Finance Act 1998

After section 59DA of the M24Taxes Management Act 1970 there shall be inserted—

“59E Further provision as to when corporation tax is due and payable.

(1)

The Treasury may by regulations make provision, in relation to companies of such descriptions as may be prescribed, for or in connection with treating amounts of corporation tax for an accounting period as becoming due and payable on dates which fall on or before the date on which corporation tax for that period would become due and payable apart from this section.

(2)

Without prejudice to the generality of subsection (1) above, regulations under this section may make provision—

(a)

for or in connection with the determination of amounts of corporation tax which are treated as becoming due and payable under the regulations;

(b)

for or in connection with the determination of the dates on which amounts of corporation tax are treated as becoming due and payable under the regulations;

(c)

for or in connection with the making of payments to the Board in respect of amounts of corporation tax which are treated as becoming due and payable under the regulations;

(d)

for or in connection with the determination of the amount of any such payments as are mentioned in paragraph (c) above;

(e)

for or in connection with the determination of the dates on which any such payments as are mentioned in paragraph (c) above become due and payable;

(f)

for or in connection with any assumptions which are to be made for any purposes of the regulations;

(g)

for or in connection with the payment to the Board of interest on amounts of corporation tax which are treated as becoming due and payable under the regulations;

(h)

for or in connection with the repayment of amounts paid under the regulations;

(i)

for or in connection with the payment of interest by the Board on amounts paid or repaid under the regulations;

(j)

with respect to the furnishing of information to the Board;

(k)

with respect to the keeping, production or inspection of any books, documents or other records;

(l)

for or in connection with the imposition of such requirements as the Treasury think necessary or expedient for any purposes of the regulations;

(m)

for or in connection with appeals in relation to questions arising under the regulations.

(3)

Regulations under this section may make provision—

(a)

for amounts of corporation tax for an accounting period to be treated as becoming due and payable on dates which fall within the accounting period;

(b)

for payments in respect of any such amounts of corporation tax for an accounting period as are mentioned in paragraph (a) above to become due and payable on dates which fall within the accounting period.

(4)

Where interest is charged by virtue of regulations under this section on any amounts of corporation tax for an accounting period which are treated as becoming due and payable under the regulations, the company shall, in such circumstances as may be prescribed, be liable to a penalty not exceeding twice the amount of that interest.

(5)

Regulations under this section—

(a)

may make such modifications of any provisions of the Taxes Acts, or

(b)

may apply such provisions of the Taxes Acts,

as the Treasury think necessary or expedient for or in connection with giving effect to the provisions of this section.

(6)

Regulations under this section which apply any provisions of the Taxes Acts may apply those provisions either without modifications or with such modifications as the Treasury think necessary or expedient for or in connection with giving effect to the provisions of this section.

(7)

Regulations under this section—

(a)

may make different provision for different purposes, cases or circumstances;

(b)

may make different provision in relation to companies or accounting periods of different descriptions;

(c)

may make such supplementary, incidental, consequential or transitional provision as appears to the Treasury to be necessary or expedient.

(8)

Subject to subsection (9) below, regulations under this section may make provision in relation to accounting periods beginning before (as well as accounting periods beginning on or after) the date on which the regulations are made.

(9)

Regulations under this section may not make provision in relation to accounting periods ending before the day appointed under section 199 of the M25Finance Act 1994 for the purposes of Chapter III of Part IV of that Act (corporation tax self-assessment).

(10)

In this section—

“modifications” includes amendments, additions and omissions;

“prescribed” means prescribed by regulations made under this section.

(11)

Any reference in this section to corporation tax includes a reference—

(a)

to any amount due from a company under section 419 of the principal Act (loans to participators etc) as if it were an amount of corporation tax chargeable on the company;

(b)

to any sum chargeable on a company under section 747(4)(a) of the principal Act (controlled foreign companies) as if it were an amount of corporation tax.”

After subsection (5) there shall be inserted—

“(5A)

Paragraph (b) of subsection (5) above does not apply in relation to interest payable to a company within the charge to corporation tax.”

In section 156 of the M29Taxation of Chargeable Gains Act 1992 (replacement of business assets: buildings and land), for subsection (4) substitute—

“(4)

Where section 98 of the Taxes Act applies (tied premises: receipts and expenses treated as those of trade), the trader shall be treated, to the extent that the conditions in subsection (1) of that section are met in relation to premises, as occupying as well as using the premises for the purposes of the trade.”.

After subsection (5) of section 120 (increase of expenditure by reference to tax charged in relation to shares) there shall be inserted the following subsections—

“(5A)

Where an amount is chargeable to tax under section 140A of the Taxes Act in respect of—

(a)

the acquisition or disposal of any interest in shares, or

(b)

any interest in shares ceasing to be only conditional,

the relevant amount is a sum equal to the amount so chargeable.

(5B)

Where an amount is chargeable to tax under section 140D of the Taxes Act in respect of the conversion of shares, the relevant amount is a sum equal to the amount so chargeable.”

After that subsection there shall be inserted the following subsection—

“(8)

For the purposes of subsection (5A) above this section shall have effect as if references in this section to shares included anything referred to as shares in section 140A of the Taxes Act.”

After section 149A there shall be inserted the following section—

“149B Employee incentive schemes: conditional interests in shares.

(1)

Where—

(a)

an individual has acquired an interest in any shares or securities which is only conditional,

(b)

that interest is one which for the purposes of section 140A of the Taxes Act is taken to have been acquired by him as a director or employee of a company, and

(c)

by virtue of section 17(1)(b) the acquisition of that interest would, apart from this section, be an acquisition for a consideration equal to the market value of the interest,

section 17 shall not apply for calculating the consideration.

(2)

Instead, the consideration for the acquisition shall be taken (subject to section 120) to be equal to the actual amount or value of the consideration given for that interest as computed in accordance with section 140B of the Taxes Act.

(3)

This section shall apply in relation only to the individual making the acquisition and, accordingly, shall be disregarded in calculating the consideration received by the person from whom the interest is acquired.

(4)

Expressions used in this section and in section 140A of the Taxes Act have the same meanings in this section as in that section.”

In section 158 of the Taxes Act 1988 (car fuel) for the Tables in subsection (2) (tables of cash equivalents) there shall be substituted—

“ TABLE A

Cylinder capacity of car in cubic centimetres	Cash equivalent
1,400 or less	£1,010
More than 1,400 but not more than 2,000	£1,280
More than 2,000	£1,890

TABLE AB

Cylinder capacity of car in cubic centimetres	Cash equivalent
2,000 or less	£1,280
More than 2,000	£1,890

TABLE B

Description of car	Cash equivalent
Any car	£1,890”

In section 9 of the M38Taxes Management Act 1970 (self-assessment), in subsection (1), for “subsection (2)" there shall be substituted “ subsections (1A) and (2) ”; and after that subsection there shall be inserted the following subsection—

“(1A)

The tax to be assessed on a person by a self-assessment shall not include any tax which, under Chapter I or IV of Part XIV of the principal Act, is charged on the administrator of a scheme (within the meaning of section 658A of that Act) and is assessable by the Board in accordance with that section.”

For section 798 of the Taxes Act 1988 there shall be substituted the following section—

“798 Restriction of relief on certain interest and dividends.

(1)

This section applies where—

(a)

in any chargeable period the profits of a trade carried on by a qualifying taxpayer include an amount computed in accordance with section 795 in respect of foreign interest or foreign dividends;

(b)

the taxpayer is entitled in accordance with this Chapter to credit for foreign tax on the foreign interest or foreign dividends; and

(c)

in the case of foreign dividends, the foreign tax mentioned in paragraph (b) above is or includes underlying tax.

(2)

The amount of the credit for foreign tax referred to in subsection (1)(b) above which, in accordance with this Chapter, is to be allowed against income tax or corporation tax—

(a)

shall be limited by treating the amount of the foreign interest or foreign dividends (as increased or reduced under section 798A) as reduced (or further reduced) for the purposes of this Chapter by an amount equal to the taxpayer’s financial expenditure in relation to the interest or dividends (as determined in accordance with section 798B); and

(b)

so far as the credit relates to foreign tax on interest or foreign tax on dividends which is not underlying tax, shall not exceed 15 per cent. of the interest or dividends, computed without regard to paragraph (a) above or to any increase or reduction under section 798A.

(3)

In this section and sections 798A and 798B—

“interest”, in relation to a loan, includes any introductory or other fee or charge which is payable in accordance with the terms on which the loan is made or is otherwise payable in connection with the making of the loan;

“foreign dividends” means dividends payable out of or in respect of the stocks, funds, shares or securities of a body of persons not resident in the United Kingdom;

“foreign interest” means interest payable by a person not resident in the United Kingdom or by a government or public or local authority in a country outside the United Kingdom.

(4)

In this section and section 798B “qualifying taxpayer” means, subject to subsection (5) below, a person carrying on a trade which includes the receipt of interest or dividends and is not an insurance business.

(5)

Where a company which is connected or associated with a qualifying taxpayer is acting in accordance with a scheme or arrangement the purpose, or one of the main purposes, of which is to prevent or restrict the application of this section to the taxpayer—

(a)

the company shall be treated for the purposes of this section as a qualifying taxpayer; and

(b)

any foreign interest or foreign dividends received in pursuance of the scheme or arrangement shall be treated for those purposes as profits of a trade carried on by the company.

(6)

For the purposes of this section and section 798B—

(a)

section 839 applies; and

(b)

subsection (10) of section 783 applies as it applies for the purposes of that section.”

In paragraph 9 (activities which constitute investment business) for sub-paragraph (1A) (definition of “intellectual property") there shall be substituted—

“(1A)

In sub-paragraph (1)(a) above “intellectual property” includes (in particular)—

(a)

any industrial, commercial or scientific information, knowledge or expertise;

(b)

any patent, trade mark, registered design, copyright or design right;

(c)

any licence or other right in respect of intellectual property;

(d)

any rights under the law of a country outside the United Kingdom which correspond or are similar to those falling within paragraph (b) or (c) above.”

In paragraph 11(1) (activities which constitute wholesale, distributive or financial business) for paragraph (c) (banking or any similar business involving the receipt of deposits, loans or both and the making of loans or investments) there shall be substituted—

“(c)

banking, deposit-taking, money-lending or debt-factoring, or any business similar to banking, deposit-taking, money-lending or debt-factoring;”.

In section 13 of that Act (attribution of gains to non-resident companies), the following subsection shall be inserted after subsection (11)—

“(11A)

For the purposes of this section the amount of the gain or loss accruing at any time to a company that is not resident in the United Kingdom shall be computed (where it is not the case) as if that company were within the charge to corporation tax on capital gains.”

For subsection (4) of that section there shall be substituted the following subsection—

“(4)

For the purposes of this Chapter securities of a company which are held—

(a)

by a person who acquired them as an employee of the company or of any other person, and

(b)

on terms which for the time being restrict his right to dispose of them,

shall (notwithstanding that they would otherwise fall to be treated as of the same class) be treated as of a different class from any securities acquired by him otherwise than as an employee of the company or of any other person and also from any shares that are not held subject to restrictions, or the same restrictions, on disposal or in the case of which the restrictions are no longer in force.”

After section 106 of the M49Taxation of Chargeable Gains Act 1992 there shall be inserted the following section—

“106A Identification of securities: general rules for capital gains tax.

(1)

This section has effect for the purposes of capital gains tax (but not corporation tax) where any securities are disposed of by any person.

(2)

The securities disposed of shall be identified in accordance with the following provisions of this section with securities of the same class that have been acquired by the person making the disposal.

(3)

The provisions of this section have effect in the case of any disposal notwithstanding that some or all of the securities disposed of are otherwise identified—

(a)

by the disposal, or

(b)

by a transfer or delivery giving effect to it;

but where a person disposes of securities in one capacity, they shall not be identified under those provisions with any securities which he holds, or can dispose of, only in some other capacity.

(4)

Securities disposed of on an earlier date shall be identified before securities disposed of on a later date; and, accordingly, securities disposed of by a later disposal shall not be identified with securities already identified as disposed of by an earlier disposal.

(5)

Subject to subsection (4) above, if within the period of thirty days after the disposal the person making it acquires securities of the same class, the securities disposed of shall be identified—

(a)

with securities acquired by him within that period, rather than with other securities; and

(b)

with securities acquired at an earlier time within that period, rather than with securities acquired at a later time within that period.

(6)

Subject to subsections (4) and (5) above, securities disposed of shall be identified with securities acquired at a later time, rather than with securities acquired at an earlier time.

(7)

Subsection (6) above shall not require securities to be identified with particular securities comprised in a section 104 holding or a 1982 holding.

(8)

Accordingly, that subsection shall have effect for determining whether, and to what extent, any securities should be identified with the whole or any part of a section 104 holding or a 1982 holding—

(a)

as if the time of the acquisition of a section 104 holding were the time when it first came into being; and

(b)

as if 31st March 1982 were the time of the acquisition of a 1982 holding.

(9)

The identification rules set out in the preceding provisions of this section have effect subject to subsection (1) of section 105, and securities disposed of shall not be identified with securities acquired after the disposal except in accordance with that section or subsection (5) above.

(10)

In this section—

“1982 holding” has the same meaning as in section 109;

“securities” means any securities within the meaning of section 104 or any relevant securities within the meaning of section 108.

(11)

For the purposes of this section securities of a company shall not be treated as being of the same class unless they are so treated by the practice of a recognised stock exchange, or would be so treated if dealt with on that recognised stock exchange.”

In subsection (1) of section 105 of that Act (disposal and acquisition on the same day), for “The following provisions" there shall be substituted “ Paragraphs (a) and (b) below ”; and for subsection (2) of that section there shall be substituted the following subsection—

“(2)

Where the quantity of securities disposed of by any person exceeds the aggregate quantity of—

(a)

the securities (if any) which are required by subsection (1) above to be identified with securities acquired on the day of the disposal,

(b)

the securities (if any) which are required by any of the provisions of section 106 or 106A(5) to be identified with securities acquired after the day of the disposal, and

(c)

the securities (if any) which are required by any of the provisions of sections 104, 106, 106A or 107, or of Schedule 2, to be identified with securities acquired before the day of the disposal,

the disposal shall be treated as diminishing a quantity of securities subsequently acquired, and as so diminishing any quantity so acquired at an earlier date, rather than one so acquired at a later date.”

In section 107 of that Act (general identification rules) for subsections (1) and (2) there shall be substituted the following subsections—

“(1)

This section has effect for the purposes of corporation tax where any securities are disposed of by a company.

(1A)

The securities disposed of shall be identified in accordance with the following provisions of this section with securities of the same class that have been acquired by the company making the disposal and could be comprised in that disposal.

(2)

The provisions of this section have effect in the case of any disposal notwithstanding that some or all of the securities disposed of are otherwise identified—

(a)

by the disposal, or

(b)

by a transfer or delivery giving effect to it;

but where a company disposes of securities in one capacity, they shall not be identified with securities which it holds, or can dispose of, only in some other capacity.”

In section 108 of that Act (relevant securities), at the beginning there shall be inserted the following subsection—

“A1

This section has effect for the purposes of corporation tax where any relevant securities are disposed of by a company.”

For sections 141 and 142 of the M53Taxation of Chargeable Gains Act 1992 (stock dividends) there shall be substituted the following section—

“142 Capital gains on stock dividends.

(1)

This section applies where any share capital to which section 249 of the Taxes Act applies is issued as mentioned in subsection (4), (5) or (6) of that section in respect of shares in the company held by any person.

(2)

The case shall not constitute a reorganisation of the company’s share capital for the purposes of sections 126 to 128.

(3)

The person who acquires the share capital by means of its issue shall (notwithstanding section 17(1)) be treated for the purposes of section 38(1)(a) as having acquired that asset for a consideration equal to the appropriate amount in cash (within the meaning of section 251(2) to (4) of the Taxes Act).”

After section 10 of the M54Taxation of Chargeable Gains Act 1992 there shall be inserted the following section—

“10A Temporary non-residents.

(1)

This section applies in the case of any individual (“the taxpayer") if—

(a)

he satisfies the residence requirements for any year of assessment (“the year of return");

(b)

he did not satisfy those requirements for one or more years of assessment immediately preceding the year of return but there are years of assessment before that year for which he did satisfy those requirements;

(c)

there are fewer than five years of assessment falling between the year of departure and the year of return; and

(d)

four out of the seven years of assessment immediately preceding the year of departure are also years of assessment for each of which he satisfied those requirements.

(2)

Subject to the following provisions of this section and section 86A, the taxpayer shall be chargeable to capital gains tax as if—

(a)

all the chargeable gains and losses which (apart from this subsection) would have accrued to him in an intervening year,

(b)

all the chargeable gains which under section 13 or 86 would be treated as having accrued to him in an intervening year if he had been resident in the United Kingdom throughout that intervening year, and

(c)

any losses which by virtue of section 13(8) would have been allowable in his case in any intervening year if he had been resident in the United Kingdom throughout that intervening year,

were gains or, as the case may be, losses accruing to the taxpayer in the year of return.

(3)

Subject to subsection (4) below, the gains and losses which by virtue of subsection (2) above are to be treated as accruing to the taxpayer in the year of return shall not include any gain or loss accruing on the disposal by the taxpayer of any asset if—

(a)

that asset was acquired by the taxpayer at a time in the year of departure or any intervening year when he was neither resident nor ordinarily resident in the United Kingdom;

(b)

that asset was so acquired otherwise than by means of a relevant disposal which by virtue of section 58, 73 or 258(4) is treated as having been a disposal on which neither a gain nor a loss accrued;

(c)

that asset is not an interest created by or arising under a settlement; and

(d)

the amount or value of the consideration for the acquisition of that asset by the taxpayer does not fall, by reference to any relevant disposal, to be treated as reduced under section 23(4)(b) or (5)(b), 152(1)(b), 162(3)(b) or 247(2)(b) or (3)(b).

(4)

Where—

(a)

any chargeable gain that has accrued or would have accrued on the disposal of any asset (“the first asset”) is a gain falling (apart from this section) to be treated by virtue of section 116(10) or (11), 134 or 154(2) or (4) as accruing on the disposal of the whole or any part of another asset, and

(b)

the other asset is an asset falling within paragraphs (a) to (d) of subsection (3) above but the first asset is not,

subsection (3) above shall not exclude that gain from the gains which by virtue of subsection (2) above are to be treated as accruing to the taxpayer in the year of return.

(5)

The gains and losses which by virtue of subsection (2) above are to be treated as accruing to the taxpayer in the year of return shall not include any chargeable gain or allowable loss accruing to the taxpayer in an intervening year which, in the taxpayer’s case, has fallen to be brought into account for that year by virtue of section 10 or 16(3).

(6)

The reference in subsection (2)(c) above to losses allowable in an individual’s case in an intervening year is a reference to only so much of the aggregate of the losses that would have been available in accordance with subsection (8) of section 13 for reducing gains accruing by virtue of that section to that individual in that year as does not exceed the amount of the gains that would have accrued to him in that year if it had been a year throughout which he was resident in the United Kingdom.

(7)

Where this section applies in the case of any individual, nothing in any enactment imposing any limit on the time within which an assessment to capital gains tax may be made shall prevent any such assessment for the year of departure from being made in the taxpayer’s case at any time before the end of two years after the 31st January next following the year of return.

(8)

In this section—

“intervening year” means any year of assessment which, in a case where the conditions in paragraphs (a) to (d) of subsection (1) above are satisfied, falls between the year of departure and the year of return;

“relevant disposal”, means a disposal of an asset acquired by the person making the disposal at a time when that person was resident or ordinarily resident in the United Kingdom; and

“the year of departure” means the last year of assessment before the year of return for which the taxpayer satisfied the residence requirements.

(9)

For the purposes of this section an individual satisfies the residence requirements for a year of assessment if that year of assessment is one during any part of which he is resident in the United Kingdom or during which he is ordinarily resident in the United Kingdom.

(10)

This section is without prejudice to any right to claim relief in accordance with any double taxation relief arrangements.”

In section 96 of that Act (payments by and to companies), after subsection (9) there shall be inserted the following subsections—

“(9A)

For the purposes of this section an individual shall be deemed to have been resident in the United Kingdom at any time in any year of assessment which in his case is an intervening year for the purposes of section 10A.

(9B)

If—

(a)

it appears after the end of any year of assessment that any individual is to be treated by virtue of subsection (9A) above as having been resident in the United Kingdom at any time in that year, and

(b)

as a consequence, any adjustments fall to be made to the amounts of tax taken to have been chargeable by virtue of this section on any person,

nothing in any enactment limiting the time for the making of any claim or assessment shall prevent the making of those adjustments (whether by means of an assessment, an amendment of an assessment, a repayment of tax or otherwise).”

The subsections inserted after subsection (1) are as follows—

“(1A)

Subject to subsection (3) below, subsection (1) above does not apply if—

(a)

the settlement falls within subsection (1B) below; or

(b)

the property comprised in the settlement is or includes property deriving directly or indirectly from a settlement falling within that subsection.

(1B)

A settlement falls within this subsection if there has been a time when the trustees of that settlement—

(a)

were not resident or ordinarily resident in the United Kingdom; or

(b)

fell to be regarded for the purposes of any double taxation relief arrangements as resident in a territory outside the United Kingdom.”

The subsection inserted after subsection (2) is as follows—

“(3)

Subsection (1A) above shall not prevent subsection (1) above from applying where the disposal in question is a disposal in consideration of obtaining settled property that is treated as made under subsection (2) above.”

After section 86 of the M56Taxation of Chargeable Gains Act 1992 there shall be inserted the following section—

“86A Attribution of gains to settlor in section 10A cases.

(1)

Subsection (2) below applies in the case of a person who is a settlor in relation to any settlement (“the relevant settlement") where—

(a)

by virtue of section 10A, amounts falling within section 86(1)(e) for any intervening year or years would (apart from this section) be treated as accruing to the settlor in the year of return; and

(b)

there is an excess of the relevant chargeable amounts for the non-residence period over the amount of the section 87 pool at the end of the year of departure.

(2)

Only so much (if any) of—

(a)

the amount falling within section 86(1)(e) for the intervening year, or

(b)

if there is more than one intervening year, the aggregate of the amounts falling within section 86(1)(e) for those years,

as exceeds the amount of the excess mentioned in subsection (1)(b) above shall fall in accordance with section 10A to be attributed to the settlor for the year of return.

(3)

In subsection (1) above, the reference to the relevant chargeable amounts for the non-residence period is (subject to subsection (5) below) a reference to the aggregate of the amounts on which beneficiaries of the relevant settlement are charged to tax under section 87 or 89(2) for the intervening year or years in respect of any capital payments received by them.

(4)

In subsection (1) above, the reference to the section 87 pool at the end of the year of departure is (subject to subsection (5) below) a reference to the amount (if any) which, in accordance with subsection (2) of that section, fell in relation to the relevant settlement to be carried forward from the year of departure to be included in the amount of the trust gains for the year of assessment immediately following the year of departure.

(5)

Where the property comprised in the relevant settlement has at any time included property not originating from the settlor, only so much (if any) of any capital payment or amount carried forward in accordance with section 87(2) as, on a just and reasonable apportionment, is properly referable to property originating from the settlor shall be taken into account for the purposes of subsections (3) and (4) above.

(6)

Where any reduction falls to be made by virtue of subsection (2) above in any amount to be attributed in accordance with section 10A to any settlor for any year of assessment, the reduction to be treated as made for that year in accordance with section 87(3) in the case of the settlement in question shall not be made until—

(a)

the reduction (if any) falling to be made by virtue of that subsection has been made in the case of every settlor to whom any amount is so attributed; and

(b)

effect has been given to any reduction required to be made under subsection (7) below.

(7)

Where in the case of any settlement there is (after the making of any reduction or reductions in accordance with subsection (2) above) any amount or amounts falling in accordance with section 10A to be attributed for any year of assessment to settlors of the settlement, the amount or (as the case may be) aggregate amount falling in accordance with that section to be so attributed shall be applied in reducing the amount carried forward to that year in accordance with section 87(2).

(8)

Where an amount or aggregate amount has been applied, in accordance with subsection (7) above, in reducing the amount which in the case of any settlement is carried forward to any year in accordance with section 87(2), that amount (or, as the case may be, so much of it as does not exceed the amount which it is applied in reducing) shall be deducted from the amount used for that year for making the reduction under section 87(3) in the case of that settlement.

(9)

Expressions used in this section and section 10A have the same meanings in this section as in that section; and paragraph 8 of Schedule 5 shall apply for the construction of the references in subsection (5) above to property originating from the settlor as it applies for the purposes of that Schedule.”

For sub-paragraph (7) of that paragraph, there shall be substituted the following sub-paragraph—

“(7)

In this paragraph—

“child” includes a stepchild; and

“grandchild” means a child of a child.”

In paragraph 9 of Schedule 5 to the M58Taxation of Chargeable Gains Act 1992 (which sets out when a settlement is a qualifying settlement for the purposes of the attribution of gains to the settlor), after sub-paragraph (1) there shall be inserted the following sub-paragraphs—

“(1A)

Subject to sub-paragraph (1B) below, a settlement created before 19th March 1991 is a qualifying settlement for the purposes of section 86 and this Schedule in—

(a)

the year 1999-00, and

(b)

subsequent years of assessment.

(1B)

Where a settlement created before 19th March 1991 is a protected settlement immediately after the beginning of 6th April 1999, that settlement shall be treated as a qualifying settlement for the purposes of section 86 and this Schedule in a year of assessment mentioned in sub-paragraph (1A)(a) or (b) above only if—

(a)

any of the five conditions set out in subsections (3) to (6A) below becomes fulfilled as regards the settlement in that year; or

(b)

any of those five conditions became so fulfilled in any previous year of assessment ending after 19th March 1991.”

After sub-paragraph (6) of that paragraph there shall be inserted the following sub-paragraph—

“(6A)

The fifth condition is that the settlement ceases to be a protected settlement at any time on or after 6th April 1999.”

After sub-paragraph (10) of that paragraph there shall be inserted the following sub-paragraphs—

“(10A)

Subject to sub-paragraph (10B) below, a settlement is a protected settlement at any time in a year of assessment if at that time the beneficiaries of that settlement are confined to persons falling within some or all of the following descriptions, that is to say—

(a)

children of a settlor or of a spouse of a settlor who are under the age of eighteen at that time or who were under that age at the end of the immediately preceding year of assessment;

(b)

unborn children of a settlor, of a spouse of a settlor, or of a future spouse of a settlor;

(c)

future spouses of any children or future children of a settlor, a spouse of a settlor or any future spouse of a settlor;

(d)

a future spouse of a settlor;

(e)

persons outside the defined categories.

(10B)

For the purposes of sub-paragraph (10A) above a person is outside the defined categories at any time if, and only if, there is no settlor by reference to whom he is at that time a defined person in relation to the settlement for the purposes of paragraph 2(1) above.

(10C)

For the purposes of sub-paragraph (10A) above a person is a beneficiary of a settlement if—

(a)

there are any circumstances whatever in which relevant property which is or may become comprised in the settlement is or will or may become applicable for his benefit or payable to him;

(b)

there are any circumstances whatever in which relevant income which arises or may arise under the settlement is or will or may become applicable for his benefit or payable to him;

(c)

he enjoys a benefit directly or indirectly from any relevant property comprised in the settlement or any relevant income arising under the settlement.

(10D)

In sub-paragraph (10C) above—

“relevant property” means property originating from a settlor; and

“relevant income” means income originating from a settlor.”

After section 101 of the M60Taxation of Chargeable Gains Act 1992, there shall be inserted the following section—

“101A Transfer within group to investment trust.

(1)

This section applies where—

(a)

an asset has been disposed of to a company (the “acquiring company") and the disposal has been treated by virtue of section 171(1) as giving rise to neither a gain nor a loss,

(b)

at the time of the disposal the acquiring company was not an investment trust, and

(c)

the conditions set out in subsection (2) below are satisfied by the acquiring company.

(2)

Those conditions are satisfied by the acquiring company if—

(a)

it becomes an investment trust for an accounting period beginning not more than 6 years after the time of the disposal,

(b)

at the beginning of that accounting period, it owns, otherwise than as trading stock—

(i)

the asset, or

(ii)

property to which a chargeable gain has been carried forward from the asset on a replacement of business assets,

(c)

it has not been an investment trust for any earlier accounting period beginning after the time of the disposal, and

(d)

at the time at which it becomes an investment trust, there has not been an event by virtue of which it falls by virtue of section 179(3) or 101C(3) to be treated as having sold, and immediately reacquired, the asset at the time specified in subsection (3) below.

(3)

The acquiring company shall be treated for all the purposes of this Act as if immediately after the disposal it had sold, and immediately reacquired, the asset at its market value at that time.

(4)

Any chargeable gain or allowable loss which, apart from this subsection, would accrue to the acquiring company on the sale referred to in subsection (3) above shall be treated as accruing to it immediately before the end of the last accounting period to end before the beginning of the accounting period for which the acquiring company becomes an investment trust.

(5)

For the purposes of this section a chargeable gain is carried forward from an asset to other property on a replacement of business assets if—

(a)

by one or more claims under sections 152 to 158, the chargeable gain accruing on a disposal of the asset is reduced, and

(b)

as a result an amount falls to be deducted from the expenditure allowable in computing a gain accruing on the disposal of the other property.

(6)

For the purposes of this section an asset acquired by the acquiring company shall be treated as the same as an asset owned by it at a later time if the value of the second asset is derived in whole or in part from the first asset; and, in particular, assets shall be so treated where—

(a)

the second asset is a freehold and the first asset was a leasehold; and

(b)

the lessee has acquired the reversion.

(7)

Where under this section a company is to be treated as having disposed of and reacquired an asset—

(a)

all such recomputations of liability in respect of other disposals, and

(b)

all such adjustments of tax, whether by way of assessment or by way of discharge or repayment of tax,

as may be required in consequence of the provisions of this section shall be carried out.

(8)

Notwithstanding any limitation on the time for making assessments, any assessment to corporation tax chargeable in consequence of this section may be made at any time within 6 years after the end of the accounting period referred to in subsection (2)(a) above.”

In section 179 of that Act (company ceasing to be a member of a group), after subsection (2B) there shall be inserted the following subsection—

“(2C)

This section shall not have effect as respects any asset if, before the time when the chargeable company ceases to be a member of the group or, as the case may be, the second group, an event has already occurred by virtue of which the company falls by virtue of section 101A(3) to be treated as having sold and immediately reacquired the asset at the time specified in subsection (3) below.”

After the section 101A of that Act inserted by section 133 above there shall be inserted the following section—

“101B Transfer of company’s assets to venture capital trust.

(1)

Where section 139 has applied on the transfer of a company’s business (in whole or in part) to a company which at the time of the transfer was not a venture capital trust, then if—

(a)

at any time after the transfer the company becomes a venture capital trust by virtue of an approval for the purposes of section 842AA of the Taxes Act; and

(b)

at the time as from which the approval has effect the company still owns any of the assets of the business transferred,

the company shall be treated for all the purposes of this Act as if immediately after the transfer it had sold, and immediately reacquired, the assets referred to in paragraph (b) above at their market value at that time.

(2)

Any chargeable gain or allowable loss which, apart from this subsection, would accrue to the company on the sale referred to in subsection (1) above shall be treated as accruing to the company immediately before the time mentioned in subsection (1)(b) above.

(3)

This section does not apply if at the time mentioned in subsection (1)(b) above there has been an event by virtue of which the company falls by virtue of section 101(1) to be treated as having sold, and immediately reacquired, the assets immediately after the transfer referred to in subsection (1) above.

(4)

Notwithstanding any limitation on the time for making assessments, any assessment to corporation tax chargeable in consequence of this section may, in a case in which the approval mentioned in subsection (1)(a) above has effect as from the beginning of an accounting period, be made at any time within 6 years after the end of that accounting period.

(5)

Where under this section a company is to be treated as having disposed of, and reacquired, an asset of a business, all such recomputations of liability in respect of other disposals and all such adjustments of tax, whether by way of assessment or by way of discharge or repayment of tax, as may be required in consequence of the provisions of this section shall be carried out.”

After subsection (1A) of section 101 of that Act there shall be inserted the following subsection—

“(1B)

This section does not apply if at the time at which the company becomes an investment trust there has been an event by virtue of which it falls by virtue of section 101B(1) to be treated as having sold, and immediately reacquired, the assets immediately after the transfer referred to in subsection (1) above.”

In section 171 of the M62Taxation of Chargeable Gains Act 1992 (transfers within a group), after the word “or" at the end of paragraph (c) of subsection (2) there shall be inserted the following paragraph—

“(cc)

a disposal by or to a venture capital trust; or”

After the section 101B of that Act inserted by section 134 above there shall be inserted the following section—

“101C Transfer within group to venture capital trust.

(1)

This section applies where—

(a)

an asset has been disposed of to a company (the “acquiring company") and the disposal has been treated by virtue of section 171(1) as giving rise to neither a gain nor a loss,

(b)

at the time of the disposal the acquiring company was not a venture capital trust, and

(c)

the conditions set out in subsection (2) below are satisfied by the acquiring company.

(2)

Those conditions are satisfied by the acquiring company if—

(a)

it becomes a venture capital trust by virtue of an approval having effect as from a time (the “time of approval") not more than 6 years after the time of the disposal,

(b)

at the time of approval the company owns, otherwise than as trading stock—

(i)

the asset, or

(ii)

property to which a chargeable gain has been carried forward from the asset on a replacement of business assets,

(c)

it has not been a venture capital trust at any earlier time since the time of the disposal, and

(d)

at the time of approval, there has not been an event by virtue of which it falls by virtue of section 179(3) or 101A(3) to be treated as having sold, and immediately reacquired, the asset at the time specified in subsection (3) below.

(3)

The acquiring company shall be treated for all the purposes of this Act as if immediately after the disposal it had sold, and immediately reacquired, the asset at its market value at that time.

(4)

Any chargeable gain or allowable loss which, apart from this subsection, would accrue to the acquiring company on the sale referred to in subsection (3) above shall be treated as accruing to it immediately before the time of approval.

(5)

Subsections (5) to (7) of section 101A apply for the purposes of this section as they apply for the purposes of that section.

(6)

Notwithstanding any limitation on the time for making assessments, any assessment to corporation tax chargeable in consequence of this section may, in a case in which the time of approval is the time at which an accounting period of the company begins, be made at any time within 6 years after the end of that accounting period.

(7)

Any reference in this section to an approval is a reference to an approval for the purposes of section 842AA of the Taxes Act.”

In section 179 of that Act (company ceasing to be a member of a group), after the subsection (2C) inserted by section 133 above there shall be inserted the following subsection—

“(2D)

This section shall not have effect as respects any asset if, before the time when the chargeable company ceases to be a member of the group or, as the case may be, the second group, an event has already occurred by virtue of which the company falls by virtue of section 101C(3) to be treated as having sold and immediately reacquired the asset at the time specified in subsection (3) below.”

In section 170(9) of the M63Taxation of Chargeable Gains Act 1992 (meaning of “company” in sections 170 to 181), after the word “and" at the end of paragraph (c) there shall be inserted the following paragraph—

“(cc)

an incorporated friendly society within the meaning of the M64Friendly Societies Act 1992; and”.

In subsection (2) of section 171 of that Act (transfers within a group), after the word “or" at the end of the paragraph (cc) inserted by section 135 above there shall be inserted the following paragraph—

“(cd)

a disposal by or to a qualifying friendly society; or”

After subsection (4) of that section there shall be inserted the following subsection—

“(5)

In subsection (2)(cd) above “qualifying friendly society” means a company which is a qualifying society for the purposes of section 461B of the Taxes Act (incorporated friendly societies entitled to exemption from income tax and corporation tax on certain profits).”

In subsection (8) of section 165 of that Act (relief for gifts of business assets), for paragraph (a) there shall be substituted the following paragraphs—

“(a)

“personal company”, in relation to an individual, means a company the voting rights in which are exercisable, as to not less than 5 per cent., by that individual;

(aa)

“holding company”, “trading company” and “trading group” have the meanings given by paragraph 22 of Schedule A1; and”.