Finance Act 1988

Part I U.K. Modifications Made by Section 50

Preliminary U.K.

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 U.K.

2 (1) In subsection (1) of section 289 (relief under the business expansion scheme), for paragraph (a) there shall be substituted—

“(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) In subsection (8) of that section, for paragraph (a) there shall be substituted—

“(a) in a case falling within subsection (1)(a) unless and until the company has carried on the activities for four months;”

(3) For subsection (9) of that section there shall be substituted—

“(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 U.K.

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 U.K.

4 In section 291 (individuals qualifying for relief), after subsection (1) there shall be inserted—

“(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 U.K.

5 Section 292 (parallel trades) shall be omitted.

Qualifying companies U.K.

6 (1) For subsection (2) of section 293 (qualifying companies) there shall be substituted—

“(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. U.K.

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. U.K.

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 U.K.

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) In subsection (4) of that section, for paragraph (a) there shall be substituted—

“(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 U.K.

10 In subsections (2) and (3) of section 306 (claims), for the words “the trade” there shall be substituted the words “the activities”.

Subsidiaries U.K.

[F1 11 (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;”.]

Textual Amendments

F1 Sch. 4 para. 11 as set out above substituted for para. 11 as originally enacted (retrospectively and to be taken always to have had effect) by Finance (No. 2) Act 1992 (c. 48), s.39 (enacted 16.7.1992).

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)”.