Income Tax Act 2007 (c. 3), Sch. 1 para. 117(3) (with Sch. 2)

Relief for losses on unquoted shares in trading companies

C1576 Provisions supplementary to sections 573 to 575.

1

M1Where a person holds shares in a company which constitute a holding and comprise—

a

shares for which he has subscribed (“qualifying shares”); and

b

shares which he has acquired otherwise than by subscription,

any question whether a disposal by him of shares forming part of the holding is of qualifying shares shall be determined by treating that and any previous disposal by him out of the holding as relating to shares acquired later rather than earlier; and if a disposal by him is of qualifying shares forming part of a holding and he makes a claim under section 573 or 574 in respect of a loss incurred on their disposal, the amount of relief under that section on the disposal shall not exceed the sums that would be allowed as deductions in computing the loss if the shares had not been part of the holding.

2

Where a claim is made under section 573 or 574 in respect of a loss accruing on the disposal of shares, section F230 of the 1992 Act (value-shifting) shall have effect in relation to the disposal as if for the references in subsections (1)(b) and F2(5)to a tax-free benefit there were substituted references to any benefit whether tax-free or not.

3

There shall be made all such adjustments of corporation tax on chargeable gains or capital gains tax, whether by way of assessment or by way of discharge or repayment of tax, as may be required in consequence of relief being given under section 573 or 574 in respect of an allowable loss or in consequence of the whole or part of such a loss in respect of which a claim is made not being relieved under that section.

4

M2For the purposes of sections 573 to 575 and this section a qualifying trading company is a company none of whose shares have at any time in the relevant period been F8listed on a recognised stock exchange and which—

a

either—

i

is a trading company on the date of the disposal; or

ii

has ceased to be a trading company at a time which is not more than three years before that date and has not since that time been an excluded company or an investment company; and

b

either—

i

has been a trading company for a continuous period of six years ending on that date or at that time; or

ii

has been a trading company for a shorter continuous period ending on that date or at that time and has not before the beginning of that period been an excluded company or an investment company; and

c

has been resident in the United Kingdom throughout the period from its incorporation until that date.

5

M3In sections 573 to 575 and this section—

  • “excluded company” means a company—

    1. a

      which has a trade which consists wholly or mainly of dealing in shares, securities, land, trades or commodity futures or is not carried on on a commercial basis and in such a way that profits in the trade can reasonably be expected to be realised; or

    2. b

      which is the holding company of a group other than a trading group; or

    3. c

      which is a building society or a registered industrial and provident society as defined in section 486(12);

  • “group” means a company which has one or more 51 per cent. subsidiaries together with that or those subsidiaries;

  • F3“holding” means any number of shares of the same class held by one person in one capacity, growing or diminishing as shares of that class are acquired or disposed of, but shares shall not be treated as being of the same class unless they are so treated by the practice of a recognised stock exchange or would be so treated if dealt with on such a stock exchange, and subsection (4) of section 104 of the 1992 Act shall apply for the purposes of this definition as it applies for the purposes of subsection (1) of that section;

  • “holding company” means a company whose business consists wholly or mainly in the holding of shares or securities of one or more companies which are its 51 per cent. subsidiaries;

  • “investment company” has the meaning given by section 130 except that it does not include the holding company of a trading group;

  • “new consideration” means consideration in money or money’s worth other than consideration of the kind excluded by F4paragraph (a) or (b) of section 128(2)F5of the 1992 Act;

  • “relevant period” means the period ending with the date on which the shares in question are disposed of and beginning with the incorporation of the company, or, if later, one year before the date on which the shares were subscribed for;

  • “shares” includes stock but except in the definition of “excluded company” does not include shares or stock not forming part of a company’s ordinary share capital;

  • “spouse” refers to one of two spouses who are living together (construed in accordance with section F6288(3) of the 1992 Act);

  • “trading company” means a company other than an excluded company which is—

    1. a

      F7a company whose business consists wholly or mainly of the carrying on of a trade or trades; or

    2. b

      the holding company of a trading group;

  • “trading group” means a group the business of whose members, taken together, consists wholly or mainly in the carrying on of a trade or trades, but for the purposes of this definition any trade carried on by a subsidiary which is an excluded company or not resident in the United Kingdom shall be treated as not constituting a trade.