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Taxation of Chargeable Gains Act 1992

Type Public General Act

Publication 1992-03-06

Last updated 2026-09-19

State In force

Department Statute Law Database

Source legislation.gov.uk

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An Act to consolidate certain enactments relating to the taxation of chargeable gains.

Reform history JSON API

(b) that date is within the period of 3 years ending with the date of the disposal.

(5) A disposal within paragraph (c) of subsection (2) is a material disposal if condition A, B, C or D is met.

(6) Condition A is that, throughout the period of 2 years ending with the date of the disposal—

(a) the company is the individual's personal company and is either a trading company or the holding company of a trading group, and

(b) the individual is an officer or employee of the company or (if the company is a member of a trading group) of one or more companies which are members of the trading group.

(7) Condition B is that the conditions in paragraphs (a) and (b) of subsection (6) are met throughout the period of 2 years ending with the date on which the company—

(a) ceases to be a trading company without continuing to be or becoming a member of a trading group, or

(b) ceases to be a member of a trading group without continuing to be or becoming a trading company,

and that date is within the period of 3 years ending with the date of the disposal.

(7ZA) If, in any case where an individual disposes of any shares in a company—

(a) there has been an issue of shares in the company to the individual following a relevant business transfer, and

(b) any of the issued shares constitute, or otherwise form part of, the shares disposed of,

the conditions in subsection (6)(a) and (b) are to be treated as met in any period ending immediately before the transfer throughout which the individual owned the business.

(7ZB) For the purposes of subsection (7ZA), shares have been issued “following a relevant business transfer” if they have been issued wholly or partly in exchange for the transfer of a business as a going concern, together with the whole assets of the business or the whole of those assets other than cash.

(7A) Condition C is that—

(a) the assets disposed of are relevant EMI shares,

(b) the option grant date is, or is before, the first date of the period of 2 years ending with the date of the disposal, and

(i) the company is either a trading company or the holding company of a trading group, and

(ii) the individual is an officer or employee of the company or (if the company is a member of a trading group) of one or more companies which are members of the trading group.

(7B) Condition D is that—

(a) the assets disposed of are relevant EMI shares acquired by the individual before the cessation date,

(b) the option grant date is, or is before, the first date of the period of 2 years ending with the cessation date,

(d) the cessation date is within the period of 3 years ending with the date of the disposal.

(7C) In this section “relevant EMI shares” means—

(a) shares of a company acquired by an individual to which subsection (7D) applies, or

(b) shares of a company to which subsection (7F) applies.

(7D) This subsection applies to shares of a company acquired by an individual if the individual—

(a) acquires them on or after 6 April 2013, and

(b) acquires them as a result of the exercise of a qualifying option within the meaning given by section 527(4) of ITEPA 2003 (enterprise management incentives) where the option is exercised on or before the specified anniversary of the date mentioned in section 529(2) of that Act (with “specified anniversary” having the meaning given in section 529(2A) of that Act).

(7E) Subsection (7D) does not apply to shares acquired as a result of the exercise of a qualifying option if—

(a) a disqualifying event (see section 533 of ITEPA 2003) occurs in relation to the option before its exercise, and

(b) it is exercised later than the period mentioned in section 532(1)(b) of ITEPA 2003.

(7F) This subsection applies to shares of a company if—

(a) the shares are the new holding in a case in which section 127 applies in relation to an individual,

(b) the original shares in that case are relevant EMI shares (whether by virtue of subsection (7D) or this subsection), and

(i) section 126, or

(ii) subject to subsection (7G), section 135(3).

(7G) Subsection (7F)(c)(ii) applies only if—

(a) the exchange of shares in question is a qualifying exchange of shares as defined in paragraph 40 of Schedule 5 to ITEPA 2003, and

(b) when the exchange occurs, the independence requirement (see paragraph 9 of Schedule 5 to ITEPA 2003) and the trading activities requirement (see paragraphs 13 and 14 of that Schedule) are met in relation to the new company (see paragraph 40(1)(a) of that Schedule).

(7H) In this section “the original relevant EMI shares”, in relation to shares which are relevant EMI shares by virtue of subsection (7F), means the shares originally acquired by the individual to which subsection (7D) applied.

(7I) If the shares disposed of are relevant EMI shares by virtue of subsection (7F), in relation to times before the reorganisation mentioned in section 127, in subsection (7A)(c) references to the company are to be read as references to (if different)—

(a) the company whose shares are the original relevant EMI shares, or

(b) if there has been more than one reorganisation since the original relevant EMI shares were acquired—

(i) the company whose shares are the original relevant EMI shares, or

(ii) if at the time in question the individual is holding relevant EMI shares which are shares of another company, that other company.

This subsection is subject to subsection (7N).

(7J) If the shares disposed of are relevant EMI shares by virtue of subsection (7F), the question of whether the requirement of subsection (7B)(a) is met is to be determined by reference to the date of the acquisition of the original relevant EMI shares.

(7K) Subject to what follows, in subsections (7A)(b) and (7B)(b) “the option grant date” means the date on which the qualifying option in question was granted.

(7L) Subsections (7M) and (7N) apply if the qualifying option is a replacement option for the purposes of the EMI code (see paragraph 41 of Schedule 5 to ITEPA 2003).

(7M) In subsections (7A)(b) and (7B)(b) “the option grant date” means—

(a) the date on which the old option was granted, or

(b) if the old option was also a replacement option, the date on which the earlier old option was granted,

and so on.

(7N) In relation to any time during the currency of an old option taken into account under subsection (7M), in subsection (7A)(c) references to the company are to be read as references to the company whose shares were the subject of the old option.

(7O) In subsection (7B) “the cessation date” means the date on which the company—

(a) ceases to be a trading company without continuing to be or becoming a member of a trading group, or

(b) ceases to be a member of a trading group without continuing to be or becoming a trading company.

(7P) Subsections (7Q) and (7R) apply in relation to a disposal of relevant EMI shares if—

(a) the shares were acquired as a result of the exercise of a qualifying option where—

(i) a disqualifying event (see section 533 of ITEPA 2003) occurs in relation to the option before its exercise, but

(ii) it is exercised within the period mentioned in section 532(1)(b) of ITEPA 2003, or

(b) if the shares are relevant EMI shares by virtue of subsection (7F), the original relevant EMI shares were acquired as mentioned in paragraph (a).

(7Q) Subsection (7A)(b) has effect as if the reference to the date of the disposal were a reference to the date of the disqualifying event.

(7R) If the disqualifying event is within section 534(1)(c) of ITEPA 2003, subsection (7B)(a) has effect as if the reference to the cessation date were a reference to the first day after the period mentioned in section 532(1)(b) of that Act if that day is later than the cessation date.

(8) For the purposes of this section—

(a) an individual who disposes of (or of interests in) assets used for the purposes of a business carried on by the individual on entering into a partnership which is to carry on the business is to be treated as disposing of a part of the business,

(b) the disposal by an individual of the whole or part of the individual's interest in the assets of a partnership is to be treated as a disposal by the individual of the whole or part of the business carried on by the partnership, and

(c) at any time when a business is carried on by a partnership, the business is to be treated as owned by each individual who is at that time a member of the partnership.

Disposal of trust business assets

169J

(1) There is a disposal of trust business assets where—

(a) the trustees of a settlement make a disposal of settlement business assets (see subsection (2)),

(b) there is an individual who is a qualifying beneficiary (see subsection (3)), and

(2) In this Chapter “settlement business assets” means—

(a) assets consisting of (or of interests in) shares in or securities of a company, or

(b) assets (or interests in assets) used or previously used for the purposes of a business,

which are part of the settled property.

(3) An individual is a qualifying beneficiary if the individual has, under the settlement, an interest in possession (otherwise than for a fixed term) in—

(a) the whole of the settled property, or

(b) a part of it which consists of or includes the settlement business assets disposed of.

(4) In relation to a disposal of settlement business assets within paragraph (a) of subsection (2) the relevant condition is that, throughout a period of 2 years ending not earlier than 3 years before the date of the disposal—

(a) the company is the qualifying beneficiary's personal company and is either a trading company or the holding company of a trading group, and

(b) the qualifying beneficiary is an officer or employee of the company or (if the company is a member of a group of companies) of one or more companies which are members of the trading group.

(5) In relation to a disposal of settlement business assets within paragraph (b) of that subsection, the relevant condition is that—

(a) the settlement business assets are used for the purposes of the business carried on by the qualifying beneficiary throughout the period of 2 years ending not earlier than 3 years before the date of the disposal, and

(b) the qualifying beneficiary ceases to carry on the business on the date of the disposal or within the period of three years before that date.

(6) In subsection (5)—

(a) the reference to a business carried on by the qualifying beneficiary includes a business carried on by a partnership of which the qualifying beneficiary is a member, and

(b) the reference to the qualifying beneficiary ceasing to carry on the business includes the qualifying beneficiary ceasing to be a member of the partnership or the partnership ceasing to carry on the business.

Disposal associated with relevant material disposal

169K

(1) There is a disposal associated with a relevant material disposal if—

(a) condition A1, A1A, A2 or A3 is met, and

(b) conditions B, C and D are met.

(1A) Condition A1 is that an individual (“P”) makes a material disposal of business assets which consists of the disposal of the whole or part of P's interest in the assets of a partnership, and—

(a) P's disposed of interest is at least a 5% interest in the partnership's assets, and

(b) at the date of the disposal, no partnership purchase arrangements exist.

(1AA) Condition A1A is that P makes a material disposal of business assets which consists of the disposal of the whole of P's interest in the assets of a partnership, and—

(a) that interest is an interest of less than 5%,

(b) P holds at least a 5% interest in the partnership's assets throughout a continuous period of at least 3 years in the 8 years ending with the date of the disposal, and

(1AB) Subject to subsection (6A), for the purposes of conditions A1 and A1A, in relation to the disposal of an interest in the assets of a partnership, “partnership purchase arrangements” means arrangements (other than the material disposal itself) under which P or a person connected with P is entitled to acquire any interest in, or increase that person's interest in, the partnership (including a share of the profits or assets of the partnership or an interest in such a share).

(1B) Condition A2 is that P makes a material disposal of business assets which consists of the disposal of shares in a company, all or some of which are ordinary shares, and at the date of the disposal—

(a) the ordinary shares disposed of constitute at least 5% of the company's ordinary share capital and are shares in the individual's personal company (and section 169S(3A)(a) to (c) apply here but as if the reference to the final day of the period mentioned in section 169S(3A)(a) were to the date of the disposal), and

(b) no share purchase arrangements exist.

(1C) But condition A2 is not met if the disposal of shares is a disposal by virtue of section 122, other than such a disposal treated as made in consideration of a capital distribution from a company which is made in the course of dissolving or winding up the company.

(1D) Condition A3 is that P makes a material disposal of business assets which consists of the disposal of securities of a company, and at the date of the disposal—

(a) the securities disposed of constitute at least 5% of the value of the securities of the company, and

(b) no share purchase arrangements exist.

(1E) Subject to subsection (6A), For the purposes of conditions A2 and A3, in relation to the disposal of shares in or securities of a company (“company A”), “share purchase arrangements” means arrangements (other than the material disposal itself) under which P or a person connected with P is entitled to acquire shares in or securities of—

(a) company A, or

(b) a company which is a member of a trading group of which company A is a member.

(2) For the purposes of subsection (1E)(b), a company is treated as a member of a trading group of which company A is a member if, at the date of the disposal mentioned in condition A2 or A3, arrangements exist which it is reasonable to assume will result in the company and company A becoming members of the same trading group.

(3) Condition B is that P makes the disposal as part of P's withdrawal from participation in the business carried on by the partnership or by the company or (if the company is a member of a trading group) a company which is a member of the trading group.

(3A) The disposal mentioned in condition B is not treated as part of P's withdrawal from participation in the business carried on by a partnership if at the date of that disposal there exist any partnership purchase arrangements.

(3AA) Subject to subsection (6A), for the purposes of condition B, in relation to a disposal mentioned in that condition and a partnership, “partnership purchase arrangements” means arrangements under which P or a person connected with P is entitled to acquire any interest in, or increase that person's interest in, the partnership (including a share of the profits or assets of the partnership or an interest in such a share), but does not include any arrangements in connection with a material disposal in relation to which condition A1 or A1A is met.

(3B) The disposal mentioned in condition B is not treated as part of P's withdrawal from participation in the business carried on by a company (“company A”) if at the date of that disposal there exist any share purchase arrangements.

(3BA) Subject to subsection (6A), for the purposes of condition B, in relation to a disposal mentioned in that condition and company A, “share purchase arrangements” means arrangements under which P or a person connected with P is entitled to acquire shares in or securities of—

(a) company A, or

(b) a company which is a member of a trading group of which company A is a member,

but does not include any arrangements in connection with a material disposal in relation to which condition A2 or A3 is met.

(3C) For the purposes of subsection (3BA)(b), a company is treated as a member of a trading group of which company A is a member if, at the date of the disposal mentioned in condition B, arrangements exist which it is reasonable to assume will result in the company and company A becoming members of the same trading group.

(4) Condition C is that, throughout the period of 2 years ending with the earlier of—

(a) the date of the material disposal of business assets, and

(b) the cessation of the business of the partnership or company,

the assets which (or interests in which) are disposed of are in use for the purposes of the business.

(4A) Condition D is that the disposal mentioned in condition B is of an asset which P owns throughout the period of 3 years ending with the date of that disposal.

(5) For the purposes of this Chapter the disposal mentioned in Condition B is the disposal associated with a relevant material disposal.

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6A) For the purposes of this section, in relation to a material disposal of business assets and a disposal mentioned in condition B, arrangements are not partnership purchase arrangements or share purchase arrangements if they were made before both disposals and without regard to either of them.

(7) In this section—

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

“securities” includes an interest in securities, and an “interest in securities” includes (in particular) an option to acquire securities;

“shares” includes an interest in shares, and an “interest in shares” includes (in particular) an option to acquire shares.

(8) For the purposes of this section, a person is treated as entitled to acquire anything which the person—

(a) is entitled to acquire at a future date, or

(b) will at a future date be entitled to acquire.

(9) For the purposes of this section the assets of—

(a) a Scottish partnership, or

(b) a partnership under the law of any other country or territory under which assets of a partnership are regarded as held by or on behalf of the partnership as such,

are to be treated as held by the members of the partnership in the proportions in which they are entitled to share in the capital profits of the partnership.

References in this section to an individual's interest in the partnership's assets are to be construed accordingly.

Relevant business assets

169L

(1) If a qualifying business disposal is one which does not consist of the disposal of (or of interests in) shares in or securities of a company, business asset disposal relief is given only in respect of the disposal of relevant business assets comprised in the qualifying business disposal.

(2) In this Chapter “relevant business assets” means assets (including, subject to section 169LA, goodwill) which are, or are interests in, assets to which subsection (3) applies, other than excluded assets (see subsection (4) below).

(3) This subsection applies to assets which—

(a) in the case of a material disposal of business assets, are assets used for the purposes of a business carried on by the individual or a partnership of which the individual is a member,

(b) in the case of a disposal of trust business assets, are assets used for the purposes of a business carried on by the qualifying beneficiary or a partnership of which the qualifying beneficiary is a member, or

(c) in the case of a disposal associated with a relevant material disposal, are assets used for the purposes of a business carried on by the partnership or company.

(4) The following are excluded assets—

(a) shares and securities, and

(b) assets, other than shares or securities, which are held as investments.

Relevant business assets: goodwill transferred to a close company

169LA

(1) Subject to subsection (1A), subsection (4) applies if—

(a) as part of a qualifying business disposal, a person (“P”) disposes of goodwill directly or indirectly to a close company (“C”), and

(b) immediately after the disposal, P meets any of the personal company conditions in the case of C or any company which is a member of a group of companies of which C is a member.

(1ZA) For the purposes of subsection (1)(b)—

(a) the reference to the personal company conditions is a reference to any of the conditions in 169S(3)(a), (b), (c)(i) or (ii), and

(b) P is taken to have all the rights and interests of any relevant connected person.

(1ZB) For the purposes of subsection (1ZA)—

(a) section 169S(3) is treated as having effect with the omission of the references to “by virtue of that holding”,

(b) section 169S(3A)(a) and (b) are to apply for the purposes of section 169S(3)(c)(ii) but as if the reference to the final day of the period mentioned in section 169S(3A)(a) were to the time immediately after the disposal, and

(c) the condition in section 169S(3)(c)(i) is to be read as containing two separate conditions (one relating to profits and the other relating to assets).

(1A) Where—

(a) subsection (1)(b) applies by virtue of P's ownership, or any relevant connected person's ownership, of C's ordinary share capital, and

(b) the conditions mentioned in subsection (1B) are met,

subsection (4) does not apply.

(1B) The conditions referred to in subsection (1A)(b) are—

(a) P and any relevant connected person dispose of C's ordinary share capital to another company (“A”) such that, immediately before the end of the relevant period, neither P nor any relevant connected person own any of C's ordinary share capital, and

(b) where A is a close company, immediately before the end of the relevant period—

(i) P and any relevant connected person together own less than 5% of the ordinary share capital of A or of any company which is a member of a group of companies of which A is a member, and

(ii) P and any relevant connected person together hold less than 5% of the voting rights in A or in any company which is a member of a group of companies of which A is a member.

(1C) In subsection (1B) “the relevant period” means the period of 28 days beginning with the date of the qualifying business disposal, or such longer period as the Commissioners for Her Majesty's Revenue and Customs may by notice allow.

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) For the purposes of this Chapter, the goodwill is not one of the relevant business assets comprised in the qualifying business disposal.

(5) If a company—

(a) is not resident in the United Kingdom, but

(b) would be a close company if it were resident in the United Kingdom,

the company is to be treated as being a close company for the purposes of this section ... .

(6) If a person—

(a) disposes of goodwill as part of a qualifying business disposal, and

(b) is party to relevant avoidance arrangements,

subsection (4) applies (if it would not otherwise do so).

(7) In subsection (6) “relevant avoidance arrangements” means arrangements the main purpose, or one of the main purposes, of which is to secure—

(a) that subsection (4) does not apply in relation to the goodwill, ...

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8) In this section—

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

“group” is to be construed in accordance with section 170;

“relevant connected person” means— a company connected with P, andtrustees connected with P.

Relief to be claimed

169M

(1) Business asset disposal relief is to be given only on the making of a claim.

(2) A claim for business asset disposal relief in respect of a qualifying business disposal must be made—

(a) in the case of a disposal of trust business assets, jointly by the trustees and the qualifying beneficiary, and

(b) otherwise, by the individual.

(3) A claim for business asset disposal relief in respect of a qualifying business disposal must be made on or before the first anniversary of the 31 January following the tax year in which the qualifying business disposal is made.

(4) A claim for business asset disposal relief in respect of a qualifying business disposal may only be made if the amount resulting under section 169N(1) is a positive amount.

Amount of relief: general

169N

(1) Where a claim is made in respect of a qualifying business disposal—

(a) the relevant gains (see subsection (5)) are to be aggregated, and

(b) any relevant losses (see subsection (6)) are to be aggregated and deducted from the aggregate arrived at under paragraph (a).

(2) The resulting amount is to be treated for the purposes of this Act as a chargeable gain accruing at the time of the disposal to the individual or trustees by whom the claim is made.

(3) The rate of capital gains tax in respect of that gain is 18%, but this is subject to subsections (4) to (4B).

(4) Subsections (4A) and (4B) apply if the aggregate of—

(a) the gain mentioned in subsection (2), and

(b) the total of so much of each amount resulting under subsection (1) by virtue of its operation in relation to earlier relevant qualifying business disposals (if any) as was—

(i) charged at the rate in subsection (3), or

(ii) subject to reduction under subsection (2) of this section as originally enacted,

exceeds £1 million..

(4A) The rate in subsection (3) is to apply only to so much (if any) of the gain mentioned in subsection (2) as (when added to the total mentioned in subsection (4)(b)) does not exceed £1 million.

(4B) Section 1H (rates of capital gains tax) is to apply to so much of the gain mentioned in subsection (2) as is not subject to the rate in subsection (3).

(5) In subsection (1)(a) “relevant gains” means—

(a) if the qualifying business disposal is of (or of interests in) shares in or securities of a company (or both), the gains accruing on the disposal (computed in accordance with the provisions of this Act fixing the amount of chargeable gains), and

(b) otherwise, the gains accruing on the disposal of any relevant business assets comprised in the qualifying business disposal (so computed).

(6) In subsection (1)(b) “relevant losses” means—

(a) if the qualifying business disposal is of (or of interests in) shares in or securities of a company (or both), any losses accruing on the disposal (computed in accordance with the provisions of this Act fixing the amount of allowable losses, on the assumption that notice has been given under section 16(2A) in respect of them), and

(b) otherwise, any losses accruing on the disposal of any relevant business assets comprised in the qualifying business disposal (so computed, on that assumption).

(7) In subsection (4) “earlier relevant qualifying business disposals” means—

(a) where the qualifying business disposal is made by an individual, earlier qualifying business disposals made by the individual and earlier disposals of trust business assets in respect of which the individual is the qualifying beneficiary, and

(b) where the qualifying business disposal is a disposal of trust business assets in respect of which an individual is the qualifying beneficiary, earlier disposals of trust business assets in respect of which that individual is the qualifying beneficiary and earlier qualifying business disposals made by that individual.

(8) If, on the same day, there is both a disposal of trust business assets in respect of which an individual is the qualifying beneficiary and a qualifying business disposal by the individual, this section applies as if the disposal of trust business assets were later.

(9) Any gain or loss taken into account under subsection (1) is not to be taken into account under this Act as a chargeable gain or an allowable loss.

Amount of relief: special provisions for certain trust disposals

169O

(1) This section applies where, on a disposal of trust business assets, there is (in addition to the qualifying beneficiary) at least one other beneficiary who, at the material time, has an interest in possession in—

(a) the whole of the settled property, or

(b) a part of it which consists of or includes the shares or securities (or interests in shares or securities) or assets (or interests in assets) disposed of.

(2) Only the relevant proportion of the amount which would otherwise result under subsection (1) of section 169N is to be treated as so resulting.

(3) And the balance of that amount, ... , is accordingly a chargeable gain for the purposes of this Act.

(4) For the purposes of this section “the relevant proportion” of an amount is the same proportion of the amount as that which, at the material time—

(a) the qualifying beneficiary's interest in the income of the part of the settled property comprising the shares or securities (or interests in shares or securities) or assets (or interests in assets) disposed of, bears to

(b) the interests in that income of all the beneficiaries (including the qualifying beneficiary) who then have interests in possession in that part of the settled property.

(5) In subsection (4) “the qualifying beneficiary's interest” means the interest by virtue of which he is the qualifying beneficiary (and not any other interest the qualifying beneficiary may have).

(6) In this section “the material time” means the end of the latest period of 2 years which ends not earlier than 3 years before the date of the disposal and—

(a) in the case of a disposal of settlement business assets within paragraph (a) of subsection (2) of section 169J, throughout which the conditions in paragraphs (a) and (b) of subsection (4) of that section are met, and

(b) in the case of a disposal of settlement business assets within paragraph (b) of subsection (2) of that section, throughout which the business is carried on by the qualifying beneficiary.

Amount of relief: special provision for certain associated disposals

169P

(1) This section applies where, on a disposal associated with a relevant material disposal, any of the conditions in subsection (4) is met.

(2) Only such part of the amount which would otherwise result under subsection (1) of section 169N as is just and reasonable is to be treated as so resulting.

(3) And the balance of that amount, ... , is accordingly a chargeable gain for the purposes of this Act.

(4) The conditions referred to in subsection (1) are—

(a) that the assets which (or interests in which) are disposed of are in use for the purposes of the business for only part of the period in which they are in the ownership of the individual,

(b) that only part of the assets which (or interests in which) are disposed of are in use for the purposes of the business for that period,

(c) that the individual is concerned in the carrying on of the business (whether personally, as a member of a partnership or as an officer or employee of a company which is the individual's personal company) for only part of the period in which the assets which (or interests in which) are disposed of are in use for the purposes of the business, and

(d) that, for the whole or any part of the period for which the assets which (or interests in which) are disposed of are in use for the purposes of the business, their availability is dependent on the payment of rent.

(5) In determining how much of an amount it is just and reasonable to bring into account under subsection (2) regard is to be had to—

(a) in a case within paragraph (a) of subsection (4), the length of the period for which the assets are in use as mentioned in that paragraph,

(b) in a case within paragraph (b) of that subsection, the part of the assets that are in use as mentioned in that paragraph,

(c) in a case within paragraph (c) of that subsection, the length of the period for which the individual is concerned in the carrying on of the business as mentioned in that paragraph, and

(d) in a case within paragraph (d) of that subsection, the extent to which any rent paid is less than the amount which would be payable in the open market for the use of the assets.

Reorganisations: disapplication of section 127

169Q

(1) This section applies where—

(a) there is a reorganisation (within the meaning of section 126), and

(b) the original shares and the new holding (within the meaning of that section) would fall to be treated by virtue of section 127 as the same asset.

(2) If an election is made under this section, a claim for business asset disposal relief may be made as if the reorganisation involved a disposal of the original shares; and if such a claim is made section 127 does not apply.

(3) An election under this section must be made—

(a) if the reorganisation would (apart from section 127) involve a disposal of trust business assets, jointly by the trustees and the qualifying beneficiary, and

(b) otherwise, by the individual.

(4) An election under this section must be made on or before the first anniversary of the 31 January following the tax year in which the reorganisation takes place.

(5) The references in this section to a reorganisation (within the meaning of section 126) includes an exchange of shares or securities which is treated as such a reorganisation by virtue of section 135 or 136.

Reorganisations involving acquisition of qualifying corporate bonds

169R

(1) This section applies where the calculation under section 116(10)(a) would (apart from this section) have effect to produce a chargeable gain for an individual by reason of a relevant transaction.

(2) If an election is made under this section, a claim for business asset disposal relief may be made as if the relevant transaction involved a disposal of the old asset; and if such a claim is made section 116(10) does not apply.

(3) An election under this section must be made—

(a) if the relevant transaction, so far as it relates to the old asset, would (apart from section 116(10)) involve a disposal of trust business assets, jointly by the trustees and the qualifying beneficiary, and

(b) otherwise, by the individual.

(4) An election under this section must be made on or before the first anniversary of the 31 January following the tax year in which the relevant transaction takes place.

(5) In this section, “old asset” and “relevant transaction” have the meaning given by section 116.

Interpretation of Chapter

169S

(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.

(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

(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

(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,

“business 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), ...

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “trading company” and “trading group”

169SA

Schedule 7ZA gives the meaning in this Chapter of “trading company” and “trading group”.

Chapter 3A — business asset disposal relief where company ceases to be individual's personal company

Overview of Chapter

169SB

This Chapter makes provision about an individual claiming business asset disposal relief in certain cases where relief would otherwise become unavailable because of a company ceasing to be the individual's personal company.

Election by individual where company ceases to be personal company

169SC

(1) If the following conditions are met, an individual may elect for this section to have effect.

(2) The first condition is that, as a result of a relevant share issue, the company ceases to be the individual's personal company.

(3) The second condition is that—

(a) if, immediately before the relevant share issue, the individual had made a disposal at their relevant value of all assets consisting of shares in or securities of the company, the disposal would have been a material disposal of business assets, and

(b) if a claim for business asset disposal relief had been made in respect of that disposal, a chargeable gain would have been treated by section 169N(2) as accruing to the individual.

(4) Where this section has effect, the individual is to be treated for the purposes of this Act—

(a) as having made a disposal immediately before the relevant share issue of all assets consisting of shares in or securities of the company, and

(b) immediately after that event, as having reacquired those assets,

at their relevant value.

(5) In this section—

“material disposal of business assets” and “personal company” have the same meanings as in Chapter 3 (see section 169S),

“relevant share issue” means an issue of shares by the company where—the shares are issued by the company for consideration consisting wholly of cash, andthe shares are subscribed, 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

“relevant value” means—in relation to an asset consisting of shares, an amount equal to the consideration that would be apportioned to the asset if, immediately before the relevant share issue, the whole of the issued share capital of the company were sold for a consideration equal to its market value at that time, orin relation to any other asset, its market value at the time of the relevant share issue.

(6) For the purposes of the definition of “relevant share issue” in subsection (5)—

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

“tax advantage” means—relief or increased relief from tax,repayment or increased repayment of tax,the avoidance or reduction of a charge to tax or an assessment to tax, orthe avoidance of a possible assessment to tax,and for the purposes of this definition “tax” means capital gains tax, corporation tax or income tax.

(7) In this Chapter—

(a) references to “the notional disposal” are references to the disposal mentioned in subsection (4)(a),

(b) references to “the notional gain” are references to the chargeable gain mentioned in subsection (3)(b), and

Supplementary election to defer gains until subsequent disposal

169SD

(1) An individual who makes an election under section 169SC may also elect that, for the purposes of this Act—

(a) no chargeable gain or allowable loss is to be treated as accruing to the individual on the notional disposal, but

(b) a chargeable gain calculated in accordance with this section is to be treated as accruing to the individual on any subsequent disposal by the individual of one or more assets consisting of shares in or securities of the company (in addition to any gain or loss that actually accrues on that disposal).

(2) The chargeable gain treated as accruing to the individual on a subsequent disposal is the amount resulting from the following steps—

Step 1 Attribute the notional gain to each of the classes of shares in or securities of the company which are the subject of the notional disposal. The attribution must be made, in relation to each class, by reference to the proportion that—the relevant gains (see section 169N(5)) accruing on the notional disposal in respect of shares or securities within each class bears tothe total amount of relevant gains accruing on the notional disposal.

Step 2 Apportion the amount attributed to each class under Step 1 to the shares or securities of that class which are the subject of the subsequent disposal. The apportionment must be by reference to the proportion that—the nominal value of the shares or securities of that class which are the subject of the subsequent disposal bears tothe nominal value of shares or securities of that class which are the subject of the notional disposal.

Step 3 The amount resulting from these steps is—the total of the amounts apportioned to shares or securities under Step 2, butexcluding, in relation to each class of shares or securities, so much of those amounts as would, together with any chargeable gains treated by this section as accruing on previous disposals of shares or securities of that class, exceed the amount attributed to that class under Step 1.

(3) If the subsequent disposal is a disposal by virtue of section 122, the nominal value of shares of a particular class which are the subject of that disposal is to be treated for the purposes of Step 2 of subsection (2) as being equal to the nominal value of shares of that class as are the subject of the notional disposal.

Application of section 169SD where section 116 applies

169SE

(1) This section has effect in any case where a transaction occurs to which section 116 (reorganisations, conversions and reconstructions) applies.

(2) If sections 116(10)(b) and 169SD(1)(b) have effect in relation to a subsequent disposal of the new asset—

(a) there must be calculated the chargeable gain that would have been treated by section 169SD(1)(b) as accruing to the individual if, at the time of the relevant transaction, the old asset had been disposed of immediately before that transaction,

(b) the whole or a corresponding part of the chargeable gain mentioned in paragraph (a) is to be treated as accruing on the subsequent disposal of the whole or part of the new asset (in addition to any gain or loss that actually accrues on that disposal and any chargeable gain treated by section 116(10)(b) as accruing on that disposal), and

(c) on that subsequent disposal, section 115 (exemptions for gilt-edged securities and qualifying corporate bonds) has effect only in relation to any gain that actually accrues and not in relation to any gain which is treated as accruing by virtue of paragraph (b).

(3) In subsection (2) “the new asset”, “the old asset” and “the relevant transaction” have the same meanings as in section 116.

Application of section 169SD where sections 127 to 130 apply

169SF

(1) This section has effect in any case where a transaction occurs to which sections 127 to 130 (treatment of share capital following a reorganisation) apply by virtue of any provision of Chapter 2 of Part 4.

(2) If a gain is treated by section 169SD(1)(b) as accruing on a subsequent disposal of the new holding and it is necessary to apportion the gain between shares or securities forming part of that new holding, the apportionment must be made in the same proportions as those in which the costs of acquisition of the original shares fall to be apportioned under the provisions of that Chapter.

(3) If subsection (3) of section 128 (consideration given or received by holder) has effect in relation to an individual, the individual is treated for the purposes of section 169SD as making the disposal of the interest in the original shares mentioned in that subsection.

(4) In this section “the new holding” and “the original shares” have the same meanings as in sections 127 to 130 (see section 126).

Elections under sections 169SC and 169SD

169SG

(1) An election under section 169SC or 169SD is irrevocable.

(2) An election under section 169SC must be made on or before the first anniversary of the 31 January following the tax year in which the notional disposal is made (“the relevant tax year”).

(3) An election under section 169SD may not be made more than 4 years after the end of the relevant tax year.

(4) If—

(a) an individual makes an election under both sections 169SC and 169SD, and

(b) a tax return under the Management Act would not otherwise be required for the relevant tax year,

the individual may make the elections by giving notice on or before the first anniversary of the 31 January following the relevant tax year.

Claims for relief in respect of subsequent disposals

169SH

(1) Where, as a result of an election under section 169SD, a chargeable gain is to be treated as accruing on a subsequent disposal, the following rules have effect.

(2) The individual making the subsequent disposal must make a claim for business asset disposal relief on or before the first anniversary of the 31 January following the first tax year in which, as a result of the election, the chargeable gain is to be treated as accruing.

(3) The chargeable gain is to be treated for the purposes of section 169N as the amount resulting from a calculation under subsection (1) of that carried out when that chargeable gain accrues and because of the claim mentioned in subsection (2).

(4) If the chargeable gain is a part only of the notional gain, each chargeable gain that subsequently accrues is to be treated for the purposes of section 169N as the amount resulting from a calculation under subsection (1) of that section carried out when that chargeable gain arises and because of the claim mentioned in subsection (2).

(5) In relation to the claim for business asset disposal relief in respect of the chargeable gain, the company is to be treated for the purposes of condition A in section 169I(6) as if it were, throughout the period of 2 years ending with the date of the subsequent disposal, the individual's personal company.

Chapter 4 — business asset disposal relief where held-over gains become chargeable

Overview of Chapter

169T

This Chapter makes provision about claiming business asset disposal relief in certain cases where, in relation to held-over gains that originally arose on a business disposal, there is a chargeable event for the purposes of Schedule 5B or 8B (relief for gains invested under the enterprise investment scheme or in social enterprises).

Eligibility conditions for deferred business asset disposal relief

169U

(1) Section 169V applies if, ignoring the operation of section 169V(2)(b), each of the following conditions is met.

(2) The first condition is that a chargeable gain (“the first eventual gain”) accrues as a result of the operation of—

paragraph 4 of Schedule 5B (enterprise investment scheme), or

paragraph 5 of Schedule 8B (investments in social enterprises).

(3) If the first condition is met, the paragraph and Schedule mentioned in subsection (2) that apply in the case are referred to in this section, and section 169V, as “the relevant paragraph” and “the applicable Schedule”.

(4) The second condition is—

(a) that the first eventual gain accrues in a case in which the original gain would, but for the operation of the applicable Schedule, have accrued on a relevant business disposal, or

(b) where the first eventual gain accrues in a case in which the original gain would, but for the operation of the applicable Schedule, have accrued as a result of the operation of either of the paragraphs mentioned in subsection (2), that the underlying disposal is a relevant business disposal.

(5) The third condition is that a claim for business asset disposal relief in respect of the first eventual gain is made, on or before the first anniversary of the 31 January following the tax year in which the first eventual gain accrues, by the individual who made the disposal mentioned in subsection (4)(a) or (b).

(6) The fourth condition is that the first eventual gain is the first gain to accrue in the case as a result of the operation of the relevant paragraph.

(7) In subsection (4) “the underlying disposal” means the disposal (not being a disposal within paragraph 3 of Schedule 5B or paragraph 6 of Schedule 8B) by virtue of which Schedule 5B or 8B has effect.

(8) For the purposes of subsection (4), whether the disposal on which the original gain would have accrued is a relevant business disposal, or whether the underlying disposal is a relevant business disposal, is to be decided according to the law applicable to disposals made at the time the disposal was made.

(9) In this section—

“the original gain”, in relation to a particular case, has the same meaning as in the applicable Schedule,

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

“relevant business disposal” means—a disposal—within section 169H(2)(a) or (c) (qualifying business disposals), andconsisting of the disposal of (or of interests in) shares in or securities of a company, ora disposal of relevant business assets which is comprised in a disposal—within section 169H(2)(a) or (c), andnot consisting of the disposal of (or of interests in) shares in or securities of a company.

Operation of deferred business asset disposal relief

169V

(1) Where this section applies, the following rules have effect.

(2) The gain mentioned in section 169U(2) (“the first eventual gain”)—

(a) is treated for relevant purposes as the amount resulting from a calculation under section 169N(1) carried out—

(i) in respect of a qualifying business disposal made when the first eventual gain accrues, and

(ii) because of the claim mentioned in section 169U(5), and

(b) except for relevant purposes, is not to be taken into account under this Act as a chargeable gain.

(3) If the first eventual gain is a part only of the original gain in the case concerned, each part of the original gain that subsequently accrues as a chargeable gain as a result of the operation of the relevant paragraph—

(a) is treated for relevant purposes as the amount resulting from a calculation under section 169N(1) carried out—

(i) in respect of a qualifying business disposal made when that chargeable gain so accrues, and

(ii) because of the claim mentioned in section 169U(5), and

(b) except for relevant purposes, is not to be taken into account under this Act as a chargeable gain.

(4) If the disposal mentioned in paragraph (a) or (b) of section 169U(4) is a disposal within section 169H(2)(c) (qualifying business disposal: disposal associated with a relevant material disposal)—

(a) a disposal mentioned in subsection (2) or (3) of this section is treated for the purposes of section 169P(1) as a disposal associated with a relevant material disposal, but

(b) section 169P applies in relation to that disposal as if the disposal referred to in section 169P(4) were the disposal mentioned in section 169U(4)(a) or (b).

(5) In this section “relevant purposes” means the purposes of—

(a) section 169N(2) to (4B), (7) and (8), and

(b) section 169P.

Chapter 5 — Investors' relief

Overview

Overview of Chapter

169VA

(1) This Chapter provides for a relief, in the form of a lower rate of capital gains tax, in respect of disposals of (and disposals of interests in) certain ordinary shares in unlisted companies.

(2) Section 169VB defines “qualifying shares”, “potentially qualifying shares” and “excluded shares”.

(3) Section 169VC creates the relief, and relief under that section is to be known as “investors' relief”.

(4) Section 169VD makes provision about disposals from holdings consisting partly of qualifying shares.

(5) Sections 169VE to 169VG contain rules for cases where there have been previous disposals from a holding, to determine which shares remain in the holding.

(6) Sections 169VH and 169VI make provision about disposals by trustees of a settlement.

(7) Section 169VJ makes provision about disposals of interests in shares.

(8) Sections 169VK and 169VL provide for a cap on the amount of investors' relief that can be claimed.

(9) Section 169VM makes provision about claims for investors' relief.

(10) Sections 169VN to 169VT make provision about how investors' relief applies following a company's reorganisation of its share capital, an exchange of shares or securities or a scheme of reconstruction.

(11) Sections 169VU to 169VY contain definitions for the purposes of this Chapter.

Qualifying shares

Qualifying shares, potentially qualifying shares and excluded shares

169VB

(1) Where there is a disposal of all or part of (or of an interest in) a holding of shares in a company, this section applies to determine whether a share which is in the holding at the time immediately before the disposal (“the relevant time”) is for the purposes of this Chapter—

(a) a qualifying share,

(b) a potentially qualifying share, or

(2) The share is a “qualifying share” at the relevant time if—

(a) the share was subscribed for, within the meaning given by section 169VU, by the person making the disposal (“the investor”),

(b) the investor has held the share continuously for the period beginning with the issue of the share and ending with the relevant time (“the share-holding period”),

(d) at the time the share was issued, none of the shares or securities of the company that issued it were listed on a recognised stock exchange,

(e) the share was an ordinary share when issued and is an ordinary share at the relevant time,

(f) the company that issued the share—

(i) was a trading company or the holding company of a trading group (as defined by section 169VV) when the share was issued, and

(ii) has been so throughout the share-holding period,

(g) at no time in the share-holding period was the investor or a person connected with the investor a relevant employee in respect of that company (within the meaning given by section 169VW), and

(h) the period beginning with the date the share was issued and ending with the date of the disposal is at least 3 years.

(3) The share is a “potentially qualifying share” at the relevant time if—

(a) the conditions in subsection (2)(a) to (g) are met, but

(b) the period beginning with the date the share was issued and ending with the date of the disposal is less than 3 years.

(4) The share is an “excluded share” at the relevant time if it is, at that time—

(a) not a qualifying share, and

(b) not a potentially qualifying share.

(5) This section is subject to Schedule 7ZB (disqualification of share where value received by investor).

(6) In relation to a share issued on or after 17 March 2016 but before 6 April 2016, any reference in subsection (2)(h) or (3) to “3 years” is to be read as a reference to the minimum period.

(7) In subsection (6) “the minimum period” means the period of 3 years extended by a period equal in length to the period beginning with the date the share was issued and ending with 5 April 2016.

The relief

Investors' relief

169VC

(1) This section applies where—

(a) a qualifying person disposes of a holding, or part of a holding, of shares in a company, and

(b) immediately before that disposal some or all of the shares in the holding are qualifying shares.

(2) If—

(a) a chargeable gain accrues to the qualifying person on the disposal, and

(b) a claim for relief under this section is made,

the rate of capital gains tax in respect of the relevant gain is 18%.

(3) In subsection (2) “the relevant gain” means—

(a) where immediately before the disposal all the shares in the holding are qualifying shares, the chargeable gain on the disposal;

(b) where at that time only some of the shares in the holding are qualifying shares, the appropriate part of that chargeable gain (defined by section 169VD).

(4) In this section—

(a) subsection (1) is subject to section 169VH (disposals by trustees of a settlement: further conditions for relief), and

(b) subsection (2) is subject to—

section 169VI (reduction of relief for certain disposals by trustees of a settlement), and

sections 169VK and 169VL (cap on investors' relief).

(5) A reference in subsection (3) to the chargeable gain on the disposal, or to the appropriate part of that gain, is a reference to that chargeable gain, or (as the case may be) that part, after any deduction of allowable losses which is made in accordance with this Act from that chargeable gain or from that part.

(6) For the application of this section to disposals of interests in shares, see section 169VJ.

(7) In this Chapter a “qualifying person” means—

(a) an individual, or

(b) the trustees of a settlement.

Disposal where holding consists partly of qualifying shares

169VD

(1) This section applies where—

(a) a disposal (“the disposal concerned”) is made as mentioned in section 169VC(1), and

(b) at the time immediately before the disposal, only some of the shares in the holding are qualifying shares.

(2) Where this section applies, for the purposes of section 169VC(3) “the appropriate part” of the chargeable gain on the disposal is so much of that chargeable gain as is found by multiplying it by the appropriate fraction.

(3) The appropriate fraction is—

$$Q T$where—Q is the number of qualifying shares found under subsection (4), andT is the total number of shares disposed of in the disposal concerned.$

(4) The number of qualifying shares found under this subsection is—

(a) all the qualifying shares in the holding at the time immediately before the disposal concerned, or

(b) if less, such number of those qualifying shares as equals the number of shares disposed of in that disposal.

Which shares are in holding immediately before disposal

169VE

(1) This section applies where—

(a) a particular disposal is made as mentioned in section 169VC(1)(a) (“the current disposal”),

(b) there have been one or more previous disposals of shares from the holding mentioned in section 169VC(1) before the current disposal, and

(c) it is necessary to determine for the purposes of this Chapter which shares are to be treated as in the holding immediately before the current disposal (and, accordingly, which shares are to be treated as having been disposed of in those previous disposals).

(2) In the case of a previous disposal as regards which investors' relief has been claimed or is being claimed, the shares to be treated as disposed of in that previous disposal are to be determined in accordance with the rules in section 169VF.

(3) In the case of a previous disposal not falling within subsection (2), the shares to be treated as disposed of in that previous disposal are to be determined in accordance with the rules in section 169VG.

Shares treated as disposed of in previous disposal where claim made

169VF

(1) The rules referred to in section 169VE(2) are as follows; and in this section “the disposal concerned” means the previous disposal mentioned in section 169VE(2).

(2) There are to be treated as having been disposed of in the disposal concerned—

(a) all the qualifying shares in the holding at the time immediately before that disposal (“the material time”), or

(b) if less, such number of those qualifying shares as equals the number of shares disposed of in that disposal.

(3) If—

(a) the number of qualifying shares in the holding at the material time was less than the total number of shares disposed of, and

(b) excluded shares were in the holding at the material time,

the available excluded shares are also to be treated as having been disposed of.

(4) “The available excluded shares” means—

(a) all the excluded shares in the holding at the material time, or

(b) if less, such number of those excluded shares as is equal to the difference between—

(i) the total number of shares disposed of, and

(ii) the number of qualifying shares in the holding at the material time.

(5) If the number of shares treated under subsections (2) to (4) as disposed of in the disposal concerned is less than the total number of shares disposed of, such number of the potentially qualifying shares in the holding at the material time as is equal to the difference are also to be treated as having been disposed of.

(6) Where the number of potentially qualifying shares in the holding at the material time exceeds the difference mentioned in subsection (5), under that subsection potentially qualifying shares acquired later are to be treated as disposed of in preference to ones acquired earlier.

(7) In this section “disposed of” (without more) means disposed of in the disposal concerned.

Shares treated as disposed of in previous disposal: no claim made

169VG

(1) The rules referred to in section 169VE(3) are as follows; and in this section “the disposal concerned” means the previous disposal mentioned in section 169VE(3).

(2) If any excluded shares were in the holding at the time immediately before the disposal concerned (“the material time”), the maximum number of excluded shares are to be treated as having been disposed of in the disposal concerned.

(3) “The maximum number of excluded shares” means—

(a) all the excluded shares in the holding at the material time, or

(b) if less, such number of those excluded shares as is equal to the number of shares disposed of.

(4) If—

(a) there were no excluded shares in the holding at the material time, or the number of such shares was less than the total number of shares disposed of, and

(b) potentially qualifying shares were in the holding at the material time,

the available potentially qualifying shares are to be treated as having been disposed of.

(5) “The available potentially qualifying shares” means—

(a) all the potentially qualifying shares in the holding at the material time, or

(b) if less, such number of those potentially qualifying shares as is equal to the difference between—

(i) the total number of shares disposed of, and

(ii) the number of excluded shares in the holding at the material time.

(6) Where the number of potentially qualifying shares in the holding at the material time exceeds the difference mentioned in subsection (5), potentially qualifying shares acquired later are to be treated as disposed of in preference to ones acquired earlier.

(7) If the number of shares treated under subsections (2) to (5) as disposed of in the disposal concerned is less than the total number of shares disposed of, such number of the qualifying shares in the holding at the material time as is equal to the difference are to be treated as having been disposed of.

(8) In this section “disposed of” (without more) means disposed of in the disposal concerned.

Trustees of a settlement: special provision

Disposals by trustees: further conditions for relief

169VH

(1) Where a disposal falling within section 169VC(1)(a) and (b) is made by the trustees of a settlement, section 169VC does not apply to the disposal unless there is at least one individual who is an eligible beneficiary in respect of the disposal.

(2) For the purposes of this section, an individual is an “eligible beneficiary” in respect of the disposal if—

(a) at the time immediately before the disposal, the individual has under the settlement an interest in possession in settled property that includes or consists of the holding of shares mentioned in section 169VC(1),

(b) the individual has had such an interest in possession under the settlement throughout the period of 3 years ending with the date of the disposal,

(c) at no time in that period has the individual been a relevant employee in respect of the company that issued the shares (within the meaning given by section 169VW), and

(d) the individual has (by the time of the claim under section 169VC in respect of the disposal) elected to be treated as an eligible beneficiary in respect of the disposal.

(3) For the purposes of subsection (2)(d), an individual elects to be treated as an eligible beneficiary in respect of a disposal if the individual tells the trustees (by whatever means) that he or she wishes to be so treated; and an election under subsection (2)(d) may be withdrawn by the individual at any time until the claim is made.

(4) In this section “interest in possession” does not include an interest in possession for a fixed term.

(5) In relation to a disposal made by the trustees of a settlement, any reference in section 169VB(2)(g) to the investor is to be read as a reference to any trustee of the settlement.

Disposals by trustees: relief reduced in certain cases

169VI

(1) Subsection (2) applies where—

(a) a disposal falling within section 169VC(1)(a) and (b) is made by the trustees of a settlement,

(b) section 169VC applies to the disposal by reason of there being at least one individual who is an eligible beneficiary in respect of the disposal (see section 169VH), and

(c) at the time immediately before the disposal, there are two or more persons each of whom has under the settlement an interest in possession in the settled property.

(2) In such a case the reference in section 169VC(2) to the relevant gain is to be read as a reference—

(a) to the eligible beneficiary's share of the relevant gain (see subsections (3) to (6)), or

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