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1(1)Section 126 of the M1 Capital Gains Tax Act 1979 shallbe amended as follows.
(2)For subsection (1) there shall be substituted—
“(1)If—
(a)an individual (in this section referred to as “the transferor”) makesa disposal otherwise than under a bargain at arm’s length of an asset withinsubsection (1A) below, and
(b) a claim for relief under this section is made by the transferor and theperson who acquires the asset (in this section referred to as “thetransferee”) or, where the trustees of a settlement are the transferee, bythe transferor alone,
then, subject to subsection (2) and sections 126A and 126B below,subsection (3) below shall apply in relation to the disposal.
(1A)An asset is within this subsection if—
(a)it is, or is an interest in, an asset used for the purposes of a trade,profession or vocation carried on by—
(i)the transferor, or
(ii)his family company, or
(iii)a member of a trading group of which the holding company is his familycompany, or
(b)it consists of shares or securities of a trading company, or of theholding company of a trading group, where—
(i)the shares or securities are neither quoted on a recognised stock exchangenor dealt in on the Unlisted Securities Market, or
(ii)the trading company or holding company is the transferor’s family company.”
(3)At the end of subsection (2) there shall be added the words “or
(c)in the case of a disposal of qualifying corporate bonds within the meaningof section 64 of the Finance Act 1984, a gain is deemed to accrue by virtueof paragraph 10(1)(b) of Schedule 13 to that Act, or
(d)subsection (3) of section 147A below applies in relation to the disposal(or would apply if a claim for relief were duly made under that section).”
(4)In subsection (7)—
(a)in paragraph (a), for the words “has the meaning” there shall besubstituted the words “, “holding company”, “trading company” and “trading group” have the meanings”, and
(b)paragraph (b) shall be omitted.
(5)After subsection (8) there shall be added—
“(9)Where a disposal in respect of which a claim is made under this sectionis (or proves to be) a chargeable transfer for inheritance tax purposes, thereshall be allowed as a deduction in computing (for capital gains tax purposes)the chargeable gain accruing to the transferee on the disposal of the assetin question an amount equal to whichever is the lesser of—
(a)the inheritance tax attributable to the value of the asset, and
(b)the amount of the chargeable gain as computed apart from this subsection,
and, in the case of a disposal which, being a potentially exempttransfer, proves to be a chargeable transfer, all necessary adjustments shallbe made, whether by the discharge or repayment of capital gains tax orotherwise.
(10)Where an amount of inheritance tax—
(a)falls to be redetermined in consequence of the transferor’s death withinseven years of making the chargeable transfer in question, or
(b)is otherwise varied,
after it has been taken into account under subsection (9) above, allnecessary adjustments shall be made, whether by the making of an assessmentto capital gains tax or by the discharge or repayment of such tax.”
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