F1SCHEDULE A1 Application of taper relief
F2Meaning of “material interest”
6A
(1)
For the purposes of paragraph 6 above, a material interest in a company means possession of, or the ability to control (directly or through the medium of other companies or by any other indirect means),—
(a)
more than 10% of the issued shares in the company of any particular class,
(b)
more than 10% of the voting rights in the company,
(c)
such rights as would, if the whole of the income of the company were distributed among the participators (without regard to any rights of any person as a loan creditor) give an entitlement to receive more than 10% of the amount distributed, or
(d)
such rights as would, in the event of the winding up of the company or in any other circumstances, give an entitlement to receive more than 10% of the assets of the company which would then be available for distribution among the participators.
(2)
For the purposes of sub-paragraph (1) above a right to acquire shares or rights (however arising) shall be treated as a right to control them.
(3)
A person shall be treated for the purposes of this paragraph as having a right to acquire any shares or rights—
(a)
which he is entitled to acquire at a future date, or
(b)
which he will at a future date be entitled to acquire.
(4)
Where—
(a)
in the case of any shares or rights, an entitlement falling within sub-paragraph (3)(a) or (b) above is conferred on a person by a contract, but
(b)
the contract is conditional,
the person shall be treated for the purposes of this paragraph as having a right to acquire the shares or rights as from the time at which the contract is made.
(5)
In any case where—
(a)
the shares of any particular class attributed to a person consist of or include shares which he or another person has a right to acquire, and
(b)
the circumstances are such that if that right were to be exercised the shares acquired would be shares which were previously unissued and which the company is contractually bound to issue in the event of the exercise of the right,
then in determining at any time prior to the exercise of the right whether the number of shares of that class attributed to the person exceeds a particular percentage of the issued shares of that class, the number of issued shares of that class shall be taken to be increased by the number of unissued shares referred to in paragraph (b) above.
(6)
The references in sub-paragraph (5) above to the shares of any particular class attributed to a person are to the shares which in accordance with sub-paragraph (1)(a) above fall to be brought into account in his case to determine whether their number exceeds a particular percentage of the issued shares of the company of that class.
(7)
Sub-paragraphs (5) and (6) above shall apply, with the necessary modifications, in relation to—
(a)
voting rights in the company (and attribution of such rights to a person in accordance with sub-paragraph (1)(b) above),
(b)
rights which would, if the whole of the income of the company were distributed among the participators (without regard to any rights of any person as a loan creditor) give an entitlement to receive any of the amount distributed (and attribution of such rights to a person in accordance with sub-paragraph (1)(c) above), and
(c)
rights which would, in the event of the winding up of the company or in any other circumstances, give an entitlement to receive any of the assets of the company which would then be available for distribution among the participators (and attribution of such rights to a person in accordance with sub-paragraph (1)(d) above),
as they apply in relation to shares of any particular class (and their attribution to a person in accordance with sub-paragraph (1)(a) above).
(8)
For the purposes of this paragraph “participator” and “loan creditor” have the meaning given by section 417 of the Taxes Act.