Finance Act 2008

(165A) (1) This section has effect for the interpretation of section 165 (and this section). (2) “Holding company” means a company that has one or more 51% subsidiaries. (3) “Trading company” means a company carrying on trading activities whose activities do not include to a substantial extent activities other than trading activities. (4) For the purposes of subsection (3) above “trading activities” means activities carried on by the company— (a) in the course of, or for the purposes of, a trade being carried on by it, (b) for the purposes of a trade that it is preparing to carry on, (c) with a view to its acquiring or starting to carry on a trade, or (d) with a view to its acquiring a significant interest in the share capital of another company that— (i) is a trading company or the holding company of a trading group, and (ii) if the acquiring company is a member of a group of companies, is not a member of that group. (5) Activities do not qualify as trading activities under subsection (4)(c) or (d) above unless the acquisition is made, or the company starts to carry on the trade, as soon as is reasonably practicable in the circumstances. (6) The reference in subsection (4)(d) above to the acquisition of a significant interest in the share capital of another company is to an acquisition of ordinary share capital in the other company— (a) such as would make that company a 51% subsidiary of the acquiring company, or (b) such as would give the acquiring company a qualifying shareholding in a joint venture company without making the two companies members of the same group of companies. (7) For the purpose of determining whether a company which has a qualifying shareholding in a joint venture company is a trading company— (a) any holding by it of shares in the joint venture company is to be disregarded, and (b) it is to be treated as carrying on an appropriate proportion of the activities of the joint venture company or, where the joint venture company is the holding company of a trading group, of the activities of that group; and in paragraph (b) above “appropriate proportion” means a proportion corresponding to the percentage of the ordinary share capital of the joint venture company held by the company. (8) “Trading group” means a group of companies— (a) one or more of whose members carry on trading activities, and (b) the activities of whose members, taken together, do not include to a substantial extent activities other than trading activities. (9) For the purposes of subsection (8) above “trading activities” means activities carried on by a member of the group— (a) in the course of, or for the purposes of, a trade being carried on by any member of the group, (b) for the purposes of a trade that any member of the group is preparing to carry on, (c) with a view to any member of the group acquiring or starting to carry on a trade, or (d) with a view to any member of the group acquiring a significant interest in the share capital of another company that— (i) is a trading company or the holding company of a trading group, and (ii) is not a member of the same group of companies as the acquiring company. (10) Activities do not qualify as trading activities under subsection (9)(c) or (d) above unless the acquisition is made, or the group member in question starts to carry on the trade, as soon as is reasonably practicable in the circumstances. (11) The reference in subsection (9)(d) above to the acquisition of a significant interest in the share capital of another company is to an acquisition of ordinary share capital in the other company— (a) such as would make that company a member of the same group of companies as the acquiring company, or (b) such as would give the acquiring company a qualifying shareholding in a joint venture company without making the joint venture company a member of the same group of companies as the acquiring company. (12) For the purpose of determining whether a group of companies is a trading group in a case where any one or more members of the group has a qualifying shareholding in a joint venture company which is not a member of the group— (a) every holding of shares in the joint venture company by a member of the group having a qualifying shareholding in it is to be disregarded, and (b) each member of the group having such a qualifying shareholding is to be treated as carrying on an appropriate proportion of the activities of the joint venture company or, where the joint venture company is a holding company of a trading group, of the activities of that group; and in paragraph (b) above “appropriate proportion” means a proportion corresponding to the percentage of the ordinary share capital of the joint venture company held by the member of the group. (13) For the purposes of this section the activities of the members of a group of companies are to be treated as one business (with the result that activities are disregarded to the extent that they are intra-group activities). (14) In this section— - “51% subsidiary” has the meaning given by section 838 of the Taxes Act, - “group of companies” means a company which has one or more 51% subsidiaries together with those subsidiaries, - “joint venture company” means a company— 1. which is a trading company or the holding company of a trading group, and 2. 75% or more of the ordinary share capital of which (in aggregate) is held by not more than 5 persons (the shareholdings of members of a group of companies being regarded for the purposes of this paragraph as held by a single company), - “ordinary share capital” has the meaning given by section 989 of ITA 2007, - “qualifying shareholding”, in relation to a company and a joint venture company, means— 1. the holding by the company of 10% or more of the ordinary share capital of the joint venture company, or 2. (where the company is a member of a group of companies) the holding by the company and the other members of the group (between them) of 10% or more of that ordinary share capital, and - “trade” means (subject to section 241(3)) anything which— 1. is a trade, profession or vocation, within the meaning of the Income Tax Acts, and 2. is conducted on a commercial basis and with a view to the realisation of profits.

35

Omit section 214C (re-organisations of mutual business: gains not eligible for taper relief) and the heading before it.

36

In section 228(8) (relief for employee share ownership trusts), for “meanings given by paragraph 22 of Schedule A1” substitute “ same meaning as in section 165 (see section 165A) ”.

37

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

38

In section 253(14)(b) (relief for loans to traders), for “meaning given by paragraph 22 of Schedule A1” substitute “ same meaning as in section 165 (see section 165A) ”.

39

Omit section 261C(2)(a) (treating trading loss etc as CGT loss: meaning of “the maximum amount”).

40

In section 279(2)(a) (foreign assets: delayed remittances), omit “(before the application of any taper relief)”.

41

In section 279A(7)(b) (deferred unascertainable consideration: election for treatment of loss), for “any amounts that fall to be brought into account for that year under section 2(4)(b) by virtue of section 2(5)(b),” substitute “ the total amount of chargeable gains treated as accruing in that year by virtue of section 87 or 89(2) (read, where appropriate, with section 10A), ”.

42

In section 279B(1) (provisions supplementary to section 279A), for paragraph (b) substitute—

(b) the person would be so chargeable if— (i) chargeable gains accrued to the person in the year, and (ii) the amount calculated under section 2(2) for the year in relation to the person exceeded the exempt amount for the year (within the meaning of section 3).

43

• (1) Section 279C (effect of election under section 279A) is amended as follows.

• (2) For subsections (3) and (4) substitute—

(3) The amount of the relevant loss that falls to be deducted (in accordance with section 2(2)(a)) from the chargeable gains of the first eligible year is limited to the first year limit. (4) The first year limit is the amount calculated under section 2(2) (read, where appropriate, with section 2(4)(a)) for the first eligible year. (4A) For the purpose of making that calculation— (a) no account is to be taken of the relevant loss, but (b) the effect of any previous election under section 279A is to be taken into account.

• (3) In subsection (6)(c), for “the provisions specified in subsection (8) below” substitute “ amounts of chargeable gains treated as accruing in that later year by virtue of section 87 or 89(2) (read, where appropriate, with section 10A) ”.

• (4) Omit subsection (8).

• (5) Omit subsection (10).

44

Omit section 284B(1) (provisions supplementary to section 284A).

45

Omit Schedule A1 (taper relief).

46

Schedule 4C (transfers of value: attribution of gains to beneficiaries) is amended as follows.

47

• (1) Paragraph 6 (gains attributed to settlor) is amended as follows.

• (2) In sub-paragraph (1), for “the tapered amount of any chargeable gains” substitute “ the amount of any chargeable gains ”.

• (3) Omit sub-paragraph (1A).

48

Omit paragraph 11 (taper relief).

49

Omit Schedule 5BA (application of taper relief to enterprise investment scheme).

50

Omit paragraph 15 of Schedule 7D (enterprise management incentives).

51

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

52

In paragraph 86(2) of Schedule 7 to ITEPA 2003 (transitionals and savings), omit the second sentence.

53

Omit section 185G(3)(c) of FA 2004 (disposal by person holding taxable interest directly).

54

Omit section 161(5) of ITA 2007 (other tax reliefs relating to EIS).

55

In consequence of paragraphs 23 to 54, omit—

• (a) in FA 1998—

• (i) section 121(1) and (2),

• (ii) section 140(5),

• (iii) Schedule 20, and

• (iv) paragraphs 2, 4, 6(3) and (4), 7 and 9 of Schedule 21,

• (b) in FA 1999—

• (i) section 72, and

• (ii) Schedule 7,

• (c) sections 66 and 67 of FA 2000,

• (d) in FA 2001—

• (i) section 78, and

• (ii) Schedule 26,

• (e) in FA 2002—

• (i) sections 46 and 47,

• (ii) paragraph 5(13) of Schedule 9,

• (iii) Schedule 10, and

• (iv) paragraphs 2(2) and 4 to 6 of Schedule 11,

• (f) in FA 2003—

• (i) section 160, and

• (ii) paragraph 5 of Schedule 29,

• (g) in Schedule 21 to FA 2004—

• (i) paragraphs 3(4) and 8, and

• (ii) in paragraph 10, in sub-paragraph (4), “, 8(2)” and sub-paragraph (6),

• (h) paragraphs 13 and 27 of Schedule 12 to FA 2006, and

• (i) paragraphs 313 and 343 of Schedule 1 to ITA 2007.

56

• (1) The amendments made by paragraph 31(2) and (3) have effect where the intervening year is the tax year 2008-09 or any subsequent tax year.

• (2) The amendments made by paragraphs 41 and 43 have effect where the eligible year is the tax year 2008-09 or any subsequent tax year.

• (3) The other amendments made by paragraphs 23 to 55 have effect in relation to chargeable gains accruing or treated as accruing in the tax year 2008-09 or any subsequent tax year.

Abolition of “kink” test

57

TCGA 1992 is amended as follows.

58

• (1) Section 35 (assets held on 31 March 1982) is amended as follows.

• (2) In subsection (2)—

• (a) for “Subject to the following provisions of this section, in” substitute “ In ”, and

• (b) for “him” substitute “ that person ”.

• (3) After that subsection insert—

(2A) For the purposes of corporation tax, subsection (2) above has effect subject to subsections (3) to (8) below (and see also subsections (9) and (10)).

• (4) In subsection (3)(d), for the words after “any of” substitute “ the no gain/no loss provisions. ”

• (5) In subsection (4), for “him” substitute “ that person ”.

• (6) In subsection (5), for “him” (in both places) substitute “ that person ”.

• (7) In subsection (6), omit—

• (a) paragraph (a),

• (b) in paragraph (aa), “in the case of an election for the purposes of corporation tax,”, and

• (c) in paragraph (b), “in either case”.

• (8) In subsection (7), for “him” substitute “ that person ”.

• (9) In subsection (9), after “effect” insert “ for the purposes of corporation tax ”.

• (10) In subsection (10), insert at the end “ for the purposes of capital gains tax and corporation tax ”.

59

After that section insert—

(35A) (1) This section applies for the purposes of capital gains tax in relation to a disposal of an asset if— (a) the person making the disposal acquired the asset after 31 March 1982 and before 6 April 2008, (b) the disposal by which the person acquired the asset (“the relevant disposal”), and any previous disposal of the asset after 31 March 1982, was a disposal on which, by virtue of any enactment, neither a gain nor a loss accrued to the person making the disposal, and (c) section 35(2) did not apply to the relevant disposal. (2) It is to be assumed that section 35(2) did apply to the relevant disposal (and that section 56(2) applied to the relevant disposal accordingly).

60

In section 55(5) (indexation allowance: assets acquired on no gain/no loss disposal), for “enactments specified in section 35(3)(d)” substitute “ no gain/no loss provisions ”.

61

In section 73(1) (death of life tenant: exclusion of chargeable gain), for “6th April 1965” substitute “ 31 March 1982 ”.

62

In section 175(2C) (replacement of business assets by member of group), for “enactments specified in section 35(3)(d)” substitute “ no gain/no loss provisions ”.

63

In section 288 (interpretation), after subsection (3) insert—

(3A) For the purposes of this Act, the following are “the no gain/no loss provisions”— (a) sections 58, 73, 139, 140A, 140E, 171, 211, 215, 216, 217A, 218 to 221, 257(3), 258(4), 264 and 267(2) of this Act; (b) section 148 of the 1979 Act; (c) section 148 of the Finance Act 1982; (d) section 130(3) of the Transport Act 1985; (e) section 486(8) of the Taxes Act; (f) paragraph 2(1) of Schedule 7 to the Broadcasting Act 1996; (g) paragraphs 3 and 9 of Schedule 26 to the Transport Act 2000; (h) paragraphs 3, 18, 29 and 32 of Schedule 9 to the Energy Act 2004; (i) paragraph 9 of Schedule 4 to the Consumers, Estate Agents and Redress Act 2007.

64

• (1) Schedule 2 (assets held on 6 April 1965) is amended as follows.

• (2) Omit paragraph 1(3).

• (3) In paragraph 4—

• (a) omit sub-paragraph (6),

• (b) in sub-paragraph (8), for “him” substitute “ the person ”,

• (c) in sub-paragraph (9)—

• (i) for “either section 58 or” (in both places) substitute “ section ”,

• (ii) omit “the spouse or civil partner of the holder, or”, and

• (iii) for “him” substitute “ the holder ”,

• (d) in sub-paragraph (10)(a), for “he” (in both places) substitute “ the person ”, and

• (e) in sub-paragraph (11), omit—

• (i) paragraph (a),

• (ii) in paragraph (b), “in the case of an election for the purposes of corporation tax,”, and

• (iii) in paragraph (c), “in either case,”.

• (4) In paragraph 17(3) omit—

• (a) paragraph (a),

• (b) in paragraph (b), “in the case of an election for the purposes of corporation tax,”, and

• (c) in paragraph (c), “in either case,”.

• (5) Omit paragraph 22.

65

• (1) Schedule 3 (assets held on 31 March 1982) is amended as follows.

• (2) In paragraph 1—

• (a) in sub-paragraph (1)—

• (i) for “Where—” substitute “ For the purposes of corporation tax, where— ”, and

• (ii) for “he” (in each place) substitute “ the person ”, and

• (b) in sub-paragraph (2), for “enactments specified in section 35(3)(d)” substitute “ no gain/no loss provisions ”.

• (3) In paragraph 2(1) and (3), omit “58 or”.

66

In paragraph 7 of Schedule 4 (deferred charges on pre-31 March 1982 gains), for “enactments specified in section 35(3)(d)” substitute “ no gain/no loss provisions ”.

67

In paragraph 7 of Schedule 4ZA (sub-fund settlements), for “sections 104(1) and 109(2)(a)” substitute “ section 104(1) ”.

68

In paragraph 12(b) of Schedule 7A (restriction on set-off or pre-entry losses), for “enactment specified in section 35(3)(d)” substitute “ of the no gain/no loss provisions ”.

69

• (1) FA 1997 is amended as follows.

• (2) In section 89(8)(a) (earn-out rights), for “enactments specified in section 35(3)(d) of that Act” substitute “ no gain/no loss provisions (within the meaning of that Act: see section 288(3A) of that Act) ”.

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

70

In consequence of paragraphs 57 to 69, omit—

• (a) in F(No.2)A 1992—

• (i) section 46(2),

• (ii) paragraph 21(2) of Schedule 9, and

• (iii) paragraph 5(9) of Schedule 17,

• (b) in FA 1994—

• (i) paragraph 2(2) of Schedule 24, and

• (ii) paragraph 4(3) of Schedule 25,

• (c) paragraph 2(3) of Schedule 4 to the Coal Industry Act 1994 (c. 21),

• (d) paragraph 3 of Schedule 7 to the Broadcasting Act 1996 (c. 55),

• (e) in the Transport Act 2000 (c. 38)—

• (i) paragraph 2(3) of Schedule 7, and

• (ii) paragraph 37 of Schedule 26,

• (f) paragraph 36 of Schedule 9 to the Energy Act 2004 (c. 20),

• (g) paragraph 33 of Schedule 10 to the Railways Act 2005 (c. 14),

• (h) section 59(2) of F(No.2)A 2005,

• (i) paragraph 14(3) of Schedule 9 to FA 2007, and

• (j) paragraph 11 of Schedule 7 to the Consumers, Estate Agents and Redress Act 2007 (c. 17).

71

The amendments made by paragraphs 57 to 70 have effect in relation to disposals on or after 6 April 2008.

Abolition of “halving relief”

72

TCGA 1992 is amended as follows.

73

In section 36 (reduction of deferred charges where wholly or partly attributable to pre-31 March 1982 increase in value), for “tax” substitute “ corporation tax in respect of chargeable gains ”.

74

• (1) Schedule 4 (deferred charges on pre-31 March 1982 gains) is amended as follows.

• (2) Before paragraph 1 insert—

(A1) This Schedule applies only for the purposes of corporation tax.

• (3) In paragraph 2(5), omit—

• (a) “, 162, 165”, and

• (b) “of this Act and section 79 of the Finance Act 1980”.

• (4) In paragraph 4(2), omit “168 (as modified by section 67(6)),”.

• (5) In paragraph 9(1), omit—

• (a) in paragraph (b), “in the case of a disposal made by, or a gain treated as accruing to, a person chargeable to corporation tax,”,

• (b) paragraph (c), and

• (c) “or (as the case may be) on or before such later date”.

75

In consequence of paragraph 74, omit paragraph 43 of Schedule 21 to FA 1996.

76

The amendments made by paragraphs 72 to 75 have effect in relation to disposals which occur on or after 6 April 2008 and to which Schedule 4 to TCGA 1992 would otherwise apply.

Abolition of indexation allowance

77

TCGA 1992 is amended as follows.

78

At the beginning of Chapter 4 of Part 2 (indexation allowance), insert—

(52A) This Chapter applies only for the purposes of corporation tax.

79

In section 53 (indexation allowance), omit—

• (a) subsection (1A), and

• (b) in subsection (4), “, 110A”.

80

• (1) Section 54 (calculation of indexation allowance) is amended as follows.

• (2) In subsection (1), for “the relevant month” substitute “ the month in which the disposal occurs ”.

• (3) Omit subsection (1A).

81

• (1) Section 145 (call options: indexation allowance) is amended as follows.

• (2) In subsection (1), omit “(subject to subsection (1A) below)”.

• (3) Omit subsection (1A).

82

In consequence of the amendments made by paragraphs 77 to 81, omit section 122(1) to (3) and (5) of FA 1998.

83

The amendments made by paragraphs 77 to 82 have effect in computing gains on disposals made on or after 6 April 2008.

Simplification of pooling etc

84

TCGA 1992 is amended as follows.

85

• (1) Section 104 (share pooling: general interpretative provisions) is amended as follows.

• (2) For subsections (2) and (2A) substitute—

(2) For the purposes of corporation tax, subsection (1) does not apply to any securities acquired by a company before 1 April 1982. (2A) See also sections 105 to 105B and— (a) section 106A in the case of capital gains tax, or (b) sections 107 to 114 in the case of corporation tax.

• (3) In subsection (3), omit “, 110A”.

• (4) After that subsection insert—

(3A) For the purposes of capital gains tax section 35(2) applies in relation to a section 104 holding as if the reference to an asset were to any of the securities constituting or forming part of the section 104 holding which were held by the person making the disposal on 31 March 1982.

• (5) In subsection (5), omit “, 110A”.

86

In section 105 (disposal on or before day of acquisition), after subsection (2) insert—

(3) None of the securities which, by virtue of this section, are identified with other securities shall be regarded as forming part of an existing section 104 holding or as constituting a section 104 holding.

87

• (1) Section 106A (identification of securities: general rules for capital gains tax) is amended as follows.

• (2) After subsection (5) insert—

(5ZA) None of the securities which, by virtue of subsection (5) above, are identified with other securities shall be regarded as forming part of an existing section 104 holding or as constituting a section 104 holding.

• (3) In subsection (6), before “securities” (in each place) insert “ relevant ”.

• (4) Omit subsection (7).

• (5) Omit subsection (8).

• (6) For subsection (10) substitute—

(10) In this section— - “securities” means any securities within the meaning of section 104 or any relevant securities, and - “relevant securities” means— 1. securities within the meaning of Chapter 2 of Part 12 of ITA 2007 (accrued income profits), 2. qualifying corporate bonds, and 3. securities which are, or have at any time been, material interests in a non-qualifying offshore fund, within the meaning of Chapter 5 of Part 17 of the Taxes Act.

• (7) In the heading, omit “general rules for”.

88

In the heading of section 107 (identification of securities etc: general rules), insert at the end “ for corporation tax ”.

89

In the heading of section 108 (identification of relevant securities), insert at the end “ for corporation tax ”.

90

• (1) Section 109 (pre-April 1982 share pools) is amended as follows.

• (2) In subsection (1), for “This” substitute “ For the purposes of corporation tax, this ”.

• (3) In the heading, for “Pre-April” substitute “ Corporation tax: pre-April ”.

91

For the heading of section 110 substitute “ Indexation for section 104 holdings for corporation tax ”.

92

Omit section 110A (indexation for section 104 holdings: CGT).

93

In the heading of section 112 (parallel pooling regulations), insert at the end “ : corporation tax ”.

94

• (1) Section 113 (calls on shares) is amended as follows.

• (2) Before subsection (1) insert—

(A1) This section has effect for the purposes of corporation tax.

• (3) In the heading, insert at the end “ : corporation tax ”.

95

• (1) Section 114 (consideration for options) is amended as follows.

• (2) Before subsection (1) insert—

(A1) This section has effect for the purposes of corporation tax.

• (3) In the heading, insert at the end “ : corporation tax ”.

96

In FA 1998, omit—

• (a) section 123(1) and (2), and

• (b) section 125(2) and (3).

97

Chapter 6 of Part 4 of ITA 2007 (losses on disposals of shares) is amended as follows.

98

• (1) Section 147 (limits on share loss relief) is amended as follows.

• (2) In subsection (1)(b)—

• (a) in sub-paragraph (i), omit “or a 1982 holding” and “or” at the end, and

• (b) for sub-paragraph (ii) substitute—

(ii) at a time earlier than the time of the disposal but after 5 April 2008 formed part of a section 104 holding, or (iii) at a time earlier than that time and than 6 April 2008 formed part of an old section 104 holding or a 1982 holding, and

.

• (3) In subsection (7)—

• (a) in the definition of “section 104 holding”, after “1992” insert “ and “old section 104 holding” is a holding that was a section 104 holding within the meaning of that provision as it applied in relation to disposals before 6 April 2008 ”, and

• (b) in the definition of “1982 holding”, insert at the end “ as it applied in relation to disposals before 6 April 2008 ”.

99

• (1) Section 148 (disposal of shares forming part of mixed holding) is amended as follows.

• (2) In subsection (3)(a)(ii), omit “or a 1982 holding”.

• (3) In subsection (5), omit “or 1982”.

• (4) In subsection (9), for “and “1982 holding” have” substitute “ has ”.

100

The amendments made by paragraphs 84 to 99 have effect in relation to disposals on or after 6 April 2008.

Meaning of “tax year”

101

• (1) Section 288 of TCGA 1992 (interpretation) is amended as follows.

• (2) In subsection (1), for the definition of “year of assessment” substitute—

“year of assessment” means tax year;

.

• (3) After that subsection insert—

(1ZA) In this Act and other enactments relating to capital gains tax “tax year” means a year beginning on 6 April and ending on the following 5 April; and “the tax year 2008-09” means the tax year beginning on 6 April 2008 (and any corresponding expression in which two years are similarly mentioned is to be read in the same way).

102

In consequence of the amendments made by paragraph 101, omit—

• (a) the definition of “tax year” in section 41(1) of FA 2005, and

• (b) paragraph 342(2)(i) of Schedule 1 to ITA 2007.

SCHEDULE 3

Introduction

1

TCGA 1992 is amended as follows.

Main provisions

2

In Part 5 (transfer of business assets), after section 169G insert—

(169H) (1) This Chapter provides relief from capital gains tax in respect of qualifying business disposals (to be known as “entrepreneurs' relief”). (2) The following are qualifying business disposals— (a) a material disposal of business assets: see section 169I, (b) a disposal of trust business assets: see section 169J, and (c) a disposal associated with a relevant material disposal: see section 169K. (3) But in the case of certain qualifying business disposals, entrepreneurs' relief is given only in respect of disposals of relevant business assets comprised in the qualifying business disposal: see section 169L. (4) Section 169M makes provision requiring the making of a claim for entrepreneurs' relief. (5) Sections 169N to 169P make provision as to the amount of entrepreneurs' relief. (6) Sections 169Q and 169R make provision about reorganisations. (7) Section 169S contains interpretative provisions for the purposes of this Chapter. (169I) (1) There is a material disposal of business assets where— (a) an individual makes a disposal of business assets (see subsection (2)), and (b) the disposal of business assets is a material disposal (see subsections (3) to (7)). (2) For the purposes of this Chapter a disposal of business assets is— (a) a disposal of the whole or part of a business, (b) a disposal of (or of interests in) one or more assets in use, at the time at which a business ceases to be carried on, for the purposes of the business, or (c) a disposal of one or more assets consisting of (or of interests in) shares in or securities of a company. (3) A disposal within paragraph (a) of subsection (2) is a material disposal if the business is owned by the individual throughout the period of 1 year ending with the date of the disposal. (4) A disposal within paragraph (b) of that subsection is a material disposal if— (a) the business is owned by the individual throughout the period of 1 year ending with the date on which the business ceases to be carried on, and (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 or B is met. (6) Condition A is that, throughout the period of 1 year 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 1 year 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. (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. (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 (c) the relevant condition is met (see subsections (4) and (5)). (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 1 year 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 1 year 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. (169K) (1) There is a disposal associated with a relevant material disposal if conditions A, B and C are met. (2) Condition A is that an individual makes a material disposal of business assets which consists of— (a) the disposal of the whole or part of the individual's interest in the assets of a partnership, or (b) the disposal of (or of interests in) shares in or securities of a company. (3) Condition B is that the individual makes the disposal as part of the withdrawal of the individual 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. (4) Condition C is that, throughout the period of 1 year 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. (5) For the purposes of this Chapter the disposal mentioned in Condition B is the disposal associated with a relevant material disposal. (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, entrepreneurs' 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 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. (169M) (1) Entrepreneurs' relief is to be given only on the making of a claim. (2) A claim for entrepreneurs' 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 entrepreneurs' 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 entrepreneurs' relief in respect of a qualifying business disposal may only be made if the amount resulting under section 169N(1) is a positive amount. (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 reduced by 4/9ths. (3) But if the aggregate of— (a) the amount resulting under subsection (1), and (b) the total of the amounts resulting under that subsection by virtue of its operation in relation to earlier relevant qualifying business disposals (if any), exceeds £1 million, the reduction is to be made in respect of only so much (if any) of the amount resulting under subsection (1) as (when added to that total) does not exceed £1 million. (4) The amount arrived at under subsections (1) to (3) 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. (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 (3) “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. (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, with no reduction under subsection (2) of that section, 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 1 year 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. (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, with no reduction under subsection (2) of that section, 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. (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 entrepreneurs' 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. (169R) (1) This section applies where the calculation under section 116(10)(a) has effect to produce a chargeable gain for an individual by reason of a relevant transaction. (2) This Chapter has effect as if— (a) (despite section 116(10)) the relevant transaction were a disposal, and (b) the disposal were a disposal of business assets consisting of the old asset made by the individual at the time of the relevant transaction. (3) Where the disposal would be a material disposal of business assets and entrepreneurs' relief is claimed in respect of it— (a) the amount resulting under section 169N(1) is to be taken to be the amount of the chargeable gain produced by the calculation under section 116(10)(a), and (b) accordingly, the amount arrived at under section 169N(1) to (3) (or a corresponding part of it) is the amount deemed to accrue by virtue of section 116(10)(b) on a disposal of the whole or part of the new asset. (4) In this section “new asset”, “old asset” and “relevant transaction” have the meaning given by section 116. (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 “personal company”, in relation to an individual, means a company— (a) at least 5% of the ordinary share capital of which is held by the individual, and (b) at least 5% of the voting rights in which are exercisable by the individual by virtue of that holding. (4) For the purposes of subsection (3) if the individual holds any shares in the company jointly or in common with one or more other persons, the individual is to be treated as sole holder of so many of them as is proportionate to the value of the individual's share (and as able to exercise voting rights by virtue of that holding). (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, - “entrepreneurs' 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), and - “trading company” and “trading group” have the same meaning as in section 165 (see section 165A).

Other amendments

3

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

4

In paragraph 1(1)(b) of Schedule 5B (enterprise investment scheme: re-investment), after “164FA,” insert “ section 169N, ”.

Commencement

5

The amendments made by this Schedule have effect in relation to disposals, reorganisations (within the meaning of section 169Q of TCGA 1992) and relevant transactions (within the meaning of section 116 of TCGA 1992) taking place on or after 6 April 2008.

Transitionals: section 169P(4)(d)

6

Section 169P of TCGA 1992 has effect in a case where the period for which the assets are in use for the purposes of the business began before 6 April 2008 as if the reference in subsection (4)(d) of that section to that period were to so much of it as falls on or after that date.

Transitionals: reorganisations

7

• (1) This paragraph applies where, by virtue of section 116(10)(b), a chargeable gain is deemed to accrue to an individual on a disposal made on or after 6 April 2008 (a “relevant disposal”) by reason of a relevant transaction to which the individual was a party taking place before that date.

• (2) Subject as follows, Chapter 3 of Part 5 (as inserted by this Schedule) has effect as if—

• (a) (despite section 116(10)) the relevant transaction were a disposal of the old asset made by the individual,

• (b) that Chapter applied in relation to that disposal (even though made before 6 April 2008), and

• (c) for the purposes of the time limit for making a claim for entrepreneurs' relief, that disposal were made at the time of the first relevant disposal.

• (3) In sub-paragraph (2) “the first relevant disposal” means the first disposal made on or after 6 April 2008 on which a chargeable gain is deemed to accrue to the individual by reason of the relevant transaction.

• (4) Where entrepreneurs' relief is claimed by virtue of this paragraph—

• (a) the amount of the chargeable gain produced by the calculation under section 116(10)(a), reduced by

• (b) any amount deemed to accrue under section 116(10)(b) and (12) before 6 April 2008 by reason of the relevant transaction,

is to be treated as constituting the amount resulting under section 169N(1).

• (5) Accordingly (but subject as follows), the amount of the chargeable gain which is deemed to accrue by virtue of section 116(10)(b) on the relevant disposal is that arrived at under section 169N(1) and (2) (in accordance with sub-paragraph (4)).

• (6) The amount of the chargeable gain which is deemed to accrue by virtue of section 116(10)(b) on the relevant disposal is the amount specified in sub-paragraph (7)—

• (a) except in a case within paragraph (b), where the relevant disposal is not a disposal of the whole of the new asset, and

• (b) in a case in which part of the new asset was disposed of before 6 April 2008, where the relevant disposal is not a disposal of the whole of the part not so disposed of.

• (7) The amount referred to in sub-paragraph (6) is the appropriate proportion of the amount in sub-paragraph (5); and “the appropriate proportion” means the proportion of the new asset, or of so much of the new asset as was not disposed of before 6 April 2008, which is disposed of on the relevant disposal.

• (7A) Section 169N(3) to (4B) is to apply to the deemed chargeable gain found in accordance with sub-paragraphs (5) to (7).

• (8) In this paragraph—

• “new asset”,

• “old asset”, and

• “relevant transaction”,

have the meaning given by section 116.

• (9) References in this paragraph to any provision are to be read as they would be if this paragraph formed part of TCGA 1992.

Transitionals: EIS and VCT

8

• (1) This paragraph applies where there is a relevant chargeable event in a case in which the original gain would, apart from Schedule 5B (enterprise investment scheme) or Schedule 5C (venture capital trusts), have accrued before 6 April 2008.

• (2) “Relevant chargeable event” means a chargeable event under—

• (a) paragraph 3(1) of Schedule 5B, or

• (b) paragraph 3(1) of Schedule 5C,

which occurs on or after 6 April 2008 in relation to any of the relevant shares held by the investor immediately before the first relevant chargeable event.

• (3) In this paragraph “the first relevant chargeable event” means the first relevant chargeable event in the case.

• (4) The following provisions apply if—

• (a) the relevant disposal would have been a material disposal of business assets had Chapter 3 of Part 5 applied in relation to it (even though made before 6 April 2008), and

• (b) a claim is made on or before the first anniversary of the 31 January following the tax year in which the first relevant chargeable event occurs.

• (5) In this paragraph “the relevant disposal” means—

• (a) where the original gain would have accrued in accordance with section 164F or 164FA, paragraphs 4 and 5 of Schedule 5B or paragraphs 4 and 5 of Schedule 5C (the “original gain event”), the relevant underlying disposal, and

• (b) otherwise, the disposal on which the original gain would have accrued (“the original gain disposal”).

• (6) In sub-paragraph (5)(a) “the relevant underlying disposal” means the disposal (not being a disposal within paragraph 3 of Schedule 5B or 5C) by virtue of which Schedule 5B or 5C has effect.

• (7) Subject as follows, the amount treated as accruing on the relevant chargeable event in respect of the original gain event or original gain disposal is the amount which would be arrived at under section section 169N(1) and (2) if—

• (a) the relevant chargeable event were a qualifying business disposal (within the meaning of Chapter 3 of Part 5), and

• (b) the relevant proportion of the postponed gain constituted the amount resulting under section 169N(1);

and “the relevant proportion” means the proportion of the relevant shares which is held by the investor immediately before the first relevant chargeable event.

• (8) The amount treated as accruing on the relevant chargeable event in respect of the original gain event or original gain disposal is that specified in sub-paragraph (9) where the relevant chargeable event is not a chargeable event in relation to all the relevant shares held by the investor immediately before the first relevant chargeable event.

• (9) The amount referred to in sub-paragraph (8) is the appropriate proportion of the amount in sub-paragraph (7); and “the appropriate proportion” means the proportion of the relevant shares held by the investor immediately before the first relevant chargeable event as respects which the relevant chargeable event is a chargeable event.

• (9A) Section 169N(3) to (4B) is to apply to the amount treated as accruing in accordance with sub-paragraphs (7) to (9).

• (10) In this paragraph—

• “chargeable event” is to be construed in accordance with paragraph 3 of Schedule 5B or paragraph 3 of Schedule 5C,

• “investor” has the same meaning as in paragraph 1 of Schedule 5B or paragraph 1 of Schedule 5C,

• “the original gain” has the same meaning as in paragraph 1 of Schedule 5B or paragraph 1 of Schedule 5C,

• “the postponed gain” means so much of the original gain as is treated by paragraph 2(2)(a) of Schedule 5B or paragraph 2(2)(a) of Schedule 5C as not having accrued at the accrual time, and

• “relevant shares” has the same meaning as in Schedule 5B or Schedule 5C.

• (11) References in this paragraph to any provision are to be read as they would be if this paragraph formed part of TCGA 1992.

SCHEDULE 4

Amendments of IHTA 1984

1

IHTA 1984 is amended as follows.

2

After section 8 insert—

(8A) (1) This section applies where— (a) immediately before the death of a person (a “deceased person”), the deceased person had a spouse or civil partner (“the survivor”), and (b) the deceased person had unused nil-rate band on death. (2) A person has unused nil-rate band on death if— $$M>VT$where—M is the maximum amount that could be transferred by a chargeable transfer made (under section 4 above) on the person's death if it were to be wholly chargeable to tax at the rate of nil per cent. (assuming, if necessary, that the value of the person's estate were sufficient but otherwise having regard to the circumstances of the person); andVT is the value actually transferred by the chargeable transfer so made (or nil if no chargeable transfer is so made).$ (3) Where a claim is made under this section, the nil-rate band maximum at the time of the survivor's death is to be treated for the purposes of the charge to tax on the death of the survivor as increased by the percentage specified in subsection (4) below (but subject to subsection (5) and section 8C below). (4) That percentage is— $$ENRBMD×100$where—E is the amount by which M is greater than VT in the case of the deceased person; andNRBMD is the nil-rate band maximum at the time of the deceased person's death.$ (5) If (apart from this subsection) the amount of the increase in the nil-rate band maximum at the time of the survivor's death effected by this section would exceed the amount of that nil-rate band maximum, the amount of the increase is limited to the amount of that nil-rate band maximum. (6) Subsection (5) above may apply either— (a) because the percentage mentioned in subsection (4) above (as reduced under section 8C below where that section applies) is more than 100 because of the amount by which M is greater than VT in the case of one deceased person, or (b) because this section applies in relation to the survivor by reference to the death of more than one person who had unused nil-rate band on death. (7) In this Act “nil-rate band maximum” means the amount shown in the second column in the first row of the Table in Schedule 1 to this Act (upper limit of portion of value charged at rate of nil per cent.) and in the first column in the second row of that Table (lower limit of portion charged at next rate). (8B) (1) A claim under section 8A above may be made— (a) by the personal representatives of the survivor within the permitted period, or (b) (if no claim is so made) by any other person liable to the tax chargeable on the survivor's death within such later period as an officer of Revenue and Customs may in the particular case allow. (2) If no claim under section 8A above has been made in relation to a person (P) by reference to whose death that section applies in relation to the survivor, the claim under that section in relation to the survivor may include a claim under that section in relation to P if that does not affect the tax chargeable on the value transferred by the chargeable transfer of value made on P's death. (3) In subsection (1)(a) above “the permitted period” means— (a) the period of two years from the end of the month in which the survivor dies or (if it ends later) the period of three months beginning with the date on which the personal representatives first act as such, or (b) such longer period as an officer of Revenue and Customs may in the particular case allow. (4) A claim made within either of the periods mentioned in subsection (3)(a) above may be withdrawn no later than one month after the end of the period concerned. (8C) (1) This section applies where— (a) the conditions in subsection (1)(a) and (b) of section 8A above are met, and (b) after the death of the deceased person, tax is charged on an amount under any of sections 32, 32A and 126 below by reference to the rate or rates that would have been applicable to the amount if it were included in the value transferred by the chargeable transfer made (under section 4 above) on the deceased person's death. (2) If the tax is charged before the death of the survivor, the percentage referred to in subsection (3) of section 8A above is (instead of that specified in subsection (4) of that section)— $$(ENRBMD-TANRBME)×100$where—E and NRBMD have the same meaning as in subsection (4) of that section;TA is the amount on which tax is charged; andNRBME is the nil-rate band maximum at the time of the event occasioning the charge.$ (3) If this section has applied by reason of a previous event or events, the reference in subsection (2) to the fraction $TANRBME$ is to the aggregate of that fraction in respect of the current event and the previous event (or each of the previous events). (4) If the tax is charged after the death of the survivor, it is charged as if the personal nil-rate band maximum of the deceased person were appropriately reduced. (5) In subsection (4) above— - “the personal nil-rate band maximum of the deceased person” is the nil rate band maximum which is treated by Schedule 2 to this Act as applying in relation to the deceased person's death, increased in accordance with section 8A above where that section effected an increase in that nil-rate band maximum in the case of the deceased person (as survivor of another deceased person), and - “appropriately reduced” means reduced by the amount (if any) by which the amount on which tax was charged at the rate of nil per cent. on the death of the survivor was increased by reason of the operation of section 8A above by virtue of the position of the deceased person.

3

In section 147 (Scotland: legitim etc), insert at the end—

(10) Where the application of subsection (4) in relation to the estate of a person means that too great an increase has been made under subsection (3) of section 8A above in the case of another person, the claim under that section in that case may be amended accordingly by the Commissioners for Her Majesty's Revenue and Customs.

4

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

5

In section 239(4) (certificates of discharge: cases where further tax not affected), after paragraph (a) (but before the “or”) insert—

(aa) that may afterwards be shown to be payable by reason of too great an increase having been made under section 8A(3) above,

.

6

In section 247(2) (tax-geared penalty), after “liable” insert “ , or for which any other person is liable by virtue of the operation of section 8A above, ”.

7

In section 272 (general interpretation), insert at the appropriate place—

“nil-rate band maximum” has the meaning given by section 8A(7);

.

Amendment of TCGA 1992

8

In section 274 of TCGA 1992 (value determined for inheritance tax), for “that tax” substitute “ the application of that tax to the estate ”.

Commencement

9

• (1) The amendments made by paragraphs 2, 3 and 4(4) have effect in relation to cases where the survivor's death occurs on or after 9 October 2007.

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

• (3) The amendments made by paragraphs 5 and 7 are to be treated as having come into force on 9 October 2007.

• (4) The amendment made by paragraph 8 has effect in relation to any ascertainment of value made on or after 6 April 2008.

Modifications for cases where deceased person died before 25 July 1986

10

• (1) Section 8A of IHTA 1984 (as inserted by paragraph 2) has effect in relation to cases where the deceased person died before 25 July 1986 (and the survivor dies on or after 9 October 2007) subject as follows.

• (2) Where the deceased person died on or after 1 January 1985—

• (a) the references in subsection (2) to a chargeable transfer made under section 4 of IHTA 1984 are to a chargeable transfer made under section 4 of CTTA 1984, and

• (b) the reference in subsection (4) to the nil-rate band maximum is to the amount shown in the second column of the first row, and the first column of the second row, of the First Table in Schedule 1 to that Act.

• (3) Where the deceased person died on or after 13 March 1975 and before 1 January 1985—

• (a) the references in subsection (2) to a chargeable transfer made under section 4 of IHTA 1984 are to a chargeable transfer made under section 22 of FA 1975, and

• (b) the reference in subsection (4) to the nil-rate band maximum is to the amount shown in the second column of the first row, and in the first column of the second row, of the First Table in section 37 of that Act.

• (4) Where the deceased person died on or after 16 April 1969 and before 13 March 1975, section 8A applies as if—

• (a) M were the amount specified in paragraph (a) in Part 1 of Schedule 17 to FA 1969 at the time of the deceased person's death,

• (b) VT were the aggregate principal value of all property comprised in the estate of the deceased person for the purposes of estate duty, and

• (c) the reference in subsection (4) to the nil-rate band maximum were to the amount mentioned in paragraph (a).

• (5) Where the deceased person died before 16 April 1969, section 8A applies as if—

• (a) M were the amount specified as the higher figure in the first line, and the lower figure in the second line, in the first column of the scale in section 17 of FA 1894 at the time of the deceased person's death,

• (b) VT were the principal value of the estate of the deceased person for the purposes of estate duty, and

• (c) the reference in subsection (4) to the nil-rate band maximum were to the figure mentioned in paragraph (a).

11

• (1) Section 8C of IHTA 1984 (as inserted by paragraph 2) has effect in relation to cases where the deceased person died before 25 July 1986 but on or after 13 March 1975 (and the survivor dies on or after 9 October 2007) subject as follows.

• (2) Where the deceased person died on or after 1 January 1985—

• (a) the reference in subsection (1) to sections 32, 32A and 126 of IHTA 1984 includes sections 32, 32A and 126 of CTTA 1984,

• (b) the reference in that subsection to section 4 of IHTA 1984 is to section 4 of CTTA 1984,

• (c) the reference in subsection (2) to the nil-rate band maximum includes the amount shown in the second column of the first row, and the first column of the second row, of the First Table in Schedule 1 to that Act,

• (d) the first reference in subsection (5) to the nil-rate band maximum is to that amount, and

• (e) the reference in subsection (5) to Schedule 2 to IHTA 1984 includes Schedule 2 to CTTA 1984.

• (3) Where the deceased person died on or after 7 April 1976 and before 1 January 1985—

• (a) the reference in subsection (1) to sections 32, 32A and 126 of IHTA 1984 includes sections 32, 32A and 126 of CTTA 1984, section 78 of FA 1976 and paragraph 2 of Schedule 9 to FA 1975,

• (b) the reference in that subsection to section 4 of IHTA is to section 22 of FA 1975,

• (c) the reference in subsection (2) to the nil-rate band maximum includes the amount shown in the second column of the first row, and the first column of the second row, of the First Table in Schedule 1 to CTTA 1984 and the amount shown in the second column of the first row, and in the first column of the second row, of the First Table in section 37 of FA 1975,

• (d) the first reference in subsection (5) to the nil-rate band maximum is to that amount, and

• (e) the reference in subsection (5) to Schedule 2 to IHTA 1984 includes Schedule 2 to CTTA 1984, Schedule 15 to FA 1980 and section 62 of FA 1978;

but, if the event occasioning the charge occurred before 27 October 1977, the reference in subsection (4) to the personal nil-rate band maximum is to the amount shown in the second column of the first row, and in the first column of the second row, of the First Table in section 37 of FA 1975 at the time of the deceased person's death.

• (4) Where the deceased person died on or after 13 March 1975 and before 7 April 1976—

• (a) the reference in subsection (1) to sections 32, 32A and 126 of IHTA 1984 includes paragraph 1 of Schedule 5 to that Act, section 126 of CTTA 1984 and paragraph 2 of Schedule 9 to FA 1975,

• (b) the reference in that subsection to section 4 of IHTA is to section 22 of FA 1975,

• (c) the reference in subsection (2) to the nil-rate band maximum includes the amount shown in the second column of the first row, and the first column of the second row, of the First Table in Schedule 1 to CTTA 1984 and the amount shown in the second column of the first row, and in the first column of the second row, of the First Table in section 37 of FA 1975, and

• (d) the reference in subsection (4) to the personal nil-rate band maximum is to the amount shown in the second column of the first row, and in the first column of the second row, of the First Table in section 37 of FA 1975 at the time of the deceased person's death.

SCHEDULE 5

1

HODA 1979 is amended as follows.

2

• (1) Section 1 (hydrocarbon oil) is amended as follows.

• (2) In subsection (1), for “Subsections (2) to (7) below” substitute “ The following provisions ”.

• (3) After subsection (7) insert—

(8) “Kerosene” means heavy oil of which more than 50% by volume distils at a temperature of 240oC or less.

3

• (1) Section 2A (power to amend definitions) is amended as follows.

• (2) In subsection (1), for paragraphs (a) to (e) substitute—

(a) biodiesel; (b) bioethanol; (c) unleaded petrol.

• (3) Omit subsections (1A) and (1B).

4

In section 6AA (excise duty on biodiesel), after subsection (3) insert—

(4) See section 14A (biodiesel used other than as fuel for road vehicles) for rebates on duty charged under this section.

5

In section 6AB (excise duty on bioblend), for subsections (3) and (4) substitute—

(3) The rate per litre of duty under this section on any bioblend is the sum of— (a) HO% of the rate per litre of duty under section 6 in the case of heavy oil, and (b) BD% of the rate per litre of duty under section 6AA. (4) In subsection (3)— - “HO%” means the percentage of the bioblend that is heavy oil, and - “BD%” means the percentage of the bioblend that is biodiesel, where the percentages are by volume to the nearest 0.001%. (4A) See section 14B (bioblend used other than as fuel for road vehicles) for rebates on duty charged under this section.

6

In section 8 (excise duty on road fuel gas)—

• (a) in subsection (2), for “in” substitute “ for ”, and

• (b) omit subsection (6).

7

In section 10 (restrictions on use of duty-free oil), omit subsection (8).

8

In section 12 (rebate not allowed on fuel for road vehicles), omit subsection (3).

9