Taxation of Chargeable Gains Act 1992

[F1 Supplemental U.K.

Textual Amendments

F1 Pt. 5 Ch. 5 inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 14 para. 2

169VU “Subscribe” etc U.K.

(1) For the purposes of this Chapter (other than this subsection) a person “subscribes for” a share in a company if—

(a) that person subscribes for the share,

(b) the share is issued to that person by the company for consideration consisting wholly of cash,

(c) the share is fully paid up at the time it is issued,

(d) the share is subscribed for, and issued, for genuine commercial reasons and not as part of arrangements the main purpose, or one of the main purposes, of which is to secure a tax advantage to any person, and

(e) the share is subscribed for, and issued, by way of a bargain at arm's length.

(2) In subsection (1) “arrangements” and “tax advantage” have the same meaning as in section 16A.

(3) If—

(a) an individual (“A”) subscribed for, or is treated under this subsection as having subscribed for, any shares,

(b) A transferred the shares to another individual (“B”) during their lives, and

(c) A was living together with B as B's spouse or civil partner at the time of the transfer,

B is to be treated for the purposes of this Chapter as having subscribed for the shares.

(4) Accordingly, for the purposes of this Chapter any period for which A held the shares continuously is to be added to, and treated as part of, the period for which B held the shares continuously.

(5) In this Chapter, apart from subsections (3) and (4), references to a person's having subscribed for a share include the person's having subscribed for the share jointly with any other person (and references to a person's holding a share or to a share being issued to a person are to be read accordingly).

169VV “Trading company” etc U.K.

(1) In this Chapter “trading company” and “the holding company of a trading group” have the same meaning as in section 165 (see section 165A).

(2) For the purposes of this Chapter a company is not to be regarded as ceasing to be a trading company, or the holding company of a trading group, merely because of anything done in consequence of—

(a) the company, or any of its subsidiaries, being in administration or receivership, or

(b) a resolution having been passed, or an order made, for the winding up of the company or any of its subsidiaries.

(3) But subsection (2) applies only if—

(a) the entry into administration or receivership, or the resolution or order for winding up, and

(b) everything done as a result of the company concerned being in administration or receivership, or as a result of that resolution or order,

is for genuine commercial reasons and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.

169VW “Relevant employee” U.K.

(1) This section applies to determine for the purposes of—

(a) section 169VB(2)(g), or

(b) section 169VH(2)(c),

whether a particular person has at any time in the relevant period been a “relevant employee” in respect of the issuing company.

(2) A person who has at any time in the relevant period been an officer or employee of—

(a) the issuing company, or

(b) a connected company,

is to be regarded as having at that time been a relevant employee in respect of the issuing company, but this is subject to subsections (3) and (5).

(3) If—

(a) a person is an unremunerated director of the issuing company or a connected company at any time in the relevant period, and

(b) the condition in subsection (4) is met,

the fact that the person holds that directorship at that time does not make the person a relevant employee in respect of the issuing company at that time.

(4) The condition referred to in subsection (3) is that at no time before the relevant period had the person mentioned in that subsection, or a person connected with that person, been—

(a) connected with the issuing company, or

(b) involved in carrying on (whether on the person's own account or as a partner, director or employee) the whole or any part of the trade, business or profession carried on by the issuing company or a company connected with that company.

(5) If—

(a) a person becomes an employee of the issuing company or a connected company at a time which is—

(i) within the relevant period, but

(ii) not within the first 180 days of that period,

(b) at the beginning of the relevant period, there was no reasonable prospect that the person would become such an employee within the relevant period, and

(c) the person is not at any time in the relevant period a director of the issuing company or a connected company,

that employment of the person does not make the person a relevant employee in respect of the issuing company at any time in the relevant period.

(6) For the purposes of subsection (5) there is a “reasonable prospect” of a thing if it is more likely than not.

(7) In this section—

• “director” is to be read in accordance with section 452 of CTA 2010,

• “connected company” means a company which at any time in the relevant period is connected with the issuing company (and it does not matter for this purpose whether that time is a time when the person in question is an officer or employee of either company);

• “the issuing company” means the company mentioned in (as the case may be) section 169VB(2)(g) or section 169VH(2)(c);

• “the relevant period” means the period mentioned in (as the case may be) section 169VB(2)(g) or section 169VH(2)(c);

• “unremunerated director” has the meaning given by section 169VX.

169VX “Unremunerated director” U.K.

(1) For the purposes of section 169VW a person (“the person concerned”) is an “unremunerated director” of the issuing company or a connected company at a particular time in the relevant period if that person is a director of that company at that time and—

(a) does not receive in the relevant period any disqualifying payment from the issuing company or a related person, and

(b) is not entitled to receive any such payment in respect of that period or any part of it.

(2) In this section “disqualifying payment” means any payment other than—

(a) a payment or reimbursement of travelling or other expenses wholly, exclusively and necessarily incurred by the person concerned in the performance of his or her duties as a director,

(b) any interest which represents no more than a reasonable commercial return on money lent to the issuing company or a related person,

(c) any dividend or other distribution which does not exceed a normal return on the investment to which the dividend or distribution relates,

(d) any payment for the supply of goods which does not exceed their market value,

(e) any payment of rent for any property occupied by the issuing company or a related person which does not exceed a reasonable and commercial rent for the property, or

(f) any necessary and reasonable remuneration which is—

(i) paid for qualifying services that are provided to the issuing company or a related person in the course of a trade or profession carried on wholly or partly in the United Kingdom, and

(ii) taken into account in calculating for tax purposes the profits of that trade or profession.

(3) In this section a “related person” means—

(a) a connected company of which the person concerned is a director, or

(b) any person connected with the issuing company or with a company within paragraph (a).

(4) In this section any reference to a payment to the person concerned includes a payment made to that person indirectly or to that person's order or for that person's benefit.

(5) In this section “qualifying services” means services which are—

(a) not secretarial or managerial services, and

(b) not services of a kind provided by the person to whom they are provided.

(6) In this section the following expressions have the same meaning as in section 169VW—

• “connected company”;

• “director”;

• “issuing company”;

• “relevant period”.

169VY General definitions U.K.

In this Chapter—

• “employee” (except in the expression “relevant employee”, which is to be read in accordance with section 169VW) has the meaning given by section 4 of ITEPA 2003;

• “employment” has the meaning given by section 4 of ITEPA 2003;

• “exchange of shares” is to be read in accordance with section 169VR(3);

• “excluded share” has the meaning given by section 169VB;

• a “holding” of shares in a company means a holding of such shares which by virtue of section 104(1) is to be regarded as a single asset;

• “investors' relief” has the meaning given by section 169VA(3);

• “office” has the meaning given by section 5(3) of ITEPA 2003;

• “ordinary shares”, in relation to a company, means any shares forming part of the company's ordinary share capital (within the meaning given by section 989 of ITA 2007);

• “potentially qualifying share” has the meaning given by section 169VB;

• “qualifying person” has the meaning given by section 169VC(7);

• “qualifying share” has the meaning given by section 169VB;

• “subscribe” is to be read in accordance with section 169VU;

• “trading company” and “the holding company of a trading group” are to be read in accordance with section 169VV.]