PART XIII MISCELLANEOUS SPECIAL PROVISIONS
F1Chapter 5AShare loss relief
Relief for losses on unquoted shares in trading companies
C1576 Provisions supplementary to sections 573 to 575.
1
F8Subject to subsections (1A) F15to (1C) below, where 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.
F91A
Subsection (1B) below applies where the holding mentioned in subsection (1) above comprises any of the following, namely—
a
shares issued before 1st January 1994 in respect of which relief has been given under Chapter III of Part VII and has not been withdrawn;
b
shares issued on or after that date to which relief under that Chapter is attributable; and
c
shares to which deferral relief (within the meaning of Schedule 5B to the 1992 Act) is attributable.
1B
Any such question as is mentioned in subsection (1) above shall not be determined as provided by that subsection, but shall be determined instead—
a
in the case of shares issued before 1st January 1994, as provided by subsections (3) to (4C) of section 299 as it has effect in relation to such shares; and
b
in the case of shares issued on or after that date, as provided by subsections (6) to (6D) of that section as it has effect in relation to such shares.
F161C
Where the holding mentioned in subsection (1) above comprises any shares—
a
to which investment relief is attributable under Schedule 15 to the Finance Act 2000 (corporate venturing scheme), and
b
which have been held continuously (within the meaning of paragraph 97 of that Schedule) from the time they were issued until the disposal,
any such question as is mentioned in that subsection shall not be determined as provided by that subsection, but shall be determined instead as provided by paragraph 93 of that Schedule (identification of shares on a disposal of part of a holding where investment relief is attributable to any shares in the holding held continuously by the disposing company).
For this purpose paragraph 93 of that Schedule shall have effect as if the references in it to a disposal had the same meaning as in subsection (1) above.
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.
F104
For the purposes of sections 573 to 575 and this section a qualifying trading company is a company which F17. . . —
a
either—
i
is an eligible trading company on the date of the disposal; or
ii
has ceased to be an eligible 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, an investment company or a trading company that is not an eligible trading company; and
b
either—
i
has been an eligible trading company for a continuous period of six years ending on that date or at that time; or
ii
has been an eligible 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, an investment company or a trading company that is not an eligible trading company; and
c
has carried on its business wholly or mainly in the United Kingdom throughout the relevant period.
4A
A company is an eligible trading company for the purposes of subsection (4) above at any time when, or in any period throughout which, it would comply with the requirements of section 293 if—
a
the provisions mentioned in subsection (4B) below were omitted;
F18ab
the reference in subsection (1A) of section 293 to the beginning of the relevant period were a reference to the time at which the shares in respect of which relief is claimed under section 573 or 574 were issued;
b
the references in subsection (6) of section 293 to dissolution were omitted F19and after paragraph (a) of that subsection there were inserted— and
b
the company continues, during the winding up, to be a trading company within the meaning of section 576(5).;
c
the reference in section 293(6A) to the eligible shares were a reference to the shares in respect of which relief is claimed under section 573 or 574;
d
any reference in section 293 F20(except subsection (1A)), 297 or 308 to the relevant period were a reference to the time that is relevant for the purposes of subsection (4)(a) above or, as the case may require, the continuous period that is relevant for the purposes of subsection (4)(b) above;
e
the reference in section 304A(1)(e)(i) to eligible shares were a reference to shares in respect of which relief is claimed under section 573 or 574;
f
references in section 304A(3) to an individual were references to a person;
g
the reference in section 304A(4) to section 304 were a reference to section 574(3)(b); and
h
the reference in section 304A(6) to the expressions “eligible shares" and “subscriber shares" were a reference to the expression “subscriber shares".
4B
The provisions are—
a
in section 293, the words “Subject to section 294,” in subsection (1)F21. . . and subsections (8A) and (8B);
b
sections 294 to 296;
c
in section 298(5), the words “and section 312(1A)(b) shall apply to determine the relevant period for the purposes of that section";
d
in section 304A, subsections (1)(e)(ii) and (2)(b), in subsection (3), the words “to which relief becomes so attributable" and paragraphs (c) and (d), in subsection (4), the words “to which relief becomes so attributable" and paragraphs (c) and (d), and subsection (5); and
e
section 308(5A).
5
M1In sections 573 to 575 and this section—
“excluded company” means a company—
- a
which has a trade which consists wholly or mainly of F11dealing in land, in commodities or futures or in shares, securities or other financial instruments, 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
- b
which is the holding company of a group other than a trading group; or
- c
which is a building society or a registered industrial and provident society as defined in section 486(12);
- a
“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 F12issued;
F13“shares”—
- a
except in subsections (1A) and (1B) above, includes stock; but
- b
except in the definition of “excluded company", does not include shares or stock not forming part of a company’s ordinary share capital;
- a
“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—
- a
F7a company whose business consists wholly or mainly of the carrying on of a trade or trades; or
- b
the holding company of a trading group;
- a
“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 F14. . . shall be treated as not constituting a trade.
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)