Part V Transfer of business assets, F3business asset disposal relief and investors' relief

F1 Chapter 3F3business asset disposal relief

169SInterpretation of Chapter

(1)

For the purposes of this Chapter “a business” means anything which—

(a)

is a trade, profession or vocation, and

(b)

is conducted on a commercial basis and with a view to the realisation of profits.

(2)

References in this Chapter to a disposal of an interest in shares in a company include a disposal of an interest in shares treated as made by virtue of section 122.

F2(3)

For the purposes of this Chapter a company is a “personal company” in relation to an individual if—

(a)

the individual holds at least 5% of the ordinary share capital of the company,

(b)

by virtue of that holding, at least 5% of the voting rights in the company are exercisable by the individual, and

(c)

either or both of the following conditions are met—

(i)

by virtue of that holding, the individual is beneficially entitled to at least 5% of the profits available for distribution to equity holders and, on a winding up, would be beneficially entitled to at least 5% of assets so available, or

(ii)

in the event of a disposal of the whole of the ordinary share capital of the company, the individual would be beneficially entitled to at least 5% of the proceeds.

(3A)

In determining whether subsection (3)(c)(ii) applies for the purposes of any provision of this Chapter under which a question arises as to whether or not a company is the individual's personal company at any time in a particular period —

(a)

it is to be assumed that (so far as this is not otherwise the case) the whole of the ordinary share capital is disposed of at that time for a consideration equal to its market value on the final day of the period,

(b)

it is to be assumed that the amount of the proceeds to which the individual would be beneficially entitled at that time is the amount of the proceeds to which, having regard to all the circumstances as they existed at that time, it would be reasonable to expect the person to be beneficially entitled, and

(c)

the effect of any avoidance arrangements is to be ignored.

(3B)

For the purposes of subsection (3A)(c)—

(a)

arrangements are “avoidance arrangements” if the main purpose of, or one of the main purposes of, the arrangements is to secure that any provision of this Chapter applies or does not apply, and

(b)

“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

(3C)

For the purposes of subsection (3) if the individual holds any shares in the company jointly with one or more other persons, the individual is to be treated as the sole holder of so many of them as is proportionate to the value of the individual's share (and references in subsection (3) to the exercise of voting rights or beneficial entitlement are to be read accordingly).

(3D)

A modified version of Chapter 6 of Part 5 of CTA 2010 (group relief: equity holders and profits or assets available for distribution) applies for the purposes of subsection (3) reading references to company A as references to the individual.

(3E)

The reference here to a modified version of Chapter 6 of Part 5 of CTA 2010 is to the provisions of that Chapter having effect as if—

(a)

for the purposes of section 158(1)(b), a person carrying on a business of banking were not a loan creditor of a company in respect of any loan capital or debt issued or incurred by the company for money lent by the person to the company in the ordinary course of that business,

(b)

sections 171(1)(b) and (3), 173, 174 and 176 to 181 were omitted, and

(c)

any modifications were made as are necessary for the purpose of applying that Chapter as if the individual were company A.

(5)

In this Chapter—

“disposal associated with a relevant material disposal” has the meaning given by section 169K,

“disposal of business assets” has the meaning given by section 169I(2),

“disposal of trust business assets” has the meaning given by section 169J,

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

“F3business asset disposal relief” has the meaning given by section 169H(1),

“holding company” has the same meaning as in section 165 (see section 165A),

“material disposal of business assets” has the meaning given by section 169I,

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

“ordinary share capital” has the same meaning as in the Income Tax Acts (see section 989 of ITA 2007),

“qualifying business disposal” has the meaning given by section 169H(2),

“relevant business asset” has the meaning given by section 169L,

“rent”, in relation to an asset, includes any form of consideration given for the use of the asset,

“securities”, in relation to a company, includes any debentures of the company which are deemed by subsection (6) of section 251 to be securities for the purposes of that section,

“settlement business assets” has the meaning given by section 169J(2),

“trade” has the same meaning as in the Income Tax Acts (see section 989 of ITA 2007), F4...

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