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Finance Act 2004

Type Public General Act

Publication 2004-07-22

Last updated 2025-04-24

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

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T is the amount of any income tax or capital gains tax payable by the chargeable person in respect of the taxable period by virtue of any of the following provisions—(a) section 461 of ITTOIA 2005,(b) section 624 of that Act,(c) sections 720 to 730 of the Income Tax Act 2007,(d) section 77 of the Taxation of Chargeable Gains Act 1992 (c. 12), and(e) section 86 of that Act,

so far as the tax is attributable to the relevant property.

(2) Regulations may, in relation to any valuation date, provide for a valuation of the relevant property by reference to an earlier valuation date to apply subject to any prescribed adjustments.

(3) In this paragraph—

“the taxable period” means the year of assessment, or part of a year of assessment, during which paragraph 8 applies to the chargeable person;

“the valuation date”, in relation to a year of assessment, means such date as may be prescribed.

Excluded transactions

10

(1) For the purposes of paragraphs 3(2) and 6(2) (the disposal condition), the disposal of any property is an “excluded transaction” in relation to any person (“the chargeable person”) if—

(a) it was a disposal of his whole interest in the property, except for any right expressly reserved by him over the property, either—

(i) by a transaction made at arm’s length with a person not connected with him, or

(ii) by a transaction such as might be expected to be made at arm’s length between persons not connected with each other,

(b) the property was transferred to his spouse or civil partner (or where the transfer has been ordered by a court, to his former spouse or civil partner),

(c) it was a disposal by way of gift (or, where the transfer is for the benefit of his former spouse or civil partner, in accordance with a court order), by virtue of which the property became settled property in which his spouse or civil partner or former spouse or civil partner is beneficially entitled to an interest in possession,

(d) the disposal was a disposition falling within section 11 of IHTA 1984 (dispositions for maintenance of family), or

(e) the disposal is an outright gift to an individual and is for the purposes of IHTA 1984 a transfer of value that is wholly exempt by virtue of section 19 (annual exemption) or section 20 (small gifts).

(2) For the purposes of paragraphs 3(3) and 6(3) (the contribution condition) the provision by a person (“the chargeable person”) of consideration for another’s acquisition of any property is an “excluded transaction” in relation to the chargeable person if—

(a) the other person was his spouse or civil partner (or, where the transfer has been ordered by the court, his former spouse or civil partner),

(b) on its acquisition the property became settled property in which his spouse or civil partner or former spouse or civil partner is beneficially entitled to an interest in possession,

(c) the provision of the consideration constituted an outright gift of money (in sterling or any other currency) by the chargeable person to the other person and was made at least seven years before the earliest date on which the chargeable person met the condition in paragraph 3(1)(a) or, as the case may be, 6(1)(a),

(d) the provision of the consideration is a disposition falling within section 11 of IHTA 1984 (dispositions for maintenance of family), or

(e) the provision of the consideration is an outright gift to an individual and is for the purposes of IHTA 1984 a transfer of value that is wholly exempt by virtue of section 19 (annual exemption) or section 20 (small gifts).

(3) A disposal is not an excluded transaction by virtue of sub-paragraph (1)(c) or (2)(b), if the interest in possession of the spouse or civil partner or former spouse or civil partner has come to an end otherwise than on the death of the spouse or civil partner or former spouse or civil partner.

Exemptions from charge

11

(1) Paragraph 3 (land), paragraph 6 (chattels) and paragraph 8 (intangible property) do not apply to a person at a time when his estate for the purposes of IHTA 1984 includes—

(a) the relevant property, or

(b) other property—

(i) which derives its value from the relevant property, and

(ii) whose value, so far as attributable to the relevant property, is not substantially less than the value of the relevant property.

(2) Where the estate for the purposes of IHTA 1984 of a person to whom paragraph 3, 6 or 8 applies includes property—

(a) which derives its value from the relevant property, and

(b) whose value, so far as attributable to the relevant property, is substantially less than the value of the relevant property,

the appropriate rental value in paragraph 4, the appropriate amount in paragraph 7 or the chargeable amount in paragraph 9 (as the case may be) is to be reduced by such proportion as is reasonable to take account of the inclusion of the property in his estate.

(3) Paragraphs 3, 6 and 8 do not apply to a person at a time when—

(a) the relevant property, or

(b) any other property—

(i) which derives its value from the relevant property, and

(ii) whose value, so far as attributable to the relevant property, is not substantially less than the value of the relevant property,

falls within sub-paragraph (5) in relation to him.

(4) Where any property which falls within sub-paragraph (5) in relation to a person includes property—

(a) which derives its value from the relevant property, and

(b) whose value, so far as attributable to the relevant property, is substantially less than the value of the relevant property,

(5) Property falls within this sub-paragraph in relation to a person at a time when it—

(a) would fall to be treated by virtue of any provision of Part 5 of the 1986 Act (inheritance tax) as property which in relation to him is property subject to a reservation,

(b) would fall to be so treated but for any of paragraphs (d) to (i) of subsection (5) of section 102 of the 1986 Act (certain cases where disposal by way of gift is an exempt transfer for purposes of inheritance tax),

(ba) would fall to be so treated but for section 102(7A) of the 1986 Act (cases where property was excluded property under the old inheritance tax regime),

(c) would fall to be so treated but for subsection (4) of section 102B of the 1986 Act (gifts with reservation: share of interest in land), or would have fallen to be so treated but for that subsection if the disposal by way of gift of an undivided share of an interest in land had been made on or after 9th March 1999, or

(d) would fall to be so treated but for section 102C(3) of, and paragraph 6 of Schedule 20 to, the 1986 Act (exclusion of benefit).

(6) Where at any time the value of a person’s estate for the purposes of IHTA 1984 is reduced by an excluded liability affecting any property, that property is not to be treated for the purposes of sub-paragraph (1) or (2) as comprised in his estate except to the extent that the value of the property exceeds the amount of the excluded liability.

(7) For the purposes of sub-paragraph (6) a liability is an excluded liability if—

(a) the creation of the liability, and

(b) any transaction by virtue of which the person’s estate came to include the relevant property or property which derives its value from the relevant property or by virtue of which the value of property in his estate came to be derived from the relevant property,

were associated operations, as defined by section 268 of IHTA 1984.

(8) In determining whether any property falls within sub-paragraph (5)(b), (c) or (d) in a case where the contribution condition in paragraph 3(3) or 6(3) is met, paragraph 2(2)(b) of Schedule 20 (exclusion of gifts of money) is to be disregarded.

(9) In this paragraph “the relevant property” means—

(a) in relation to paragraphs 3 and 6—

(i) where the disposal condition in paragraph 3(2) or 6(2) is met, the property disposed of,

(ii) where the contribution condition in paragraph 3(3) or 6(3) is met, the property representing the consideration directly or indirectly provided,

(b) in relation to paragraph 8, the relevant property within the meaning of that paragraph.

(10) Property is not to be treated as falling within sub-paragraph (5)(b) at any time in a case falling within section 102(5)(h) of the 1986 Act unless the property remains subject to trusts which comply with the requirements of paragraph 3 (1) of Schedule 4 to IHTA 1984.

(11) Sub-paragraph (12) applies where at any time—

(a) the relevant property has ceased to be comprised in a person's estate for the purposes of IHTA 1984, or

(b) he has directly or indirectly provided any consideration for the acquisition of the relevant property,

and at any subsequent time the relevant property or any derived property is comprised in his estate for the purposes of IHTA 1984 as a result of section 49(1) of that Act (treatment of interests in possession).

(12) Where this sub-paragraph applies, the relevant property and any derived property—

(a) are not to be treated for the purposes of sub-paragraphs (1) and (2) as comprised in his estate at that subsequent time, and

(b) are not to be treated as falling within sub-paragraph (5) in relation to him at that subsequent time.

(13) For the purposes of sub-paragraphs (11) and (12) references, in relation to the relevant property, to any derived property are to other property—

(a) which derives its value from the relevant property, and

(b) whose value, so far as attributable to the relevant property, is not substantially less than the value of the relevant property.

Chargeable person resident or domiciled outside the United Kingdom

12

(1) This Schedule does not apply in relation to any person for any year of assessment during which he is not resident in the United Kingdom.

(2) Where in any year of assessment a person is resident in the United Kingdom but is not a long-term UK resident, this Schedule does not apply to him unless the property falling within paragraph 3(1)(a), 6(1)(a) or 8(1)(c) is situated in the United Kingdom.

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

(4) In this paragraph, “long-term UK resident” has the same meaning as in IHTA 1984.

Exemption in cases where aggregate notional annual values do not exceed £5,000

13

(1) This paragraph applies where, in relation to any person who would (apart from this paragraph) be chargeable under this Schedule for any year of assessment, the aggregate of the amounts specified in sub-paragraph (2) in respect of that year does not exceed £5,000.

(2) Those amounts are—

(a) in relation to any land to which paragraph 3 applies in respect of him, the appropriate rental value as determined under paragraph 4(2),

(b) in relation to any chattel to which paragraph 6 applies in respect of him, the appropriate amount as determined under paragraph 7(2), and

(c) in relation to any intangible property to which paragraph 8 applies in respect of him, the chargeable amount determined under paragraph 9.

(3) Where this paragraph applies, the person is not chargeable for that year of assessment under any of the following provisions—

(a) paragraph 3(5) (land),

(b) paragraph 6(5) (chattels), or

Power of Treasury to confer further exemptions by regulations

14

Regulations may confer further exemptions from the charges to income tax imposed by paragraphs 3, 6 and 8.

Valuation

15

Except as otherwise provided by this Schedule, the value of any property shall for the purposes of this Schedule be the price which the property might reasonably be expected to fetch if sold in the open market at that time; but that price shall not be assumed to be reduced on the ground that the whole property is to be placed on the market at one and the same time.

Changes in distribution of deceased’s estate

16

Any disposition made by a person (“the chargeable person”) in relation to an interest in the estate of a deceased person is to be disregarded for the purposes of this Schedule if by virtue of section 17 of IHTA 1984 (changes in distribution of deceased’s estate, etc.) the disposition is not treated for the purposes of inheritance tax as a transfer of value by the chargeable person.

Guarantees

17

Where a person (“A”) acts as guarantor in respect of a loan made to another person (“B”) by a third party in connection with B’s acquisition of any property, the mere giving of the guarantee is not to be regarded as the provision by A of consideration for B’s acquisition of the property.

Persons chargeable under different provisions by reference to same property

18

(1) Where, in any year of assessment, a person (“the chargeable person”) is (apart from this paragraph) chargeable to income tax both—

(a) under paragraph 3 (land) or paragraph 6 (chattels) by reason of his occupation of any land or his possession or use of any chattel, and

(b) under paragraph 8 (intangible property) by reference to any intangible property which derives its value (whether in whole or part) from the land or the chattel,

he is to be charged to income tax under whichever provision produces the higher chargeable amount in relation to him.

(2) Where sub-paragraph (1) applies, only the amount under the paragraph under which he is chargeable is to be taken into account in relation to the chargeable person for the purposes of paragraph 13(2).

Relationship with Part 3 of Income Tax (Earnings and Pensions) Act 2003

19

Where, in any year of assessment, a person is (apart from this paragraph) chargeable, in respect of his occupation of any land or his possession or use of any chattel, to income tax both—

(a) under this Schedule, and

(b) under Part 3 of the Income Tax (Earnings and Pensions) Act 2003 (c. 1),

the provisions of that Part shall have priority and he shall not be chargeable to income tax under this Schedule, except to the extent that the amount chargeable under this Schedule exceeds the amount to be treated as earnings under that Part.

Regulations

20

(1) Regulations under this Schedule may—

(a) make different provision for different cases, and

(b) include transitional provisions and savings.

(2) Any power conferred by this Schedule to prescribe a rate of interest includes power—

(a) to prescribe different rates in relation to property of different descriptions, and

(b) to prescribe a rate by reference to a rate specified in the regulations.

Election for application of inheritance tax provisions

21

(1) This paragraph applies where—

(a) a person (“the chargeable person”) would (apart from this paragraph) be chargeable under paragraph 3 (land) or paragraph 6 (chattels) for any year of assessment (“the initial year”) by reference to his enjoyment of any property (“the relevant property”), and

(b) he has not been chargeable under the paragraph in question in respect of any previous year of assessment by reference to his enjoyment of the relevant property, or of any other property for which the relevant property has been substituted.

(2) The chargeable person may elect in accordance with paragraph 23 that—

(a) the preceding provisions of this Schedule shall not apply to him during the initial year and subsequent years of assessment by reference to his enjoyment of the relevant property or of any property which may be substituted for the relevant property, but

(b) so long as the chargeable person continues to enjoy the relevant property or any property which is substituted for the relevant property—

(i) the chargeable proportion of the property is to be treated for the purposes of Part 5 of the 1986 Act (in relation to the chargeable person) as property subject to a reservation, but only so far as the chargeable person is not beneficially entitled to an interest in possession in the property

(ii) section 102(3) and (4) of that Act shall apply, but only so far as the chargeable person is not beneficially entitled to an interest in possession in the property, and

(iii) if the chargeable person is beneficially entitled to an interest in possession in the property, sections 53(3) and (4) and 54 of IHTA 1984 (which deal with cases of property reverting to the settlor etc) shall not apply in relation to the chargeable proportion of the property.

(3) In this paragraph, “the chargeable proportion”, in relation to any property, means—

$$DVV$where DV and V are to be read in accordance with paragraph 4(2) or 7(2), as the case requires, but as if—(a) any reference in paragraph 4(2) or 7(2) to the valuation date were a reference—(i) in the case of property falling within subsection (3) of section 102 of the Finance Act 1986, to the date of the death of the chargeable person, and(ii) in the case of property falling within subsection (4) of that section, to the date on which the property ceases to be treated as property subject to a reservation, and(iii) in the case of property in which the chargeable person is beneficially entitled to an interest in possession, to the date of his death or (if his interest comes to an end on an earlier date) that earlier date, and(b) the transactions to be taken into account in calculating DV included transactions after the time when the election takes effect as well as transactions before that time.$

(4) For the purposes of this paragraph a person “enjoys” property if—

(a) in the case of an interest in land, he occupies the land, and

(b) in the case of an interest in a chattel, he is in possession of, or has the use of, the chattel.

22

(1) This paragraph applies where—

(a) a person (“the chargeable person”) would (apart from this paragraph) be chargeable under paragraph 8 (intangible property) for any year of assessment (“the initial year”) by reference to any property (“the relevant property”), and

(b) he has not been chargeable under that paragraph in respect of any previous year of assessment by reference to the relevant property or any property which the relevant property represents or is derived from.

(2) The chargeable person may elect in accordance with paragraph 23 that—

(a) the preceding provisions of this Schedule shall not apply to him during the initial year and subsequent years of assessment by reference to the relevant property or any property which represents or is derived from the relevant property, but

(b) so long as the conditions in sub-paragraph (3) are satisfied—

(i) the relevant property and any property which represents or is derived from the relevant property shall be treated for the purposes of Part 5 of the 1986 Act (in relation to the chargeable person) as property subject to a reservation, but only so far as the chargeable person is not beneficially entitled to an interest in possession in the property concerned

(ii) section 102(3) and (4) of that Act shall apply, but only so far as the chargeable person is not beneficially entitled to an interest in possession in the property concerned, and

(iii) if the chargeable person is beneficially entitled to an interest in possession in the property concerned, sections 53(3) and (4) and 54 of IHTA 1984 (which deal with cases of property reverting to the settlor etc) shall not apply in relation to that property.

(3) The conditions referred to in sub-paragraph (2)(b) are—

(a) that the relevant property or the property which represents or is derived from the relevant property remains comprised in the settlement, and

(b) that any income arising under the settlement would be treated by virtue of section 624 of ITTOIA 2005 as income of the chargeable person.

23

(1) In this paragraph—

“election” means an election under paragraph 21 or 22;

“the relevant filing date” means 31st January in the year of assessment that immediately follows the initial year within the meaning of paragraph 21 or (as the case requires) paragraph 22.

(2) The election must be made in the prescribed manner.

(3) The election must be made on or before—

(a) the relevant filing date, or

(b) such later date as an officer of Revenue and Customs may, in a particular case, allow.

(5) The election may be withdrawn or amended, during the life of the chargeable person, at any time on or before the relevant filing date.

(6) Subject to sub-paragraph (5), the election takes effect for the purposes of inheritance tax from the beginning of the initial year within the meaning of paragraph 21 or (as the case requires) paragraph 22 or, if later, the date on which the chargeable person would (but for the election) have first become chargeable under this Schedule by reference to the property to which the election relates.

SCHEDULE 16

Income tax relief: restricted securities

1

(1) Chapter 2 of Part 7 of the Income Tax (Earnings and Pensions) Act 2003 (c. 1) (employment income: restricted securities) is amended as follows.

(2) In section 426 (charge on occurrence of chargeable event), for subsections (1) to (4) substitute—

(1) If a chargeable event occurs in relation to the employment-related securities, the taxable amount counts as employment income of the employee for the relevant tax year. (2) For this purpose— (a) “chargeable event” has the meaning given by section 427, (b) “the taxable amount”is the amount determined under section 428, and (c) “the relevant tax year”is the tax year in which the chargeable event occurs. (3) Relief may be available under section 428A (relief for secondary Class 1 contributions met by employee) against an amount counting as employment income under this section.

(3) After section 428 insert—

(428A) (1) Relief is available under this section against an amount counting as employment income under section 426 (“the employment income amount”) if— (a) an agreement having effect under paragraph 3A of Schedule 1 to the Contributions and Benefits Act has been entered into allowing the secondary contributor to recover from the employee the whole or part of any secondary Class 1 contribution in respect of that amount, or (b) an election having effect under paragraph 3B of that Schedule is in force which has the effect of transferring to the employee the whole or part of the liability to pay secondary Class 1 contributions in respect of that amount. (2) The amount of the relief is the total of— (a) any amount that under the agreement referred to in subsection (1)(a) is recovered in respect of the employment income amount by the secondary contributor before 5th June in the tax year following that in which the chargeable event occurs, and (b) the amount of any liability in respect of the employment income amount that, by virtue of the election referred to in subsection (1)(b), has become the employee’s liability. (3) If notice of withdrawal of approval of the election is given, the amount of the liability referred to in subsection (2)(b) is limited to the amount met before 5th June in the tax year following that in which the chargeable event occurs. (4) Relief under this section is given by way of deduction from the amount otherwise counting as employment income. (5) Relief under this section does not affect the amount to be taken into account— (a) as employment income in determining contributions payable under the Contributions and Benefits Act, or (b) as relevant employment income for the purposes of paragraph 3A or 3B of Schedule 1 to that Act. (6) In this section— - “approval”, in relation to an election, means approval by the Inland Revenue under paragraph 3B of Schedule 1 to the Contributions and Benefits Act, and - “secondary contributor” has the same meaning as in that Act (see section 7).

Income tax relief: convertible securities

2

(1) Chapter 3 of Part 7 of the Income Tax (Earnings and Pensions) Act 2003 (c. 1) (employment income: convertible securities) is amended as follows.

(2) In section 438 (charge on occurrence of chargeable event), for subsections (1) to (4) substitute—

(1) If a chargeable event occurs in relation to the employment-related securities, the taxable amount counts as employment income of the employee for the relevant tax year. (2) For this purpose— (a) “chargeable event” has the meaning given by section 439, (b) “the taxable amount”is the amount determined under section 440, and (c) “the relevant tax year”is the tax year in which the chargeable event occurs. (3) Relief may be available under section 442A (relief for secondary Class 1 contributions met by employee) against an amount counting as employment income under this section.

(3) After section 442 insert—

(442A) (1) Relief is available under this section against an amount counting as employment income under section 438 (“the employment income amount”) if— (a) an agreement having effect under paragraph 3A of Schedule 1 to the Contributions and Benefits Act has been entered into allowing the secondary contributor to recover from the employee the whole or part of any secondary Class 1 contribution in respect of that amount, or (b) an election having effect under paragraph 3B of that Schedule is in force which has the effect of transferring to the employee the whole or part of the liability to pay secondary Class 1 contributions in respect of that amount. (2) The amount of the relief is the total of— (a) any amount that under the agreement referred to in subsection (1)(a) is recovered in respect of the employment income amount by the secondary contributor before 5th June in the tax year following that in which the chargeable event occurs, and (b) the amount of any liability in respect of the employment income amount that, by virtue of the election referred to in subsection (1)(b), has become the employee’s liability. (3) If notice of withdrawal of approval of the election is given, the amount of the liability referred to in subsection (2)(b) is limited to the amount met before 5th June in the tax year following that in which the gain is realised. (4) Relief under this section is given by way of deduction from the amount otherwise counting as employment income. (5) Relief under this section does not affect the amount to be taken into account— (a) as employment income in determining contributions payable under the Contributions and Benefits Act, or (b) as relevant employment income for the purposes of paragraph 3A or 3B of Schedule 1 to that Act. (6) In this section— - “approval”, in relation to an election, means approval by the Inland Revenue under paragraph 3B of Schedule 1 to the Contributions and Benefits Act, and - “secondary contributor” has the same meaning as in that Act (see section 7).

Income tax relief: securities options

3

(1) Chapter 5 of Part 7 of the Income Tax (Earnings and Pensions) Act 2003 (c. 1) (employment income: securities options) is amended as follows.

(2) In section 476 (charge on occurrence of chargeable event), for subsections (1) to (4) substitute—

(1) If a chargeable event occurs in relation to an employment-related securities option, the taxable amount counts as employment income of the employee for the relevant tax year. (2) For this purpose— (a) “chargeable event” has the meaning given by section 477, (b) “the taxable amount”is the amount determined under section 478, and (c) “the relevant tax year”is the tax year in which the chargeable event occurs. (3) Relief under section 481 or 482 (relief for secondary Class 1 contributions or special contribution met by employee) may be available against an amount counting as employment income under this section.

(3) In section 480 (deductible amounts), omit subsection (7).

(4) In section 481 (deductible amount in respect of secondary Class 1 contributions met by employee)—

(a) in the heading for “Deductible amount in respect of” substitute “ Relief for ”;

(b) in subsection (1) for the opening words down to “if” substitute “ Relief is available under this section against an amount counting as employment income under section 476 if ”;

(d) after subsection (4) insert—

(4A) Relief under this section is given by way of deduction from the amount otherwise counting as employment income. (4B) Relief under this section does not affect the amount to be taken into account— (a) as employment income in determining contributions payable under the Contributions and Benefits Act, or (b) as relevant employment income for the purposes of paragraph 3A or 3B of Schedule 1 to that Act.

(5) In section 482 (deductible amount in respect of special contribution met by employee)—

(a) in the heading for “Deductible amount in respect of” substitute “ Relief for ”;

(b) in subsection (1) for the opening words down to “if” substitute “ Relief is available under this section against an amount counting as employment income under section 476 if ”;

(6) The amount of the relief is the amount of the liability referred to in subsection (4). (“) Relief under this section is given by way of deduction from the amount otherwise counting as employment income.

Consequential amendments: PAYE

4

(1) Part 11 of the Income Tax (Earnings and Pensions) Act 2003 (c. 1) (Pay As You Earn) is amended as follows.

(2) In section 698 (PAYE: special charges on employment-related securities), after subsection (2) insert—

(2A) For the purposes of this section the amount likely to count as employment income under section 426 or 438 means the amount after deducting the amount of any relief likely to be available under section 428A or 442A (relief for secondary Class 1 contributions met by employee).

(3) In section 700 (PAYE: gains from securities options), after subsection (4) insert—

(4A) For the purposes of this section the amount likely to count as employment income under section 476 means the amount after deducting the amount of any relief likely to be available under section 481 or 482 (relief for secondary Class 1 contributions or special contribution met by employee).

Consequential amendments: corporation tax relief

5

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

Consequential amendments: capital gains tax

6

(1) Section 119A of the Taxation of Chargeable Gains Act 1992 (c. 12) (increase in expenditure by reference to tax charged in relation to employment-related securities) is amended as follows.

(2) For subsection (5) (determination of relevant amount) substitute—

(5) In determining for the purposes of subsection (4) the amount counting as employment income— (a) in the case of an amount counting as employment income under section 476 of ITEPA 2003 any amounts deducted under section 480(5)(a) or (b) of that Act shall be added back, and (b) no account shall be taken of any relief under section 428A, 442A, 481 or 482 of that Act (relief for secondary Class 1 contributions or special contribution met by employee).

(3) Omit subsection (8).

(4) Nothing in this paragraph affects the operation of section 119A(5) of the Taxation of Chargeable Gains Act 1992 (c. 12), as inserted by paragraph 50 (1) of Schedule 22 to the Finance Act 2003 (c. 14), in relation to amounts deducted under section 481 or 482 of the Income Tax (Earnings and Pensions) Act 2003 (c. 1) before the amendment of those sections by this Schedule.

Other consequential amendments

7

(1) In section 484(7) of the Income Tax (Earnings and Pensions) Act 2003 (definitions for Chapter 5 of Part 7), omit the definition of “the Contributions and Benefits Act” and the word “and” preceding it.

(2) In section 721 (1) of that Act (general definitions), at the appropriate place insert—

“the Contributions and Benefits Act” means SSCBA 1992 or SSCB(NI)A 1992;

(3) In Part 2 of Schedule 1 to that Act (index of defined expressions), for the entry relating to “the Contributions and Benefits Act” substitute—

the Contributions and Benefits Act	section 721(1)

SCHEDULE 17

Free or subsidised meals

1

(1) In Chapter 11 of Part 4 of the Income Tax (Earnings and Pensions) Act 2003 (employment income: miscellaneous exemptions), in section 317 (free or subsidised meals), for subsection (1) substitute—

(1) No liability to income tax arises in respect of the provision for an employee by the employer of free or subsidised meals if they are provided— (a) in a canteen, or (b) on the employer’s business premises, and conditions A to C are met.

(2) This amendment has effect for the year 2004-05 and subsequent tax years.

Payments to non-approved pension schemes: exception for employment where earnings not within main charging provisions

2

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

Time limit for assessment: income received after year for which it is assessable

3

(1) In Part 4 of the Taxes Management Act 1970 (c. 9) (assessments and claims), for section 35 (time limit for assessment: emoluments received after year for which they are assessable) substitute—

(35) (1) Where income to which this section applies is received in a year of assessment subsequent to that for which it is assessable, an assessment to income tax as respects that income may be made at any time within six years after the year of assessment in which it was received. (2) This section applies to— (a) employment income, (b) pension income, and (c) social security income.

(2) This amendment has effect in relation to income assessable for the year 2004-05 and subsequent years of assessment.

Computation of profits or gains under Schedule D: delayed payment of remuneration

4

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Donations to charity by individuals: application to Crown employment

5

(1) In section 25(2) of the Finance Act 1990 (c. 29) (donations to charity by individuals: qualifying conditions), in paragraph (i)(i) for the words from “or performs duties” to “performed in the United Kingdom” substitute “ or is in Crown employment as defined in section 28(2) of the Income Tax (Earnings and Pensions) Act 2003 ”.

(2) This amendment (which supersedes the amendment made by paragraph 166(3) of Schedule 6 to the Income Tax (Earnings and Pensions) Act 2003) has effect for the year 2003-04 and subsequent years of assessment.

Payments on account of income tax

6

(1) Section 108 of the Finance Act 1995 (c. 4) shall be deemed not to have been repealed by Part 1 of Schedule 8 to the Income Tax (Earnings and Pensions) Act 2003 and the inclusion of that section among the enactments so repealed shall be deemed not to have affected the amendments made by that section in section 59A of the Taxes Management Act 1970 (c. 9) (payments on account of income tax).

(2) Nothing in this paragraph affects anything done—

(a) on or after 6th April 2003 (when the Income Tax (Earnings and Pensions) Act 2003 came into force), and

(b) before the passing of this Act,

in reliance on the view that the amendments referred to in sub-paragraph (1) had ceased to have effect.

Tax relief for expenditure on R&D or remediation of contaminated land: staff costs

7

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

Gains and losses of a company from intangible fixed assets: delayed payment of remuneration

8

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

Minor corrections of the Income Tax (Earnings and Pensions) Act 2003

9

(1) The Income Tax (Earnings and Pensions) Act 2003 (c. 1) is amended as follows.

(2) In section 286 (power to amend sections 279 to 285), in the heading and in subsection (1), for “279” substitute “ 277 ”.

(3) In Chapter 11 of Part 7 (supplementary provisions about employee benefit trusts), in section 554(1)(a) (attribution of further interest in company), for “employment” substitute “ employee ”.

(4) In section 577 (United Kingdom social security pensions)—

(a) in subsection (2), in paragraph (b) of the definition of “state pension”, for “48” substitute “ 48A ”, and

(b) omit subsection (3).

(5) In section 677 (UK social security benefits wholly exempt from income tax), in Part 2 of Table B (benefits payable under regulations), omit the entry relating to compensation payments where child support reduced because of a change in legislation.

Other minor corrections

10

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

(3) In section 38(9) of the Finance Act 1988 (c. 39) (maintenance payments under existing obligations: 1989-90 onwards)—

(a) for “68(1)(b) or 192(3)” substitute “or 68(1)(b)”, and

(b) after “Taxes Act 1988” insert “or section 355 of the Income Tax (Earnings and Pensions) Act 2003”.

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SCHEDULE 18

Part 1 — Income tax relief

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

2

(1) Section 289A of the Taxes Act 1988 (form of relief) is amended as follows.

(2) In subsection (6), for the words from “A claim” to “below is complied with” substitute “ A claim for relief in respect of eligible shares issued by a company shall not be allowed unless subsection (7) below is complied with in relation to the issue of shares in question ”.

(3) In subsection (7)—

(a) in paragraph (a)—

(i) for “the case of shares issued” substitute “ a case where the money raised by an issue of eligible shares is raised wholly ”,

(ii) for “company or subsidiary concerned has carried on the trade for four months” substitute “ trade concerned has been carried on for four months by no person other than the qualifying company or a qualifying 90% subsidiary of that company ”,

(b) in paragraph (b)—

(i) for “the case of shares issued” substitute “ a case where the money raised by an issue of eligible shares is raised wholly or partly ”,

(ii) for the words from “or within” to the end substitute “ the research and development concerned has been carried on for four months by no person other than the qualifying company or a qualifying 90% subsidiary of that company ”.

(4) In subsection (8)—

(a) for paragraph (a) substitute—

(a) by reason only of the qualifying company or any other company being wound up or dissolved without winding up— (i) the trade concerned is carried on as mentioned in subsection (7)(a) above, or (ii) the research and development concerned is carried on as mentioned in subsection (7)(b) above, for a period shorter than four months, and

(b) in paragraph (b)—

(i) omit “it is shown that”,

(ii) for “was for” substitute “ is for ”,

(iii) for “not as” substitute “ is not ”,

(iv) for “which was” substitute “ which is ”,

(5) In subsection (8A)—

(a) for the words from “Where” to “shorter period.” substitute—

Where, by reason only of anything done as a consequence of the qualifying company or any other company being in administration or receivership— (a) the trade concerned is carried on as mentioned in subsection (7)(a) above for a period shorter than four months, or (b) the research and development concerned is carried on as mentioned in subsection (7)(b) above for a period shorter than four months, subsection (7)(a) or, as the case may be, (7)(b) above shall have effect as if it referred to that shorter period.

(b) in paragraph (b), after “company” insert “ concerned ”.

3

In section 289B of the Taxes Act 1988 (attribution of relief to shares) in subsection (4), for “same day” substitute “ same day, but this subsection does not apply in relation to section 289A(6) and (7) ”.

4

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

5

(1) Section 293 of the Taxes Act 1988 (qualifying companies) is amended as follows.

(2) In subsection (4A)—

(a) omit “which is in administration or receivership”,

(b) after “by reason” insert “ only ”,

(3) In subsection (4B)(b), after “company” insert “ concerned ”.

(4) In subsection (5)—

(a) after “winding up of the company” insert “ or any of its subsidiaries ”,

(b) after “or the company” insert “ or any of its subsidiaries ”.

(5) In subsection (6)—

(a) for “by reason of” substitute “ by reason only of the company or any of its subsidiaries ”,

(b) in paragraph (a), for “and not” substitute “ and is not ”.

(6) After subsection (6) insert—

(6ZA) The company must not at any time in the relevant period have a property managing subsidiary which is not a qualifying 90% subsidiary of the company. (6ZB) “Property managing subsidiary” means a subsidiary of the company whose business consists wholly or mainly in the holding or managing of land or any property deriving its value from land. (6ZC) In subsection (6ZB) above, “land” and “property deriving its value from land” have the same meaning as in section 776.

6

(1) In section 300 of the Taxes Act 1988 (value received from company) for subsection (2)(b) substitute—

(b) repays, in pursuance of any arrangements for or in connection with the acquisition of the shares in respect of which the relief is claimed, any debt owed to the individual other than a debt which was incurred by the company— (a) on or after the date of issue of those shares; and (b) otherwise than in consideration of the extinguishment of a debt incurred before that date;

(2) Subject to sub-paragraph (3), the amendment made by this paragraph has effect in relation to shares issued on or after 17th March 2004.

(3) The amendment made by this paragraph does not have effect in relation to the repayment of a debt incurred before 17th March 2004 if—

(a) the shares were subscribed for before that date, and

(b) the debt was incurred on or after the date on which the shares were subscribed for.

7

(1) In section 303 of the Taxes Act 1988 (value received by persons other than claimants) in subsection (9A), for “section 303AA” substitute “ sections 303AA and 303A ”.

(2) The amendment made by this paragraph has effect in relation to any repayment (within the meaning of section 303A of the Taxes Act 1988) made on or after 17th March 2004.

8

(1) In section 303A of the Taxes Act 1988 (restriction on withdrawal of relief under section 303) in subsection (6), omit paragraph (a).

(2) The amendment made by this paragraph has effect in relation to any repayment (within the meaning of section 303A of the Taxes Act 1988) made on or after 17th March 2004.

9

In section 308 of the Taxes Act 1988 (application to subsidiaries)—

(a) in subsection (1)(a), omit the words from “and, except” to “relevant period”,

(b) in subsection (2)—

(i) omit paragraphs (a) to (c),

(ii) before paragraph (d) insert—

(ca) that more than 50 per cent. of the ordinary share capital of the subsidiary is owned directly or indirectly by the qualifying company;

(iii) in paragraph (e), for “the conditions in paragraphs (a) to” substitute “ either of the conditions in paragraphs (ca) and ”, and for “could” substitute “ would ”,

(d) in subsection (3)(a)—

(i) omit “it is shown that”,

(ii) for “and not” substitute “ and is not ”,

(e) omit subsection (3)(b) and the word “and” immediately preceding it,

(f) after subsection (3) insert—

(3A) The conditions shall not be regarded as ceasing to be satisfied by reason only of anything done as a consequence of the subsidiary or any other company being in administration or receivership if— (a) the entry into administration or receivership, and (b) everything done as a consequence of the company concerned being in administration or receivership, is for bona fide commercial reasons and is not part of a scheme or arrangement the main purpose of which or one of the main purposes of which is the avoidance of tax.

(g) in subsection (4)—

(i) after “only of” insert “ arrangements being in existence for ”,

(ii) omit “within the relevant period”,

(iii) omit “it is shown that”,

(iv) after “disposal is” insert “ to be ”,

(v) for “and not” substitute “ and is not to be ”,

(h) omit subsection (5),

(i) after subsection (5A) insert—

(5B) Subsections (2) to (10) of section 838 apply for the purposes of subsection (2)(ca) above as they apply for the purposes of subsection (1) of that section.

10

(1) In section 310 of the Taxes Act 1988 (information)—

(a) in subsection (5)—

(i) for “289(6),” substitute “ 289(1D), (6) or (9)(e), 289A(8)(b) or (8A), ”,

(ii) for “293(8),” substitute “ 293(4B), (6) or (8), ”,

(iii) for “or 308(2)(e)” substitute “ or 308(2)(e), (3), (3A) or (4) ”,

(b) in subsection (6)—

(i) in paragraph (a), after “289(6)” insert “ or 293(4B) or (6) ”,

(ii) after paragraph (a) insert—

(aa) in relation to section 289(1D), 289A(8)(b) or (8A) or 308(3), (3A) or (4), the claimant, the company, any other company in question and any person controlling the company or any other company in question;

(iii) in paragraph (c), after “section” insert “ 289(9)(e), ”,

(6A) The references in subsections (5) and (6) above to subsections (3), (3A) and (4) of section 308 are to be read as including those provisions as applied by section 289(10) and (11).

(2) The amendments made by this paragraph have effect in relation to any notice given after the passing of this Act in respect of shares issued on or after 17th March 2004.

11

(1) Section 312 of the Taxes Act 1988 (interpretation) is amended as follows.

(2) In subsection (1)—

(a) before the definition of “control” insert—

“bonus shares” means shares which are issued otherwise than for payment (whether in cash or otherwise);

(b) in the definition of “control” after “sections” insert “ 289(9), ”,

“qualifying 90% subsidiary”, in relation to any company, is to be construed in accordance with section 289(9) to (13);

(d) in the definition of “termination date”—

(i) in paragraph (a), for “the shares were issued wholly or mainly in order to raise money” substitute “ the money raised by the issue was raised wholly or mainly ”,

(ii) in paragraph (a), for “subsidiary” substitute “ qualifying 90% subsidiary of the company ”,

(iii) in paragraph (b), for “the company or subsidiary concerned had not” substitute “ neither the company nor any of its qualifying 90% subsidiaries had ”,

(iv) in the full-out words at the end, for “it” substitute “ the company or any qualifying 90% subsidiary of the company ”.

(3) After subsection (1A) insert—

(1ZA) In determining, for the purposes of the definition of “termination date” in subsection (1) above, when a qualifying trade is begun to be carried on by a qualifying 90% subsidiary of a company there shall be disregarded any carrying on of the trade by it before it became such a subsidiary of the company.

Part 2 — Deferral relief

12

Schedule 5B to the Taxation of Chargeable Gains Act 1992 (c. 12) (enterprise investment scheme: re-investment) is amended as follows.

13

(1) In paragraph 1(2) (definition of qualifying investment)—

(a) in paragraph (a), omit “wholly in cash”,

(b) after that paragraph insert—

(aza) he subscribed for the shares (other than any of them which are bonus shares) wholly in cash,

(c) in paragraph (c), for the words from “are fully” to “future date)” substitute “ (other than any of them which are bonus shares) are fully paid up ”,

(d) in paragraph (e), after “Act” insert “ (read with section 289(1B) to (1E) of that Act) ”,

(e) in paragraph (f), for “all the shares comprised in the issue” substitute “ the shares (other than any of them which are bonus shares) ”,

(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) After paragraph 1(4) of that paragraph insert—

(5) Shares are not fully paid up for the purposes of sub-paragraph (2)(c) above if there is any undertaking to pay cash to any person at a future date in respect of the acquisition of the shares.

14

In paragraph 1A (failure of conditions of application)—

(a) in sub-paragraph (1), after “the shares” insert “ mentioned in sub-paragraph (2)(a) of that paragraph ”,

(b) in sub-paragraph (2), after “the shares” insert “ mentioned in sub-paragraph (2)(a) of that paragraph ”,

(c) in sub-paragraph (3), for “an issue of eligible shares,” substitute “ the shares mentioned in sub-paragraph (2)(a) of that paragraph, ”,

(d) in sub-paragraph (4), for “an issue of eligible shares, the shares” substitute “ the issue of eligible shares, the shares mentioned in sub-paragraph (2)(a) of that paragraph ”,

(e) in sub-paragraph (5)(b), after “the shares” insert “ mentioned in paragraph 1(2)(a) above ”.

15

(1) In paragraph 10 (re-investment in same company, etc)—

(a) in sub-paragraph (1), for “other securities” substitute “ securities ”,

(b) after sub-paragraph (3) insert—

(4) In this paragraph “group of companies” means a company which has one or more 51 per cent. subsidiaries, together with those subsidiaries.

(2) The amendments made by this paragraph have effect, for the purposes of paragraph 10 (1) of Schedule 5B to the Taxation of Chargeable Gains Act 1992 (c. 12), in relation to holdings of shares or securities disposed of on or after 17th March 2004.

(3) The amendment made by sub-paragraph (1)(b) has effect, for the purposes of paragraph 10(2) of that Schedule, in relation to eligible shares in a relevant company issued on or after 17th March 2004.

16

(1) In paragraph 13 (value received by investor) in sub-paragraph (2)(b)(i), for “on which he subscribed for the shares” substitute “ of issue of the shares ”.

(2) Subject to sub-paragraph (3), the amendment made by this paragraph has effect in relation to shares issued on or after 17th March 2004.

(3) The amendment made by this paragraph does not have effect in relation to the repayment of a debt incurred before 17th March 2004 if—

(a) the shares were subscribed for before that date, and

(b) the debt was incurred on or after the date on which the shares were subscribed for.

17

(1) In paragraph 14 (value received by other persons) in sub-paragraph (7), for “paragraph 14AA” substitute “ paragraphs 14AA and 14A ”.

(2) The amendment made by this paragraph has effect in relation to any repayment (within the meaning of paragraph 14A of Schedule 5B to the Taxation of Chargeable Gains Act 1992 (c. 12)) made on or after 17th March 2004.

18

(1) In paragraph 14A (certain receipts to be disregarded for the purposes of paragraph 14) in sub-paragraph (6), omit paragraph (a).

(2) The amendment made by this paragraph has effect in relation to any repayment (within the meaning of paragraph 14A of Schedule 5B to the Taxation of Chargeable Gains Act 1992) made on or after 17th March 2004.

19

(1) In paragraph 16 (information)—

(a) in sub-paragraph (6), for “293(8) or 308(2)(e)” substitute “ 289(1D) or (9)(e), 289A(8)(b) or (8A), 293(4B), (6) or (8) or 308(2)(e), (3), (3A) or (4) ”,

(b) in sub-paragraph (7)—

(i) in paragraph (a), after “above” insert “ or section 293(4B) or (6) of the Taxes Act ”,

(ii) after paragraph (a) insert—

(aa) in relation to section 289(1D), 289A(8)(b) or (8A) or 308(3), (3A) or (4) of the Taxes Act, the claimant, the company, any other company in question and any person controlling the company or any other company in question;

(iii) in paragraph (c), after “section” insert “ 289(9)(e), ”,

(iv) in the full-out words at the end, for “(a)” substitute “ (a), (aa) ”,

(7A) The references in sub-paragraphs (6) and (7) above to subsections (3), (3A) and (4) of section 308 of the Taxes Act are to be read as including those provisions as applied by section 289(10) and (11) of that Act.

(2) The amendments made by this paragraph have effect in relation to any notice given after the passing of this Act in respect of shares issued on or after 17th March 2004.

20

(1) In paragraph 19 (1) (interpretation)—

(a) before the definition of “arrangements” insert—

“51 per cent. subsidiary” has the meaning given by section 838 of the Taxes Act;

(b) after the definition of “associate” insert—

“bonus shares” means shares which are issued otherwise than for payment (whether in cash or otherwise);

(2) The amendment made by sub-paragraph (1)(a) has effect in relation to shares issued on or after 17th March 2004, except that, for the purposes of the amendment made by sub-paragraph (1)(b) of paragraph 15 of this Schedule, it has effect in accordance with sub-paragraphs (2) and (3) of that paragraph.

Part 3 — Commencement

21

Except where otherwise provided, the amendments made by this Schedule have effect in relation to shares issued on or after 17th March 2004.

SCHEDULE 19

Part 1 — Increase in relief on investments and distributions

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

2

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

3

The amendments made by this Part have effect for the year 2004-05 and subsequent years of assessment.

Part 2 — Abolition of deferral relief

Main amendments

4

Section 151A(3) of the Taxation of Chargeable Gains Act 1992 (c. 12) (which introduces Schedule 5C) shall cease to have effect.

5

Schedule 5C to that Act (venture capital trusts: deferred charge on re-investment) shall cease to have effect.

Consequential amendment

6

(1) The Taxation of Chargeable Gains Act 1992 is amended as follows.

(2) In paragraph 2(4) of Schedule 5B (enterprise investment scheme: re-investment) omit “or Schedule 5C”.

Commencement

7

(1) The amendments made by this Part have effect in relation to shares issued on or after 6th April 2004 which are shares by reference to which an individual is given relief under Part 1 of Schedule 15B to the Taxes Act 1988.

(2) But nothing in this Act affects the continuing operation of Schedule 5C to the Taxation of Chargeable Gains Act 1992 (c. 12) for the purposes of section 151B(8)(b)(ii) of that Act.

Part 3 — Miscellaneous

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

9

In paragraph 3 (requirement as to company’s business)—

(a) in sub-paragraph (3)—

(i) for the words from “the relevant company” to “all times since,” substitute “ when the relevant holding was issued and at all times since, a qualifying company (whether or not the same such company at every such time) must ”,

(ii) in paragraph (b)—

(a) for “it intended to carry” substitute “ was intended to be carried ”,

(b) after “Kingdom” insert “ by a qualifying company ”,

(iii) omit the words from “and for the purposes” to the end,

(b) in sub-paragraph (4)—

(i) in paragraph (a), for the words from “the relevant company” to “intended trade” substitute “ the intended trade was begun to be carried on by a qualifying company ”,

(ii) in paragraph (b), for the words from “that company” to “that period,” substitute “ at all times since the end of that period, a qualifying company (whether or not the same such company at every such time) has ”,

(5A) In sub-paragraphs (3) and (4) above, “qualifying company” means the relevant company or any relevant qualifying subsidiary of that company. (5B) In determining for the purposes of sub-paragraph (4)(a) above when the intended trade was begun to be carried on by a qualifying company which is a relevant qualifying subsidiary of the relevant company there shall be disregarded any carrying on of the trade by it before it became such a subsidiary of the relevant company.

10

After paragraph 5 insert—

(5A) (1) For the purposes of this Schedule, a company (“the subsidiary”) is a relevant qualifying subsidiary of the relevant company at any time when it falls within sub-paragraph (2) below. (2) The subsidiary falls within this sub-paragraph if— (a) the relevant company possesses not less than 90 per cent. of the issued share capital of, and not less than 90 per cent. of the voting power in, the subsidiary; (b) the relevant company would— (i) in the event of a winding up of the subsidiary, or (ii) in any other circumstances, be beneficially entitled to receive not less than 90 per cent. of the assets of the subsidiary which would then be available for distribution to the equity holders of the subsidiary; (c) the relevant company is beneficially entitled to not less than 90 per cent. of any profits of the subsidiary which are available for distribution to the equity holders of the subsidiary; (d) no person other than the relevant company has control of the subsidiary within the meaning of section 840; and (e) no arrangements are in existence by virtue of which any of the conditions in paragraphs (a) to (d) above would cease to be met. (3) Sub-paragraphs (4) to (4C) and (5) of paragraph 10 below apply in relation to sub-paragraph (2) of this paragraph as they apply in relation to sub-paragraph (3) of that paragraph, but with the following modification. (4) That modification is that sub-paragraph (5) of that paragraph is to be read as if the words “or (as the case may be) by another subsidiary of that company” were omitted. (5) For the purposes of this paragraph— (a) the persons who are equity holders of the subsidiary, and (b) the percentage of the assets of the subsidiary to which an equity holder would be entitled, shall be determined in accordance with paragraphs 1 and 3 of Schedule 18. (6) But in making that determination— (a) references in paragraph 3 of that Schedule to the first company are to be read as references to an equity holder, and (b) references in that paragraph to a winding up are to be read as including references to any other circumstances in which assets of the subsidiary are available for distribution to its equity holders.

11

In paragraph 6 (requirements as to the money raised by the investment in question)—

(a) in sub-paragraph (1)(a)(ii), for the words from “the relevant company” to “employ” substitute “ is intended to be employed ”,

(b) in sub-paragraph (2AA)(b), for the words from “the relevant company” to the end substitute “ the condition in paragraph 3(4)(a) above was satisfied ”,

(2AB) The requirements of this paragraph are not satisfied if either of the following, namely— (a) the trade by reference to which the requirements of paragraph 3(3) above are satisfied, and (b) any preparations for that trade falling within paragraph 3(3)(b) above, are carried on, at any time after the issue of the relevant holding, by a person other than the relevant company or a relevant qualifying subsidiary of that company. (2AC) Sub-paragraph (2AD) below applies where preparations mentioned in sub-paragraph (2AB)(b) above are carried on by the relevant company or a relevant qualifying subsidiary of that company at any time after the issue of the relevant holding. (2AD) Where this sub-paragraph applies, the requirements of this paragraph are not to be regarded, by virtue of sub-paragraph (2AB) above, as failing to be satisfied by reason only of the carrying on of the trade mentioned in sub-paragraph (2AB)(a) above by a person other than— (a) the relevant company, or (b) a qualifying subsidiary of that company, at any time after the issue of the relevant holding but before the relevant company or any relevant qualifying subsidiary of that company carries on that trade. (2AE) The requirements of this paragraph are not to be regarded, by virtue of sub-paragraph (2AB) above, as failing to be satisfied by reason only of the carrying on of the trade mentioned in sub-paragraph (2AB)(a) above— (a) by the partners in a partnership of which the relevant company, or a relevant qualifying subsidiary of that company, is a member, or (b) by the parties to a joint venture to which the relevant company, or a relevant qualifying subsidiary of that company, is a party. (2AF) The requirements of this paragraph are not to be regarded, by virtue of sub-paragraph (2AB) above, as failing to be satisfied if— (a) by reason only of anything done as a consequence of the relevant company or any other company being in administration or receivership, or (b) by reason only of the relevant company or any other company being wound up or dissolved without winding up, the trade mentioned in sub-paragraph (2AB)(a) above ceases to be carried on by the relevant company or a relevant qualifying subsidiary of that company and is subsequently carried on by a person who has not been connected, at any time after the date which is one year before the issue of the relevant holding, with the relevant company. (2AG) Sub-paragraph (2AF) above applies only if (as the case may be)— (a) the entry into administration or receivership and everything done as a consequence of the company concerned being in administration or receivership, or (b) the winding up or dissolution, is for bona fide commercial reasons and is not part of a scheme or arrangement the main purpose of which or one of the main purposes of which is the avoidance of tax. (2AH) Sub-paragraph (2) of paragraph 11A below applies for the purposes of sub-paragraphs (2AF) and (2AG) above as it applies for the purpose of that paragraph.

(d) omit sub-paragraph (5).

12

In paragraph 10 (meaning of “qualifying subsidiary”)—

(a) omit sub-paragraph (3)(a) to (c),

(b) before sub-paragraph (3)(d) insert—

(ca) the subsidiary is a 51 per cent. subsidiary of the relevant company;

(c) in sub-paragraph (3)(e), for “the relevant company could cease to fall within this sub-paragraph” substitute “ either of the conditions in paragraphs (ca) and (d) above would cease to be met ”,

(d) in sub-paragraph (4)—

(i) after “time when it” insert “ or any other company ”,

(ii) omit “it is shown”,

(iii) omit the first “that” in paragraph (a),

(iv) omit “that” in paragraph (b),

(v) for “and not” substitute “ and is not ”,

(e) after sub-paragraph (4) insert—

(4A) Sub-paragraph (4B) below applies at a time when the subsidiary or any other company is in administration or receivership. (4B) The subsidiary shall not be regarded, by reason only of anything done as a consequence of the company concerned being in administration or receivership, as having ceased to be a company falling within sub-paragraph (3) above if— (a) the entry into administration or receivership, and (b) everything done as a consequence of the company concerned being in administration or receivership, is for bona fide commercial reasons and is not part of a scheme or arrangement the main purpose of which or one of the main purposes of which is the avoidance of tax. (4C) Sub-paragraph (2) of paragraph 11A below applies for the purposes of sub-paragraphs (4A) and (4B) above as it applies for the purpose of that paragraph.

(f) in sub-paragraph (5)—

(i) omit the words “it is shown that”,

(ii) for “and not” substitute “ and is not to be ”,

(g) omit sub-paragraph (6).

13

After paragraph 10 insert—

(10ZA) (1) The requirement of this paragraph is that the relevant company must not have a property managing subsidiary which is not a relevant qualifying subsidiary of the relevant company. (2) “Property managing subsidiary” means a qualifying subsidiary of the relevant company whose business consists wholly or mainly in the holding or managing of land or any property deriving its value from land. (3) In sub-paragraph (2) above, “land” and “property deriving its value from land” have the same meaning as in section 776.

14

In paragraph 11 (winding up of the relevant company)—

(a) omit “it is shown”,

(b) omit the first “that” in paragraph (a),

(d) in paragraph (b), for “and not” substitute “ and is not ”.

15

In paragraph 11A (company in administration or receivership) in sub-paragraph (1), after “by reason” insert “ only ”.

16

The amendments made by this Part have effect for the purpose of determining whether shares or securities issued on or after 17th March 2004 are, for the purposes of section 842AA of the Taxes Act 1988, to be regarded as comprised in a company’s qualifying holdings.

SCHEDULE 20

1

Schedule 15 to the Finance Act 2000 (c. 17) (the corporate venturing scheme) is amended as follows.

2

In paragraph 3 (meaning of “the qualification period”)—

(a) in sub-paragraph (1)(b)(ii), and

(b) in sub-paragraph (2)(a) and (b),

for “qualifying subsidiaries” substitute “ qualifying 90% subsidiaries ”.

3

In paragraph 15 (introduction) after paragraph (e) insert—

(ea) property managing subsidiaries (see paragraph 21A);

4

In paragraph 20 (the qualifying subsidiaries requirement) for sub-paragraph (2) substitute—

(2) In this paragraph “subsidiary” means any company which the company controls, either on its own or together with any person connected with it. (3) For the purpose of sub-paragraph (2), the question whether a person controls a company shall be determined in accordance with section 416(2) to (6) of the Taxes Act 1988.

5

(1) Paragraph 21 (meaning of “qualifying subsidiary”) is amended as follows.

(2) In sub-paragraph (2)—

(a) omit paragraphs (a) to (c),

(b) before paragraph (d) insert—

(ca) the subsidiary is a 51% subsidiary of the relevant company;

(c) in paragraph (e) for “the conditions in paragraphs (a) to” substitute “ either of the conditions in paragraphs (ca) and ”.

(3) In sub-paragraph (4)(a)(ii), after “company” insert “ concerned ”.

(4) In sub-paragraph (5)—

(a) after “qualifying subsidiary” insert “ of the relevant company ”,

(b) for “and not part” substitute “ and is not to be part ”.

6

After paragraph 21 insert—

(21A) (1) The issuing company is not a qualifying issuing company in relation to the relevant shares if, at any time during the qualification period relating to those shares, it has a property managing subsidiary which is not a qualifying 90% subsidiary of the issuing company (see paragraph 23(10) and (11)). (2) “Property managing subsidiary” means a qualifying subsidiary of the issuing company whose business consists wholly or mainly in the holding or managing of land or any property deriving its value from land. (3) In sub-paragraph (2), “land” and “property deriving its value from land” have the same meaning as in section 776 of the Taxes Act 1988.

7

In paragraph 23 (the trading activities requirement)—

(a) in sub-paragraph (3)(b), for “at least one group company” substitute “ the issuing company or a qualifying 90% subsidiary of the issuing company ”,

(b) in sub-paragraph (5)—

(i) for “a subsidiary” substitute “ a qualifying 90% subsidiary of the issuing company ”,

(ii) for “or subsidiary” substitute “ or a qualifying 90% subsidiary of the issuing company ”,

(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8

In paragraph 24 (ceasing to meet trading requirements by reason of administration, receivership etc)—

(a) in sub-paragraph (1)—

(i) omit “which is in administration or receivership”,

(ii) after “by reason” insert “ only ”,

(b) in sub-paragraph (2)(b), after “company” insert “ concerned ”,

(i) in paragraph (a), for “of the company or any of its subsidiaries” substitute “ only of the company or any of its qualifying subsidiaries ”,

(ii) in paragraph (b), for “and not” substitute “ and is not ”.

9

In paragraph 25 (meaning of “qualifying trade”) in sub-paragraph (3)(b), for “any other group company” substitute “ the issuing company or any of its qualifying 90% subsidiaries ”.

10

In paragraph 35 (requirement as to the shares) in sub-paragraph (2), for “the issuing company at a future date” substitute “ any person at a future date in respect of the acquisition of the shares ”.

11

In paragraph 36 (requirement as to money raised)—

(a) in sub-paragraph (1B)(b)—

(i) for “relevant trade was not being carried on” substitute “ issuing company or a qualifying 90% subsidiary of that company had not begun to carry on the relevant trade ”,

(ii) for “subsidiary” substitute “ qualifying 90% subsidiary of that company ”,

(b) in sub-paragraphs (4)(b)(ii) and (5)(b), for “qualifying subsidiary” substitute “ qualifying 90% subsidiary ”.

12

In paragraph 40 (entitlement to claim)—

(a) in sub-paragraph (2), for paragraph (a) substitute—

(a) the funded trade has been carried on for four months by no person other than the issuing company or a qualifying 90% subsidiary of that company, disregarding— (i) any time spent preparing to carry on that trade, and (ii) any person required to be disregarded in accordance with sub-paragraph (2A) or (2B), and

(b) after sub-paragraph (2) insert—

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