F1SCHEDULE 4
Part I Modifications Made by Section 50
Preliminary
1
The modifications of Chapter III of Part VII of the Taxes Act 1988 (relief for investment in new corporate trades: the business expansion scheme) made by section 50 of this Act are as follows.
The relief
2
(1)
“(a)
those shares are issued to him after the passing of the Finance Act 1988 and before the end of 1993 for the purpose of raising money for qualifying activities which are being carried on by the company or which it intends to carry on;”
(2)
“(a)
in a case falling within subsection (1)(a) unless and until the company has carried on the activities for four months;”
(3)
“(9)
A claim for relief may be allowed under subsection (1)(a) at any time after the activities have been carried on by the company for four months, if the conditions for the relief are then satisfied.”
(4)
In subsection (12)(b) of that section, for the words from “either” onwards there shall be substituted the words “four years after that date”.
(5)
Subsection (13) of that section shall be omitted.
Restriction of relief where amounts raised exceed permitted maximum
3
(1)
In subsection (1) of section 290A (restriction of relief where amounts raised exceed permitted maximum), for “£500,000” there shall be substituted “£5 million”.
(2)
In subsection (4) of that section, for the words “any trade or part of a trade” there shall be substituted the words “any qualifying activities” and for “£500,000”, in both places, there shall be substituted “£5 million”.
(3)
Subsections (6) to (8), (10) and (11) of that section shall be omitted.
Individuals qualifying for relief
4
“(1A)
An individual is connected with the company if—
(a)
he, or an associate of his, occupies or is a tenant of a dwelling-house in which the company holds an interest; and
(b)
the interest held by the company is superior to any interest in the dwelling-house held by the individual.”
Parallel trades
5
Section 292 (parallel trades) shall be omitted.
Qualifying companies
6
(1)
“(2)
The company must, throughout the relevant period, be an unquoted company which is resident in the United Kingdom and not resident elsewhere, and be—
(a)
a company which exists wholly, or substantially wholly, for the purpose of carrying on activities which do not include, to any substantial extent, activities which are not qualifying activities; or
(b)
a company whose activities consist wholly of—
(i)
the holding of shares or securities of, or the making of loans to, one or more qualifying subsidiaries of the company; or
(ii)
both the holding of such shares or securities, or the making of such loans, and the carrying on of activities which do not include, to any substantial extent, activities which are not qualifying activities.”
(2)
Subsections (4) and (9) to (11) of that section shall be omitted.
Companies with interests in land etc.
7
The following shall be omitted, namely—
(a)
section 294 (companies with interests in land);
(b)
section 295 (valuation of interests in land for purposes of section 294(1)(b)); and
(c)
section 296 (section 294 disapplied where amounts raised total £50,000 or more).
Qualifying trades etc.
8
The following shall also be omitted, namely—
(a)
section 297 (qualifying trades); and
(b)
section 298 (provisions supplementary to sections 293 and 297).
Replacement capital
9
(1)
In subsection (1) of section 302 (replacement capital), for the words “carry on as its trade or as part of its trade a trade which was” there shall be substituted the words “carry on, as its activities or as part of its activities, activities which were” and for the words “of a trade” there shall be substituted the words “of activities”.
(2)
In subsection (2) of that section, for the words “the trade”, in each place where they occur, there shall be substituted the words “the activities”.
(3)
“(a)
the persons to whom activities belong and, where activities belong to two or more persons, their respective shares in those activities shall be determined in accordance with section 344(1)(a) and (b), (2) and (3) (those provisions having effect for this purpose with any necessary modifications);”
(4)
In subsection (5) of that section, the definition of “trade” shall be omitted.
Claims
10
In subsections (2) and (3) of section 306 (claims), for the words “the trade” there shall be substituted the words “the activities”.
Subsidiaries
F211
(1)
For subsection (1) of section 308 (application to subsidiaries) there shall be substituted—
“(1)
A qualifying company may, in the relevant period, have one or more subsidiaries if the subsidiary or, as the case may be, each subsidiary is a subsidiary to which subsection (1A) or (1B) below applies.
(1A)
This subsection applies to a subsidiary if—
(a)
it is a dormant subsidiary or exists wholly, or substantially wholly, for the purpose of carrying on activities which do not include, to any substantial extent, activities which are not qualifying activities, and
(b)
the conditions mentioned in subsection (2) below are satisfied in respect of it and, except as provided by subsection (3) below, continue to be satisfied in respect of it until the end of the relevant period.
(1B)
This subsection applies to a subsidiary if—
(a)
it is a property managing subsidiary, and
(b)
reading each reference in subsection (2) below to 90 per cent. as a reference to 51 per cent., the conditions in that subsection are satisfied in respect of it and, except as provided by subsection (3) below, continue to be satisfied in respect of it until the end of the relevant period.”
(2)
In subsection (5) of that section, for paragraph (a) there shall be substituted—
“(a)
a subsidiary is a property managing subsidiary if it exists wholly, or substantially wholly, for the purpose of holding or managing (or holding and managing) a single block of flats and more than half of those flats are let by the qualifying company or any of its subsidiaries in the course of qualifying activities;”.
12
In subsection (2) of section 309 (further provisions as to subsidiaries), for the words “a qualifying trade which is” there shall be substituted the words “qualifying activities which are” and for the words “subsections (8), (9), (12)(b)(ii) and (13)” there shall be substituted the words “subsections (8) and (9)”.
Part II Dwelling-Houses to Which Section 50 Does Not Apply
Expensive dwelling-houses
13
(1)
Section 50 of this Act does not apply to a dwelling-house the market value of which exceeds—
(a)
in the case of a dwelling-house in Greater London, £125,000;
(b)
in any other case, £85,000.
(2)
The market value of a dwelling-house at any date (“the valuation date”) shall be taken to be the price which, at the relevant date, it might reasonably have been expected to fetch on a sale in the open market—
F3(a)
on the assumption that the dwelling-house was in the same state as at the valuation date;
(b)
on the assumptions as to title mentioned in sub-paragraph (4) below;
and in this paragraph “the relevant date” means the date of the issue of the shares or, if later, the date when the company or any of its subsidiaries first acquired an interest in the dwelling-house (or the land which comprises the dwelling-house).
F4(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4)
The assumptions as to title are—
(a)
where the dwelling-house is in England and Wales or Northern Ireland and is a house, that the vendor was selling for an estate in fee simple with vacant possession and that the dwelling-house was to be conveyed with the same rights and subject to the same burdens as it would be if conveyed in pursuance of the right to buy legislation;
(b)
where the dwelling-house is in England and Wales or Northern Ireland and is a flat, that the vendor was granting a lease with vacant possession for a term of 125 years at a rent of £10 per annum and that the grant was to be made with the same rights and subject to the same burdens as it would be if made in pursuance of that legislation; and
(c)
where the dwelling-house is in Scotland, that it was available with vacant possession and with no heritable security constituted over any interest in it.
(5)
In sub-paragraph (4) above “the right to buy legislation” means—
(a)
in relation to a dwelling-house in England and Wales, Part V of the M1Housing Act 1985;
(b)
in relation to a dwelling-house in Northern Ireland, Chapter I of Part II of the M2Housing (Northern Ireland) Order 1983;
and “flat” and “house” have the same meanings as in that legislation.
(6)
The Treasury may by order amend sub-paragraph (1) above by substituting a different amount for any amount for the time being specified there.
Unfit and sub-standard dwelling-houses
14
Section 50 of this Act does not apply to—
(a)
a dwelling-house in England and Wales which is unfit for human habitation within the meaning of section 604 of the M3Housing Act 1985 or does not have all the standard amenities within the meaning of section 508 of that Act;
(b)
a dwelling-house in Scotland which does not meet the tolerable standard described, for the purposes of the M4Housing (Scotland) Act 1987, by section 86 of that Act or does not have all the standard amenities described in the first column of Part I of Schedule 18 to that Act; or
(c)
a dwelling-house in Northern Ireland which is unfit for human habitation within the meaning of Article 46 of the M5Housing (Northern Ireland) Order 1981 or does not have all the standard amenities within the meaning of Article 59 of the M6Housing (Northern Ireland) Order 1983.
Dwelling-houses already let etc.
15
(1)
F5Subject to sub-paragraphs (1A) to (1C) below, section 50 of this Act does not apply to a dwelling-house if—
(a)
before the relevant date, the company or any of its subsidiaries had entered into arrangements for letting the whole or any part of the dwelling-house;
(b)
at that date, the whole or any part of the dwelling-house was let; or
(c)
after that date, the whole or any part of the dwelling-house has been let otherwise than on a qualifying tenancy.
F6(1A)
Section 50 of this Act is not precluded from applying to a dwelling-house by sub-paragraph (1)(a) above if the arrangements there mentioned were for letting to a person who was an owner-occupier of the dwelling-house before the relevant date.
(1B)
Section 50 of this Act is not precluded from applying to a dwelling-house by sub-paragraph (1)(b) above if the letting there mentioned was to a person—
(a)
who was an owner-occupier of the dwelling-house before the date of the letting, and
(b)
to whom the dwelling-house or part is let on a qualifying tenancy by the company or any of its subsidiaries after the relevant date.
(1C)
Section 50 of this Act is not precluded from applying to a dwelling-house by sub-paragraph (1)(c) above if the letting there mentioned was to a person—
(a)
who was an owner-occupier of the dwelling-house before the relevant date, and
(b)
to whom the dwelling-house or part is let on a qualifying tenancy by the company or any of its subsidiaries after the letting mentioned in sub-paragraph (1)(c).
(2)
In this paragraph—
“let” includes let under a licence and “letting” shall be construed accordingly;
“the relevant date” means the date when the company or any of its subsidiaries first acquired an interest in the dwelling-house (or the land which comprises the dwelling-house).
F7(3)
For the purposes of this paragraph, a person shall be taken to have been an owner-occupier of a dwelling-house before the relevant date or, as the case may be, the date mentioned in sub-paragraph (1B)(a) above if—
(a)
at any time before that date, he occupied the dwelling-house as his only or principal home and had a freehold interest in it, or
(b)
for a period of at least two years ending on that date, he occupied the dwelling-house as his only or principal home and had an interest in it under a lease for a term of years certain not less than twenty-one of which remained unexpired at that date.
(4)
In the application of sub-paragraph (3) above to a dwelling-house in Scotland—
(a)
for paragraph (a) there shall be substituted—
“(a)
at any time before that date he occupied the dwelling-house and—
(i)
was the absolute owner of it, or
(ii)
was the owner of thedominium utile in it,”; and
(b)
in paragraph (b) the word “certain” shall be omitted.
(5)
In the application of sub-paragraph (3) above to a dwelling-house in Northern Ireland, any conveyance or assignment of an interest in it by way of mortgage shall be disregarded.
Dwelling-houses already qualifying for relief
16
(1)
Section 50 of this Act does not apply to a dwelling-house if—
(a)
a certificate has been issued under section 306(2) of the Taxes Act 1988 (as modified by paragraph 10 above) by some other company (“the other company”); and
(b)
at any time after the issue of the shares to which that certificate related, the conditions mentioned in sub-paragraph (2) below were satisfied in relation to the dwelling-house (or a dwelling-house the whole or any part of which has been converted into or consists of the whole or any part of the dwelling-house).
(2)
The conditions referred to in sub-paragraph (1) above are satisfied in relation to a dwelling-house at any time if, at that time—
(a)
the dwelling-house is a dwelling-house to which section 50 of this Act applies in relation to the other company or any of its subsidiaries; and
(b)
an interest in the dwelling-house is owned by that company or any such subsidiary.
Dwelling-houses qualifying for capital allowances
17
Section 50 of this Act does not apply to a dwelling-house in respect of which the company is entitled to capital allowances under paragraph 2 of Schedule 12 to the M7Finance Act 1982.
Interpretation of certain expressions: Scotland
18
In the application of the above provisions of this Part to Scotland, references to acquiring an interest shall be construed, if there is a contract to acquire the interest, as references to entering into that contract and for the purposes of paragraph 16(2)(b) above, a company or subsidiary shall be regarded as owning an interest during the period between its entering into such a contract as regards that interest and its acquiring the interest.