Part III Income Tax, Corporation Tax and Capital Gains Tax

Chapter II Other provisions

Enterprise incentives

62 Enterprise management incentives.

F1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

63 Corporate venturing scheme.

(1)

Schedule 15 to this Act (which makes provision for the corporate venturing scheme) has effect.

(2)

Schedule 16 to this Act (which makes consequential amendments) has effect.

(3)

Paragraph 3(2)(a)(i) to (iii) and (3) of Schedule 16 (and paragraph 3(1) so far as it relates to those provisions) have effect—

(a)

in relation to claims made under section 573 of the Taxes Act 1988, in respect of disposals on or after 1st April 2000, and

(b)

in relation to claims made under section 574 of that Act, in respect of disposals on or after 6th April 2000.

(4)

Subject to that, Schedules 15 and 16 apply in relation to shares issued on or after 1st April 2000 but before 1st April 2010.

64 Enterprise investment scheme: amendments.

The provisions relating to the enterprise investment scheme are amended in accordance with Schedule 17 to this Act.

In that Schedule—

Part I makes amendments reducing various periods which apply in relation to the provisions which determine the reliefs under the scheme;

Part II makes amendments about qualifying companies;

Part III makes other minor amendments.

65 Venture capital trusts: amendments.

The provisions relating to venture capital trusts are amended in accordance with Schedule 18 to this Act.

In that Schedule—

Part I makes amendments reducing various periods which apply in relation to the provisions which determine the reliefs; and

Part II makes amendments about qualifying holdings.

66 Taper relief: taper for business assets.

(1)

Section 2A of the M1Taxation of Chargeable Gains Act 1992 (taper relief) is amended as follows.

(2)

In subsection (5), for the first two columns of the table (which relate to gains on disposals of business assets) substitute—

Gains on disposals of business assets

Number of whole years in qualifying holding period

Percentage of gain chargeable

1

87.5

2

75

3

50

4 or more

25

(3)

For subsections (8) and (9) substitute—

“(8)

The qualifying holding period of an asset for the purposes of this section is—

(a)

in the case of a business asset, the period after 5th April 1998 for which the asset had been held at the time of its disposal;

(b)

in the case of a non-business asset where—

(i)

the time which, for the purposes of paragraph 2 of Schedule A1, is the time when the asset is taken to have been acquired by the person making the disposal is a time before 17th March 1998, and

(ii)

there is no period which by virtue of paragraph 11 or 12 of that Schedule does not count for the purposes of taper relief,

the period mentioned in paragraph (a) plus one year;

(c)

in the case of any other non-business asset, the period mentioned in paragraph (a).

This subsection is subject to paragraph 2(4) of Schedule A1 and paragraph 3 of Schedule 5BA.”.

(4)

This section applies to disposals on or after 6th April 2000.

67 Taper relief: assets qualifying as business assets.

(1)

Schedule A1 to the M2Taxation of Chargeable Gains Act 1992 (application of taper relief) is amended as follows.

(2)

In paragraph 4 (conditions for shares to qualify as business assets)—

(a)

in sub-paragraph (4) (disposal by personal representatives), for the words following “if at that time" substitute “ the relevant company was a qualifying company by reference to the personal representatives ”; and

(b)

in sub-paragraph (5) (disposal by legatee), for paragraph (b) substitute—

“(b)

the relevant company was a qualifying company by reference to the personal representatives.”.

(3)

In paragraph 5 (conditions for other assets to qualify as business assets)—

(a)

in sub-paragraph (2) (disposal by individual), for paragraphs (d) and (e) substitute—

“(d)

the purposes of any office or employment held by that individual with a person carrying on a trade.”;

and

(b)

in sub-paragraph (3) (disposal by trustees of settlement), for paragraphs (e) and (f) substitute—

“(e)

the purposes of any office or employment held by an eligible beneficiary with a person carrying on a trade.”.

(4)

For paragraph 6 (companies which are qualifying companies) substitute—

“6

(1)

A company shall be taken to have been a qualifying company by reference to an individual at any time when—

(a)

the company was a trading company or the holding company of a trading group, and

(b)

one or more of the following conditions was met—

(i)

the company was unlisted,

(ii)

the individual was an officer or employee of the company, or of a company having a relevant connection with it, or

(iii)

the voting rights in the company were exercisable, as to not less than 5%, by the individual.

(2)

A company shall be taken to have been a qualifying company by reference to the trustees of a settlement at any time when—

(a)

the company was a trading company or the holding company of a trading group, and

(b)

one or more of the following conditions was met—

(i)

the company was unlisted,

(ii)

an eligible beneficiary was an officer or employee of the company, or of a company having a relevant connection with it, or

(iii)

the voting rights in the company were exercisable, as to not less than 5%, by the trustees.

(3)

A company shall be taken to have been a qualifying company by reference to an individual’s personal representatives at any time when—

(a)

the company was a trading company or the holding company of a trading group, and

(b)

one or more of the following conditions was met—

(i)

the company was unlisted, or

(ii)

the voting rights in the company were exercisable, as to not less than 5%, by the personal representatives.”.

(5)

In paragraph 22(1) (interpretation), at the appropriate place insert—

““unlisted company” means a company—

(a)

none of whose shares is listed on a recognised stock exchange, and

(b)

which is not a 51 per cent subsidiary of a company whose shares, or any class of whose shares, is so listed;”;

and omit the definitions of “full-time working officer or employee" and “qualifying office or employment".

(6)

After paragraph 22 insert—

“23 Qualifying shareholdings in joint venture companies

(1)

This Schedule has effect subject to the following provisions where a company (“the investing company”) has a qualifying shareholding in a joint venture company.

(2)

For the purposes of this paragraph a company is a “joint venture company” if, and only if—

(a)

it is a trading company or the holding company of a trading group, and

(b)

75% or more of its ordinary share capital (in aggregate) is held by not more than five companies.

For the purposes of paragraph (b) above the shareholdings of members of a group of companies shall be treated as held by a single company.

(3)

For the purposes of this paragraph a company has a “qualifying shareholding” in a joint venture company if—

(a)

it holds more than 30% of the ordinary share capital of the joint venture company, or

(b)

it is a member of a group of companies, it holds ordinary share capital of the joint venture company and the members of the group between them hold more than 30% of that share capital.

(4)

For the purpose of determining whether the investing company is a trading company—

(a)

any holding by it of shares in the joint venture company shall be disregarded, and

(b)

it shall be treated as carrying on an appropriate proportion—

(i)

of the activities of the joint venture company, or

(ii)

where the joint venture company is the holding company of a trading group, of the activities of that group.

This sub-paragraph does not apply if the investing company is a holding company.

(5)

For the purpose of determining whether the investing company is a holding company—

(a)

any holding by it of shares in the joint venture company shall be disregarded, and

(b)

it shall be treated as carrying on an appropriate proportion of the activities—

(i)

of the joint venture company, or

(ii)

where the joint venture company is the holding company of a trading group, of that group.

This sub-paragraph does not apply if the joint venture company is a 51 per cent subsidiary of the investing company.

(6)

For the purpose of determining whether a group of companies is a trading group—

(a)

every holding of shares in the joint venture company by a member of the group having a qualifying shareholding in that company shall be disregarded, and

(b)

each member of the group having such a qualifying shareholding shall be treated as carrying on an appropriate proportion of the activities—

(i)

of the joint venture company, or

(ii)

where the joint venture company is the holding company of a trading group, of that group.

This sub-paragraph does not apply if the joint venture company is a member of the group.

(7)

In sub-paragraphs (4)(b), (5)(b) and (6)(b) above “an appropriate proportion” means a proportion corresponding to the percentage of the ordinary share capital of the joint venture company held by the investing company or, as the case may be, by the group member concerned.

(8)

The following shall be treated as having a relevant connection with each other—

(a)

the investing company;

(b)

the joint venture company;

(c)

any company having a relevant connection with the investing company;

(d)

any company having a relevant connection with the joint venture company by virtue of being—

(i)

a 51 per cent subsidiary of that company, or

(ii)

a member of the same commercial association of companies.

(9)

The acquisition by the investing company of the qualifying shareholding shall not be treated as a relevant change of activity for the purposes of paragraph 11 above.

(10)

For the purposes of this paragraph “ordinary share capital” has the meaning given by section 832(1) of the Taxes Act.”.

(7)

This section has effect for determining whether an asset is a business asset at any time on or after 6th April 2000.

It does not affect the determination on or after that date whether an asset was a business asset at a time before that date.