Finance Act 2016

PART 2 — Consequential amendments

FA 1998

2

Schedule 18 to FA 1998 (company tax returns) is amended as follows.

3

In paragraph 25(3)—

• (a) insert “ or ” at the end of paragraph (b), and

• (b) omit paragraph (d) and the “or” preceding it.

4

In paragraph 42(4)—

• (a) insert “ or ” at the end of paragraph (a), and

• (b) omit paragraph (c) and the “or” preceding it.

CTA 2009

5

In section A1 of CTA 2009 (overview of the Corporation Tax Acts), in subsection (2)—

• (a) omit paragraph (h), and

• (b) after that paragraph insert—

(ha) Part 6A of that Act (hybrid and other mismatches),

.

CTA 2010

6

CTA 2010 is amended as follows.

7

In section 938N (group mismatch schemes: priority)—

• (a) omit paragraph (d), and

• (b) after that paragraph insert—

(da) Part 6A of that Act (hybrid and other mismatches);

.

8

In section 938V (tax mismatch schemes: priority)—

• (a) omit paragraph (c), and

• (b) after that paragraph insert—

(ca) Part 6A of TIOPA 2010 (hybrid and other mismatches);

.

TIOPA 2010

9

TIOPA 2010 is amended as follows.

10

In section 1 (overview of Act), in subsection (1)—

• (a) omit paragraph (c), and

• (b) after that paragraph insert—

(ca) Part 6A (hybrid and other mismatches),

.

11

In section 157 (direct participation), in subsection (1)—

• (a) omit the “and” at the end of paragraph (b), and

• (b) after paragraph (c) insert

, and (d) in Part 6A, section 259NB(4).

12

In section 158 (indirect participation: defined by sections 159 to 162), in subsection (4)—

• (a) omit the “and” at the end of paragraph (b), and

• (b) after paragraph (c) insert

, and (d) in Part 6A, section 259NB(4),

.

13

In section 159 (indirect participation: potential direct participant), in subsection (1)—

• (a) omit the “and” at the end of paragraph (b), and

• (b) after paragraph (c) insert

, and (d) in Part 6A, section 259NB(4).

14

In section 160 (indirect participation: one of several major participants), in subsection (1)—

• (a) omit the “and” at the end of paragraph (b), and

• (b) after paragraph (c) insert

, and (d) in Part 6A, section 259NB(4).

15

Omit Part 6 (tax arbitrage).

16

Omit Part 4 of Schedule 11 (tax arbitrage: index of defined expressions used in Part 6).

17

After that Part of that Schedule insert—

arrangement (in Part 6A)	section 259NF
CFC and CFC charge (in Part 6A)	section 259B(4)
the Commissioners (in Part 6A)	section 259NF
control group (in Part 6A)	section 259NB
deduction period (in Chapter 10 of Part 6A)	section 259JA(5)(a)
dual resident company (in Chapter 10 of Part 6A)	section 259JA(3)
dual territory double deduction amount (in Chapter 10 of Part 6A)	section 259JA(5)
dual territory double deduction (in Chapter 11 of Part 6A)	section 259KB
excessive PE deduction (in Chapter 6 of Part 6A)	section 259FA(8)
excessive PE deduction (in Chapter 11 of Part 6A)	section 259KB
financial instrument (in Part 6A)	section 259N
foreign CFC and foreign CFC charge (in Part 6A)	section 259B(4)
foreign deduction period (in Chapter 10 of Part 6A)	section 259JA(5)(b)
hybrid entity (in Part 6A)	section 259BE
hybrid entity deduction period (in Chapter 9 of Part 6A)	section 259IA(2)(a)
hybrid entity double deduction amount (in Chapter 9 of Part 6A)	section 259IA(4)
hybrid or otherwise impermissible deduction/non-inclusion mismatch (in Chapter 3 of Part 6A)	section 259CB
hybrid payee (in Chapter 7 of Part 6A)	section 259GA(3)
hybrid payee deduction/non-inclusion mismatch (in Chapter 7 of Part 6A)	section 259GB
hybrid payer (in Chapter 5 of Part 6A)	section 259EA(3)
hybrid payer deduction/non-inclusion mismatch (in Chapter 5 of Part 6A)	section 259EB
hybrid transfer arrangement (in Chapter 4 of Part 6A)	section 259DB
hybrid transfer deduction/non-inclusion mismatch (in Chapter 4 of Part 6A)	section 259DC
imported mismatch payment (in Chapter 11 of Part 6A)	section 259KA(2)
imported mismatch arrangement (in Chapter 11 of Part 6A)	section 259KA(2)
investor (in Part 6A)	section 259BE(4)
investor deduction period (in Chapter 9 of Part 6A)	section 259IA(2)(b)
investor jurisdiction (in Part 6A)	section 259BE(4)
mismatch payment (in Chapter 11 of Part 6A)	section 259KA(6)
multinational company (in Chapter 6 of Part 6A)	section 259FA(3)
multinational company (in Chapter 8 of Part 6A)	section 259HA(4)
multinational payee deduction/non-inclusion mismatch (in Chapter 8 of Part 6A)	section 259HB
ordinary income (in Part 6A)	sections 259BC and 259BD
over-arching arrangement (in Chapter 11 of Part 6A)	section 259KA(5)
P (in Chapter 11 of Part 6A)	section 259KA(3)
parent jurisdiction (in Chapter 6 of Part 6A)	section 259FA(3)(a)
parent jurisdiction (in Chapter 8 of Part 6A)	section 259HA(4)(a)
parent jurisdiction (in Chapter 10 of Part 6A)	section 259JA(4)(b)(ii)
payee (in Part 6A)	section 259BB(6)
payee jurisdiction (in Part 6A)	section 259BB(9)
payer (in Part 6A)	section 259BB(1)(a) or (2)
payment (in Part 6A)	section 259BB(1)
payment period (in Part 6A)	section 259BB(1)(b) or (2)
PE jurisdiction (in Chapter 8 of Part 6A)	section 259HA(4)(b)
PE jurisdiction (in Chapter 10 of Part 6A)	section 259JA(4)(a)
PE jurisdiction (in Chapter 11 of Part 6A)	section 259KB(3)(a)
permanent establishment (in Part 6A)	section 259BF
quasi-payment (in Part 6A)	section 259BB(2) to (5)
related (in Part 6A)	section 259NC
relevant deduction (in Part 6A)	section 259BB(1)(b) or (2)(a)
relevant investment fund (in Part 6A)	section 259NA
relevant mismatch (in Chapter 11 of Part 6A)	section 259KA(6)
relevant multinational company (in Chapter 10 of Part 6A)	section 259JA(4)
relevant PE period (in Chapter 6 of Part 6A)	section 259FA(4)
series of arrangements (in Chapter 11 of Part 6A)	section 259KA(5)
substitute payment (in Chapter 4 of Part 6A)	section 259DB(5)
tax (in Part 6A)	section 259B
taxable period (in Part 6A)	section 259NF
taxable profits (in Part 6A)	sections 259BC(2) and 259BD(5)
underlying instrument (in Chapter 4 of Part 6A)	section 259DB(3)
underlying return (in Chapter 4 of Part 6A)	section 259DB(5)(b)

PART 3 — Commencement

18

Chapters 3 to 5 and 7 and 8 of Part 6A of TIOPA 2010 (counteraction of deduction/non-inclusion mismatches arising from payments and quasi-payments) have effect in relation to—

• (a) payments made on or after the commencement date, and

• (b) quasi-payments in relation to which the payment period begins on or after the commencement date.

19

Chapter 6 of Part 6A of TIOPA 2010 (counteraction of deduction/non-inclusion mismatches relating to intra-company transfers from permanent establishments) has effect in relation to excessive PE deductions in relation to which the relevant PE period begins on or after the commencement date.

20

Chapters 9 and 10 of Part 6A of TIOPA 2010 (counteraction of double deduction mismatches) have effect for accounting periods beginning on or after the commencement date.

21

Chapter 11 of Part 6A of TIOPA 2010 (imported mismatch payments) has effect in relation to imported mismatch payments that are—

• (a) payments made on or after the commencement date, or

• (b) quasi-payments in relation to which the payment period begins on or after the commencement date.

22

The following provisions of this Schedule have effect in relation to accounting periods beginning on or after the commencement date—

• (a) paragraphs 2 to 4, and

• (b) paragraphs 5(a), 7(a), 8(a), 10(a), 15 and 16.

23

For the purposes of paragraph 18 and 21, where a payment period begins before the commencement date and ends on or after that date (“the straddling period”)—

• (a) so much of the straddling period as falls before the commencement date, and so much of that period as falls on or after that date, are to be treated as separate taxable periods, and

• (b) where it is necessary to apportion an amount for the straddling period to the two separate taxable periods, it is to be apportioned—

• (i) on a time basis according to the respective length of the separate taxable periods, or

• (ii) if that method would produce a result that is unjust or unreasonable, on a just and reasonable basis.

24

For the purposes of paragraphs 19, 20 and 22(b), where a company has an accounting period beginning before the commencement date and ending on or after that date (“the straddling period”)—

• (a) so much of the straddling period as falls before the commencement date, and so much of the straddling period as falls on or after that date, are to be treated as separate accounting periods, and

• (b) where it is necessary to apportion an amount for the straddling period to the two separate accounting periods, it is to be apportioned—

• (i) in accordance with section 1172 of CTA 2010 (time basis), or

• (ii) if that method would produce a result that is unjust or unreasonable, on a just and reasonable basis.

25

In this Part of this Schedule “the commencement date” means 1 January 2017.

SCHEDULE 11

1

TCGA 1992 is amended in accordance with this Schedule.

2

In section 14B(1) (meaning of “non-resident CGT disposal”), in paragraph (a) after “disposal of a UK residential property interest” insert “ (within the meaning given by Schedule B1) ”.

3

Omit section 14C (which introduces Schedule B1 and is superseded by the section 4BB inserted by section 83 of this Act).

4

In Schedule B1 (disposals of UK residential property interests), in paragraph 1—

• (a) in sub-paragraph (4) for “6 April 2015” substitute “ the relevant date ”;

• (b) after that sub-paragraph insert—

(4A) In sub-paragraph (4) “the relevant date” means— (a) for the purpose of determining whether a disposal is a non-resident CGT disposal, 6 April 2015; (b) for any other purpose, 31 March 1982.

5

After Schedule B1 insert—

SCHEDULE BA1 (1) (1) For the purposes of this Act, the disposal by a person (“P”) of an interest in non-UK land (whether made before or after this Schedule comes into force) is a “disposal of a non-UK residential property interest” if the first or second condition is met. (2) The first condition is that— (a) the land has at any time in the relevant ownership period consisted of or included a dwelling, or (b) the interest in non-UK land subsists for the benefit of land that has at any time in the relevant ownership period consisted of or included a dwelling. (3) The second condition is that the interest in non-UK land subsists under a contract for an off-plan purchase. (4) In sub-paragraph (2) “relevant ownership period” means the period— (a) beginning with the day on which P acquired the interest in non-UK land or 31 March 1982 (whichever is later), and (b) ending with the day before the day on which the disposal occurs. (5) If the interest in non-UK land disposed of by P as mentioned in sub-paragraph (1) results from interests in non-UK land which P has acquired at different times (“the acquired interests”), P is regarded for the purposes of sub-paragraph (4)(a) as having acquired the interest when P first acquired any of the acquired in-terests. (6) In this paragraph— - “contract for an off-plan purchase” means a contract for the acquisition of land consisting of, or including, a building or part of a building that is to be constructed or adapted for use as a dwelling; - “dwelling” is to be read in accordance with paragraph 4. (7) Paragraphs 6 and 20 of Schedule 4ZZC contain further provision about interests under contracts for off-plan purchases. (2) (1) In this Schedule “interest in non-UK land” means— (a) an estate, interest, right or power in or over land outside the United Kingdom, or (b) the benefit of an obligation, restriction or condition affecting the value of any such estate, interest, right or power, other than an excluded interest. (2) The following are excluded interests— (a) any security interest; (b) a licence to use or occupy land. (3) In sub-paragraph (2) “security interest” means an interest or right held for the purpose of securing the payment of money or the performance of any other obligation. (4) The Treasury may by regulations— (a) provide that any other description of interest or right in relation to land outside the United Kingdom is an excluded interest; (b) exclude from sub-paragraph (2) such interests or rights as may be prescribed in the regulations. (5) Regulations under sub-paragraph (4) may make incidental, consequential, supplementary or transitional provision or savings. (3) (1) Sub-paragraph (2) applies where— (a) a person (“P”) grants at any time an option binding P to sell an interest in non-UK land, and (b) a disposal by P of that interest in non-UK land at that time would be a disposal of a non-UK residential property interest by virtue of paragraph 1. (2) The grant of the option is regarded for the purposes of this Schedule as the disposal of an interest in the land in question (if it would not be so regarded apart from this paragraph). (3) Nothing in this paragraph affects the operation of section 144 in relation to the grant of the option (or otherwise). (4) Subsection (6) of section 144 (interpretation of references to “sale” etc) applies for the purposes of this paragraph as it applies for the purposes of that section. (4) (1) Paragraph 4 of Schedule B1 (meaning of “dwelling”), read with paragraphs 6 to 10 of that Schedule, applies for the purposes of this Schedule as it applies for the purposes of Schedule B1, but as if— (a) in paragraph 4, sub-paragraphs (5) and (6) were omitted, (b) in paragraphs 6 and 8— (i) any reference to an interest in UK land were to an interest in non-UK land within the meaning of this Schedule, and (ii) any reference to paragraph 1(4) of that Schedule were a reference to paragraph 1(4) of this Schedule, and (c) in paragraphs 7 to 9 any reference to planning permission or development consent were to any permission or consent corresponding to planning permission or development consent within the meaning of that Schedule. (2) In paragraph 5 of Schedule B1 (power to amend), the reference to paragraph 4 includes paragraph 4 as applied by this paragraph. (3) The Treasury may by regulations under this sub-paragraph make provision changing or clarifying the cases where a building outside the United Kingdom counts as a dwelling for the purposes of this Schedule (and sub-paragraph (1) has effect subject to any such regulations). (4) Provision made under sub-paragraph (3) may include provision corresponding to paragraph 4(5) of Schedule B1. (5) In this Schedule “land” includes a building.

SCHEDULE 12

1

TCGA 1992 is amended in accordance with this Schedule.

2

In section 57A(3) (gains and losses on relevant high value disposals: interaction with other provisions)—

• (a) the words from “Part 4” to the end become paragraph (a), and

• (b) after that paragraph insert

or, (b) Part 3 of Schedule 4ZZC applies (other disposals of residential property interests which are or involve relevant high value disposals).

3

After section 57B insert—

(57C) Schedule 4ZZC makes provision about the computation of— (a) residential property gains or losses, and (b) other gains or losses, on disposals of residential property interests which are not non-resident CGT disposals.

4

In Schedule B1 (disposals of UK residential property interests), in paragraph 1(7) after “Schedule 4ZZB” insert “ and paragraphs 6 and 20 of Schedule 4ZZC ”.

5

After Schedule 4ZZB insert—

SCHEDULE 4ZZC (1) (1) In this Schedule “RPI disposal” means a disposal of a residential property interest which is not a non-resident CGT disposal. (2) This Schedule applies for the purpose of determining, in relation to an RPI disposal— (a) whether a residential property gain or loss accrues on the disposal, and the amount of any such gain or loss, and (b) whether a gain or loss other than a residential property gain or loss accrues on the disposal, and the amount of any such gain or loss. (3) In this Schedule— (a) Part 2 contains the main rules for computing the gains and losses; (b) Part 3 contains the rules for computing the gains and losses in a case where the RPI disposal is, or involves, a relevant high value disposal (as defined in section 2C). (2) (1) For the purposes of this Schedule, a relevant high value disposal is “comprised in” an RPI disposal if— (a) the RPI disposal is treated for the purposes of section 2C and Schedule 4ZZA as two or more disposals, and (b) the relevant high value disposal is one of those. (2) In this Schedule— - “chargeable interest” has the same meaning as in Part 3 of the Finance Act 2013 (annual tax on enveloped dwellings) (see section 107 of that Act); - “dwelling” has the meaning given by — 1. paragraph 4 of Schedule B1, in relation to a disposal of a UK residential property interest; 2. paragraph 4 of Schedule BA1, in relation to a disposal of a non-UK residential property interest; - “subject-matter”, in relation to an interest in land (or a chargeable interest) means the land to which the interest relates. (3) (1) This Part of this Schedule applies where a person (“P”) makes an RPI disposal of (or of part of) an interest in land. (2) But this Part of this Schedule does not apply if the disposal is— (a) a relevant high value disposal, or (b) a disposal in which a relevant high value disposal is comprised. (3) In this Part of this Schedule “the disposed of interest” means— (a) the interest in land, or (b) if the disposal is of part of that interest, the part disposed of. (4) (1) The residential property gain or loss accruing on the disposal is computed as follows. - Step 1 Determine the amount of the gain or loss that accrues to P. - Step 2 The residential property gain or loss accruing on the disposal is an amount equal to the relevant fraction of that gain or loss (but see Step 3). - Step 3 If there has been mixed use of the subject matter of the disposed of interest on one or more days in the relevant ownership period, the residential property gain or loss accruing on the disposal is equal to the appropriate fraction of the amount given by Step 2. (2) In Step 2 “the relevant fraction” means— $$RD TD$where—“RD” is the number of days in the relevant ownership period on which the subject matter of the disposed of interest consists wholly or partly of a dwelling;“TD” is the total number of days in the relevant ownership period.$ (3) For the purposes of Step 3 there is “mixed use” of land on any day on which the land consists partly, but not exclusively, of one or more dwellings. (4) In Step 3 “the appropriate fraction” means the fraction that is, on a just and reasonable apportionment, attributable to the dwelling or dwellings. (5) In this paragraph the “relevant ownership period” means the period— (a) beginning with the day on which P acquired the disposed of interest or, if later, 31 March 1982, and (b) ending with the day before the day on which the disposal occurs. (5) The gain or loss accruing on the disposal which is not a residential property gain or loss is computed as follows. - Step 1 In a case where there is a gain under Step 1 of paragraph 4(1), determine the amount of that gain remaining after the deduction of the residential property gain determined under that paragraph.That remaining gain is the gain accruing on the disposal which is not a residential property gain. - Step 2 In a case where there is a loss under Step 1 of paragraph 4(1), determine the amount of that loss remaining after the deduction of the residential property loss determined under that paragraph.That remaining loss is the loss accruing on the disposal which is not a residential property loss. (6) (1) This paragraph applies where the disposal referred to in paragraph 3(1) is a disposal of a residential property interest only because of— (a) the second condition in paragraph 1 of Schedule B1, or (b) the second condition in paragraph 1 of Schedule BA1, (interest subsisting under a contract for the acquisition of land that consists of, or includes, a building that is to be constructed for use as a dwelling). (2) The land that is the subject of the contract concerned is treated for the purposes of this Part of this Schedule as consisting of (or, as the case requires, including) a dwelling throughout P's period of ownership of the disposed of interest. (7) (1) This Part of this Schedule applies where— (a) a person (other than an excluded person) (“P”) makes an RPI disposal of (or of part of) an interest in land, and (b) that disposal (“the disposal of land”) is a relevant high value disposal or a relevant high value disposal is comprised in it. (2) “Excluded person” has the meaning given by section 2B(2). (8) (1) This paragraph applies for the interpretation of this Part of this Schedule. (2) “The asset”, in relation to a relevant high value disposal, means the chargeable interest which (or a part of which) is the subject of that disposal. (3) “The disposed of interest”, in relation to a relevant high value disposal, means the asset or, if only part of the asset is the subject of the relevant high value disposal, that part of the asset. (4) A day is a “residential property chargeable day” in relation to a relevant high value disposal if— (a) it is a day on which the subject matter of the disposed of interest consists wholly or partly of a dwelling, but (b) it is not an ATED chargeable day (as defined in paragraph 3 of Schedule 4ZZA). (9) (1) The residential property gain or loss accruing on the disposal of land is computed as follows. - Step 1 Determine in accordance with paragraphs 10 to 15 the amount of the residential property gain or loss accruing on each relevant high value disposal. - Step 2 Add together the amounts of any gains or losses determined under Step 1 (treating any amount which is a loss as a negative amount). (2) If the result is a positive amount, that amount is the residential property gain on the disposal of land. (3) If the result is a negative amount, that amount (expressed as a positive number) is the residential property loss on the disposal of land. (10) (1) This paragraph applies to a relevant high value disposal where— (a) the disposal does not fall within any of Cases 1, 2 or 3 in paragraph 2 of Schedule 4ZZA, or (b) P has made an election under paragraph 5 of that Schedule in respect of the asset. (2) The residential property gain or loss accruing on the relevant high value disposal is computed as follows— - Step 1 Determine the amount of gain or loss which accrues to P. (For the purpose of determining the amount of that gain or loss, no account is taken of section 57C or this Schedule.) - Step 2 The residential property gain or loss accruing on the relevant high value disposal is equal to the special fraction of that gain or loss. (3) The “special fraction” is— $$SD TD$where—“SD” is the number of residential property chargeable days in the relevant ownership period;“TD” is the total number of days in the relevant ownership period.$ (4) “Relevant ownership period” means the period— (a) beginning with the day on which P acquired the disposed of interest or, if later, 31 March 1982, and (b) ending with the day before the day on which the relevant high value disposal occurs. (11) (1) This paragraph applies to a relevant high value disposal where— (a) the disposal falls within Case 1, 2 or 3 in paragraph 2 of Schedule 4ZZA, and (b) P has not made an election under paragraph 5 of that Schedule in respect of the asset. (2) The residential property gain or loss accruing on the relevant high value disposal is computed in accordance with paragraphs 12 to 15. (3) In those paragraphs “the relevant year” means— (a) where the relevant high value disposal falls within Case 1 in paragraph 2 of Schedule 4ZZA, 2013, (b) where it falls within Case 2 in that paragraph, 2015, and (c) where it falls within Case 3 in that paragraph, 2016. (12) (1) Take the following steps— - Step 1 Determine the amount equal to the special fraction of the notional pre-ATED gain or loss (as the case may be) (see paragraph 13). - Step 2 Determine the amount equal to the special fraction of the notional post-ATED gain or loss (as the case may be) (see paragraph 14). - Step 3 Add (treating any amount which is a loss as a negative amount)— 1. the amount of any gain or loss determined under Step 1, and 2. the amount of any gain or loss determined under Step 2. (2) If the result is a positive amount, that amount is the residential property gain on the relevant high value disposal. (3) If the result is a negative amount, that amount (expressed as a positive number) is the residential property loss on the relevant high value disposal. (13) (1) This paragraph applies for the purposes of Step 1 in paragraph 12. (2) “Notional pre-ATED gain or loss” means the gain or loss which would have accrued on 5 April of the relevant year had the disposed of interest been disposed of for a consideration equal to the market value of the interest on that date. (3) The “special fraction” is— $$SD TD$where—“SD” is the number of residential property chargeable days in the relevant ownership period;“TD” is the total number of days in the relevant ownership period.$ (4) The “relevant ownership period” is the period— (a) beginning with the day on which P acquired the disposed of interest or, if later, 31 March 1982, and (b) ending with 5 April of the relevant year. (14) (1) This paragraph applies for the purposes of Step 2 in paragraph 12. (2) “Notional post-ATED gain or loss” means the gain or loss which would have accrued on the relevant high value disposal had P acquired the disposed of interest on 5 April of the relevant year for a consideration equal to its market value on that date (and see paragraph 15). (3) The “special fraction” is— $$SD TD$where—“SD” is the number of residential property chargeable days in the relevant ownership period;“TD” is the total number of days in the relevant ownership period.$ (4) The “relevant ownership period” is the period beginning with 6 April of the relevant year and ending with the day before the day on which the relevant high value disposal occurs. (15) (1) This paragraph applies for the purposes of computing the notional post-ATED gain or loss for the purposes of Step 2 in paragraph 12. (2) In determining whether the asset which is the subject of the relevant high value disposal is a wasting asset (as defined for the purposes of Chapter 2 of Part 2), ignore the assumption that the asset was acquired on 5 April of the relevant year. (3) Sections 41 (restriction of losses by reference to capital allowances and renewals allowances) and 47 (wasting assets subject to capital allowances) apply in relation to any capital allowance or renewals allowance made in respect of the expenditure actually incurred by P in acquiring or providing the asset as if that allowance were made in respect of the expenditure treated as incurred by P on 5 April of the relevant year. (16) (1) The gain or loss on the disposal of land which is neither ATED-related nor a residential property gain or loss (“the balancing gain or loss”) is computed as follows. - Step 1 Determine in accordance with paragraphs 17 and 18 the amount of the gain or loss accruing on each relevant high value disposal which is neither ATED-related nor a residential property gain or loss.This is the “balancing” gain or loss for each disposal. - Step 2 Add together the amounts of any balancing gains or losses determined under Step 1 (treating any amount which is a loss as a negative amount). (2) If the result is a positive amount, that amount is the balancing gain on the disposal of land. (3) If the result is a negative amount, that amount (expressed as a positive number) is the balancing loss on the disposal of land. (17) (1) In the case of a relevant high value disposal to which paragraph 10 applies, the amount of the balancing gain or loss is determined as follows. (2) Determine the number of balancing days in the relevant ownership period. (3) “Balancing day” means a day which is neither— (a) a residential property chargeable day, nor (b) an ATED chargeable day (as defined in paragraph 3 of Schedule 4ZZA). (4) The balancing gain or loss on the disposal is equal to the balancing fraction of the amount of the gain or (as the case may be) loss determined under Step 1 of paragraph 10(2). (5) The “balancing fraction” is— $$BD TD$where—“BD” is the number of balancing days in the relevant ownership period;“TD” is the total number of days in the relevant ownership period.$ (6) In this paragraph “relevant ownership period” has the same meaning as in paragraph 10. (18) (1) The amount of the balancing gain or loss on a relevant high value disposal to which paragraph 11 applies is found by adding— (a) the amount of the balancing gain or loss belonging to the notional pre-ATED gain or loss, and (b) the amount of the balancing gain or loss belonging to the notional post-ATED gain or loss, (treating any amount which is a loss as a negative amount). (2) If the result is a positive amount, that amount is the balancing gain on the relevant high value disposal. (3) If the result is a negative amount, that amount (expressed as a positive number) is the balancing loss on the relevant high value disposal. (4) The balancing gain or loss belonging to the notional pre-ATED gain or loss is equal to the balancing fraction of the notional pre-ATED gain or loss. (5) The balancing gain or loss belonging to the notional post-ATED gain or loss is equal to the balancing fraction of the notional post-ATED gain or loss. (6) The balancing fraction is— $$BD TD$where—“BD” is the number of balancing days in the appropriate ownership period;“TD” is the total number of days in the appropriate ownership period.$ (7) “Balancing day” means a day which is neither— (a) a residential property chargeable day, nor (b) an ATED chargeable day (as defined in paragraph 3 of Schedule 4ZZA). (8) The appropriate ownership period is— (a) for the purpose of computing the balancing gain or loss belonging to the notional pre-ATED gain or loss, the relevant ownership period mentioned in paragraph 13(4); (b) for the purpose of computing the balancing gain or loss belonging to the notional post-ATED gain or loss, the relevant ownership period mentioned in paragraph 14(4). (9) In this paragraph— - “notional pre-ATED gain or loss” means the same as in paragraph 13(2); - “notional post-ATED gain or loss” means the same as in paragraph 14(2). (19) (1) This paragraph applies where the disposals comprised in the disposal of land include a disposal (the “non-ATED related disposal”) which is not a relevant high value disposal. (2) This Part of this Schedule (apart from this paragraph) applies in relation to the non-ATED related disposal as if it were a relevant high value disposal. (3) Sub-paragraph (4) applies if there has, at any time in the relevant ownership period, been mixed use of the subject matter of the disposed of interest. (4) The amount of any residential property gain or loss on the non-ATED related disposal computed under this Part of this Schedule is taken to be the appropriate fraction of the amount that it would otherwise be. (5) In sub-paragraph (4) “the appropriate fraction” means the fraction that is, on a just and reasonable apportionment, attributable to the dwelling or dwellings. (6) In this paragraph the “relevant ownership period” means— (a) where paragraph 10 applies, the relevant ownership period as defined in paragraph 10(4), or (b) where paragraph 11 applies, the relevant ownership period as defined in paragraphs 13(4) and 14(4). (20) (1) This paragraph applies where the RPI disposal made by P is a disposal of a residential property interest only because of— (a) the second condition in paragraph 1 of Schedule B1, or (b) the second condition in paragraph 1 of Schedule BA1, (interest subsisting under a contract for the acquisition of land that consists of, or includes, a building that is to be constructed for use as a dwelling). (2) The land that is the subject of the contract concerned is treated for the purposes of this Part of this Schedule as consisting of (or, as the case requires, including) a dwelling throughout P's period of ownership of the interest in land.

SCHEDULE 13

1

TCGA 1992 is amended as follows.

2

In section 169H(7) (introduction), for “Section 169S contains” substitute “ Sections 169S and 169SA contain ”.

3

In section 169S (interpretation of Chapter), subsection (4A) is treated as never having had effect, and is omitted accordingly.

4

After section 169S insert—

(169SA) Schedule 7ZA gives the meaning in this Chapter of “trading company” and “trading group”.

5

After Schedule 7 insert—

SCHEDULE 7ZA (1) (1) This paragraph gives the meaning of “trading company” and “trading group” where used in the following provisions of Chapter 3 of Part 5 (entrepreneurs' relief)— (a) in section 169I (material disposal of business assets)— (i) paragraphs (a) and (b) of subsection (6) (which apply for the purposes of conditions A and B in that section), and (ii) sub-paragraphs (i) and (ii) of subsection (7A)(c) (which apply for the purposes of conditions C and D in that section), and (b) section 169J(4) (disposal of trust business assets). (2) “Trading company” and “trading group” have the same meaning as in section 165 (see section 165A), but as modified by Part 2 of this Schedule. (3) “Trading activities” (see section 165A(4) and (9)) is to be read in accordance with Part 3 of this Schedule. (2) In provisions of Chapter 3 of Part 5 not mentioned in paragraph 1(1), “trading company” and “trading group” have the same meaning as in section 165 (see section 165A), except that subsections (7) and (12) of section 165A are to be disregarded. (3) In relation to a disposal of assets consisting of (or of interests in) shares in or securities of a company (“company A”), activities of a joint venture company are to be attributed to a company under subsections (7) and (12) of section 165A only if P— (a) passes the shareholding test in relation to the joint venture company (see paragraphs 5 to 8), and (b) passes the voting rights test in relation to the joint venture company (see paragraphs 9 to 12). (4) (1) For the purposes of this Part, a company is an “investing company” in relation to P and a joint venture company if it meets conditions 1 and 2. (2) Condition 1 is that— (a) the company is company A (see paragraph 3), or (b) P directly owns some portion of the ordinary share capital of the company. (3) Condition 2 is that the company owns some portion of the ordinary share capital of the joint venture company (whether it is owned directly, indirectly, or partly directly and partly indirectly). (4) In sub-paragraph (3) the reference to a company owning share capital indirectly is to be read in accordance with section 1155 of CTA 2010. (5) P passes the shareholding test in relation to a joint venture company if, throughout the relevant period, the sum of the percentages given by paragraphs (a) and (b) is at least 5%— (a) the percentage of the ordinary share capital of the joint venture company that is owned directly by P, and (b) P's indirect shareholding percentage (see paragraph 6). (6) P's “indirect shareholding percentage” is found by— (a) calculating the percentage of the ordinary share capital of the joint venture company that is owned indirectly by P through a particular investing company (see paragraph 7), and (b) where there are two or more investing companies, adding those percentages together. (7) The percentage of the ordinary share capital of a joint venture company that is owned indirectly by P through a particular investing company (“company IC”) at a particular time is given by— $$R × S × 100$where—R is the fraction of company IC's ordinary share capital that is owned by P at that time, andS is the fraction of the joint venture company's ordinary share capital that is owned by company IC at that time (whether it is owned directly, indirectly, or partly directly and partly indirectly) (see paragraph 8).$ (8) (1) The fraction of the joint venture company's ordinary share capital that is owned indirectly by company IC is calculated— (a) by applying sections 1156 and 1157 of CTA 2010, as read with section 1155 of that Act, and (b) on the assumptions specified in sub-paragraph (2). (2) The assumptions are— (a) where company IC directly owns more than 50% of the ordinary share capital of a company, company IC is taken to own the whole of the ordinary share capital of that company; (b) where a company other than company IC (“company B”) directly owns more than 50% of the ordinary share capital of another company (“company C”) which is a member of a group of companies of which company IC is a member, company B is taken to own the whole of the ordinary share capital of company C. (9) P passes the voting rights test in relation to a joint venture company if, throughout the relevant period, the sum of the percentages given by paragraphs (a) and (b) is at least 5%— (a) the percentage of the voting rights that P holds directly in the joint venture company, and (b) P's indirect voting rights percentage (see paragraph 10). (10) P's “indirect voting rights percentage” is found by— (a) calculating the percentage of the voting rights in the joint venture company that P holds indirectly through a particular investing company (see paragraph 11), and (b) where there are two or more investing companies, adding those percentages together. (11) The percentage of the voting rights in a joint venture company that P holds indirectly through a particular investing company (“company IC”) at a particular time is given by— $$T × U × 100$where—T is the fraction of the voting rights in company IC that is held by P at that time, andU is the fraction of the voting rights in the joint venture company that is held by company IC at that time (whether the voting rights are held directly, indirectly, or partly directly and partly indirectly) (see paragraph 12).$ (12) (1) The fraction of the voting rights in the joint venture company that is held indirectly by company IC is calculated— (a) by applying sections 1156 and 1157 of CTA 2010, as read with section 1155 of that Act, as if references in those sections to owning the ordinary share capital of a company were references to holding voting rights in a company, and (b) on the assumptions specified in sub-paragraph (2). (2) The assumptions are— (a) where company IC directly holds more than 50% of the voting rights in a company, company IC is taken to hold all the voting rights in that company; (b) where a company other than company IC (“company B”) directly holds more than 50% of the voting rights in another company (“company C”) which is a member of a group of companies of which company IC is a member, company B is taken to hold all the voting rights in company C. (13) (1) In relation to a disposal of assets consisting of (or of interests in) shares in or securities of a company (“company A”), activities carried on by a company as a member of a partnership are to be treated as not being trading activities of the company (see section 165A(4) and (9)) if P fails either or both of the following— (a) the profits and assets test in relation to the partnership (see paragraphs 15 to 20); (b) the voting rights test in relation to the partnership (see paragraphs 21 to 23). (2) In relation to such a disposal, activities carried on by a company as a member of a partnership are also to be treated as not being trading activities of the company if the company is not a member of the partnership throughout the relevant period. (14) (1) This paragraph applies for the purposes of this Part. (2) A company is a “direct interest company” in relation to P if— (a) it is company A (see paragraph 13(1)), or (b) P directly owns some portion of the ordinary share capital of the company. (3) A company is a “relevant corporate partner” in relation to P and a partnership if— (a) a direct interest company in relation to P (“company DIC”) owns some portion of the ordinary share capital of the company (whether it is owned directly, indirectly or partly directly and partly indirectly), (b) the company is a member of a group of companies of which company DIC is a member, and (c) the company is a member of the partnership. (4) In sub-paragraph (3) the reference to a company owning share capital indirectly is to be read in accordance with section 1155 of CTA 2010. (15) P passes the profits and assets test in relation to a partnership if, throughout the relevant period, the sum of the percentages given by paragraphs (a), (b) and (c) is at least 5%— (a) the percentage which is P's direct interest in the assets of the partnership, (b) the percentage which is P's share of the partnership through direct interest companies that are members of the partnership (see paragraph 16), and (c) the percentage which is P's share of the partnership through direct interest companies and relevant corporate partners in the partnership (see paragraph 18). (16) P's “share of the partnership through direct interest companies that are members of the partnership” is found by— (a) calculating the percentage which is P's indirect share of the partnership through each direct interest company that is a member of the partnership (see paragraph 17), and (b) where there are two or more direct interest companies that are members of the partnership, adding those percentages together. (17) The percentage which is P's indirect share of the partnership through a particular direct interest company that is a member of the partnership (“company DICP”) at a particular time is given by— $$R × V × 100$where—R is the fraction of company DICP's ordinary share capital that is owned by P at that time, andV is the lower of—the fraction of the profits of the partnership in which company DICP has an interest at that time, andthe fraction of the assets of the partnership in which company DICP has an interest at that time.$ (18) P's “share of the partnership through direct interest companies and relevant corporate partners in the partnership” is found by— (a) calculating the percentage which is P's indirect share of the partnership through each direct interest company and each relevant corporate partner in the partnership (see paragraph 19), and (b) where there are two or more direct interest companies or two or more relevant corporate partners, or both, adding those percentages together. (19) The percentage which is P's indirect share of the partnership through a particular direct interest company (“company DIC”) and a particular relevant corporate partner in the partnership (“company CP”) at a particular time is given by— $$R × V × W × 100$where—R is the fraction of company DIC's ordinary share capital that is owned by P at that time,V is the lower of—the fraction of the profits of the partnership in which company CP has an interest at that time, andthe fraction of the assets of the partnership in which company CP has an interest at that time, andW is the fraction of company CP's ordinary share capital that is owned by company DIC at that time (whether it is owned directly, indirectly, or partly directly and partly indirectly) (see paragraph 20).$ (20) (1) The fraction of a company's ordinary share capital that is owned indirectly by company DIC is calculated— (a) by applying sections 1156 and 1157 of CTA 2010, as read with section 1155 of that Act, and (b) on the assumptions specified in sub-paragraph (2). (2) The assumptions are— (a) where company DIC directly owns more than 50% of the ordinary share capital of a company, company DIC is taken to own the whole of the ordinary share capital of that company; (b) where a company other than company DIC (“company B”) directly owns more than 50% of the ordinary share capital of another company (“company C”) which is a member of a group of companies of which company DIC is a member, company B is taken to own the whole of the ordinary share capital of company C. (21) (1) P passes the voting rights test in relation to a partnership if, throughout the relevant period, the sum of P's direct voting rights percentage and P's indirect voting rights percentage is at least 5%. (2) P's “direct voting rights percentage” is found by— (a) taking the percentage of the voting rights that P holds directly in each direct interest company that is a member of the partnership, and (b) where P directly holds voting rights in two or more direct interest companies that are members of the partnership, adding those percentages together. (3) P's “indirect voting rights percentage” is found by— (a) calculating the percentage which is P's indirect holding of voting rights in each relevant corporate partner in the partnership through each direct interest company (see paragraph 22), and (b) where there are two or more relevant corporate partners or two or more direct interest companies, or both, adding those percentages together. (22) The percentage which is P's indirect holding of voting rights in a particular relevant corporate partner in the partnership (“company CP”) through a particular direct interest company (“company DIC”) at a particular time is given by— $$T × X × 100$where—T is the fraction of the voting rights in company DIC that is held by P at that time, andX is the fraction of the voting rights in company CP that is held by company DIC at that time (whether the voting rights are held directly, indirectly, or partly directly and partly indirectly) (see paragraph 23).$ (23) (1) The fraction of the voting rights in a company that is held indirectly by company DIC is calculated— (a) by applying sections 1156 and 1157 of CTA 2010, as read with section 1155 of that Act, as if references in those sections to owning the ordinary share capital of a company were references to holding voting rights in a company, and (b) on the assumptions specified in sub-paragraph (2). (2) The assumptions are— (a) where company DIC directly holds more than 50% of the voting rights in a company, company DIC is taken to hold all the voting rights in that company; (b) where a company other than company DIC (“company B”) directly holds more than 50% of the voting rights in another company (“company C”) which is a member of a group of companies of which company DIC is a member, company B is taken to hold all the voting rights in company C. (24) (1) In the case of a material disposal of business assets, “P” means the individual making the disposal. (2) In the case of a disposal of trust business assets— (a) “P” means any relevant beneficiary, but (b) in any reference to P passing or failing the tests mentioned in paragraphs 3 and 13(1), P is to be read as being a single body consisting of all the relevant beneficiaries (so that, for the purposes of determining if those tests are met, percentages are to be calculated in respect of each relevant beneficiary and then aggregated). (3) The following are “relevant beneficiaries”— (a) the qualifying beneficiary in relation to the disposal (see section 169J(3)), and (b) any other beneficiary who is, in relation to the disposal, a beneficiary mentioned in section 169O(1). (25) “The relevant period” means— (a) for the purposes of conditions A and C in section 169I, the period of 1 year ending with the date of the disposal, (b) for the purposes of conditions B and D in section 169I, the period of 1 year ending with the date mentioned in subsection (7)(a) or (b) or (7O)(a) or (b) of that section, and (c) for the purposes of section 169J(4), a period of 1 year ending not earlier than 3 years before the date of the disposal. (26) (1) Terms used in this Schedule which are defined in subsection (14) of section 165A have the same meaning as they have in that subsection. (2) References to a person holding voting rights include references to a person who has the ability to control the exercise of voting rights by another person. (3) For the purposes of Part 3 of this Schedule, the assets of— (a) a Scottish partnership, or (b) a partnership under the law of any other country or territory under which assets of a partnership are regarded as held by or on behalf of the partnership as such, are to be treated as held by the members of the partnership in the proportions in which they are entitled to share in the capital profits of the partnership. References in Part 3 to a person's interest in the assets of a partnership are to be construed accordingly.

6

• (1) The amendments made by this Schedule (except paragraph 3) have effect in relation to disposals made on or after 18 March 2015, but only for the purposes of determining what is a trading company or trading group at times on or after that date.

• (2) In conditions B and D in section 169I of TCGA 1992 (material disposal of business assets)—

• (a) a reference to a company ceasing to be a trading company does not include a case where, as a result of the coming into force of the amendments made by this Schedule, a company which was a trading company immediately before 18 March 2015 is treated as ceasing on that day to be a trading company, and

• (b) a reference to a company ceasing to be a member of a trading group does not include a case where, as a result of the coming into force of the amendments made by this Schedule, a company which was a member of a trading group immediately before 18 March 2015 is treated as ceasing on that day to be a member of a trading group.

• (3) Sub-paragraph (2) is without prejudice to the operation of section 43(4) of FA 2015.

SCHEDULE 14

1

• (1) In the heading to Part 5 of TGCA 1992, after “ASSETS” insert “, ENTREPRENEURS' RELIEF AND INVESTORS' RELIEF”.

• (2) In the heading to Chapter 1 of that Part, before “GENERAL PROVISIONS” insert “ TRANSFER OF BUSINESS ASSETS: ”

2

In Part 5 of TCGA 1992, after section 169V insert—

(169VA) (1) This Chapter provides for a relief, in the form of a lower rate of capital gains tax, in respect of disposals of (and disposals of interests in) certain ordinary shares in unlisted companies. (2) Section 169VB defines “qualifying shares”, “potentially qualifying shares” and “excluded shares”. (3) Section 169VC creates the relief, and relief under that section is to be known as “investors' relief”. (4) Section 169VD makes provision about disposals from holdings consisting partly of qualifying shares. (5) Sections 169VE to 169VG contain rules for cases where there have been previous disposals from a holding, to determine which shares remain in the holding. (6) Sections 169VH and 169VI make provision about disposals by trustees of a settlement. (7) Section 169VJ makes provision about disposals of interests in shares. (8) Sections 169VK and 169VL provide for a cap on the amount of investors' relief that can be claimed. (9) Section 169VM makes provision about claims for investors' relief. (10) Sections 169VN to 169VT make provision about how investors' relief applies following a company's reorganisation of its share capital, an exchange of shares or securities or a scheme of reconstruction. (11) Sections 169VU to 169VY contain definitions for the purposes of this Chapter. (169VB) (1) Where there is a disposal of all or part of (or of an interest in) a holding of shares in a company, this section applies to determine whether a share which is in the holding at the time immediately before the disposal (“the relevant time”) is for the purposes of this Chapter— (a) a qualifying share, (b) a potentially qualifying share, or (c) an excluded share. (2) The share is a “qualifying share” at the relevant time if— (a) the share was subscribed for, within the meaning given by section 169VU, by the person making the disposal (“the investor”), (b) the investor has held the share continuously for the period beginning with the issue of the share and ending with the relevant time (“the share-holding period”), (c) the share was issued on or after 17 March 2016, (d) at the time the share was issued, none of the shares or securities of the company that issued it were listed on a recognised stock exchange, (e) the share was an ordinary share when issued and is an ordinary share at the relevant time, (f) the company that issued the share— (i) was a trading company or the holding company of a trading group (as defined by section 169VV) when the share was issued, and (ii) has been so throughout the share-holding period, (g) at no time in the share-holding period was the investor or a person connected with the investor a relevant employee in respect of that company (within the meaning given by section 169VW), and (h) the period beginning with the date the share was issued and ending with the date of the disposal is at least 3 years. (3) The share is a “potentially qualifying share” at the relevant time if— (a) the conditions in subsection (2)(a) to (g) are met, but (b) the period beginning with the date the share was issued and ending with the date of the disposal is less than 3 years. (4) The share is an “excluded share” at the relevant time if it is, at that time— (a) not a qualifying share, and (b) not a potentially qualifying share. (5) This section is subject to Schedule 7ZB (disqualification of share where value received by investor). (6) In relation to a share issued on or after 17 March 2016 but before 6 April 2016, any reference in subsection (2)(h) or (3) to “3 years” is to be read as a reference to the minimum period. (7) In subsection (6) “the minimum period” means the period of 3 years extended by a period equal in length to the period beginning with the date the share was issued and ending with 5 April 2016. (169VC) (1) This section applies where— (a) a qualifying person disposes of a holding, or part of a holding, of shares in a company, and (b) immediately before that disposal some or all of the shares in the holding are qualifying shares. (2) If— (a) a chargeable gain accrues to the qualifying person on the disposal, and (b) a claim for relief under this section is made, the rate of capital gains tax in respect of the relevant gain is 10 per cent. (3) In subsection (2) “the relevant gain” means— (a) where immediately before the disposal all the shares in the holding are qualifying shares, the chargeable gain on the disposal; (b) where at that time only some of the shares in the holding are qualifying shares, the appropriate part of that chargeable gain (defined by section 169VD). (4) In this section— (a) subsection (1) is subject to section 169VH (disposals by trustees of a settlement: further conditions for relief), and (b) subsection (2) is subject to— - section 169VI (reduction of relief for certain disposals by trustees of a settlement), and - sections 169VK and 169VL (cap on investors' relief). (5) A reference in subsection (3) to the chargeable gain on the disposal, or to the appropriate part of that gain, is a reference to that chargeable gain, or (as the case may be) that part, after any deduction of allowable losses which is made in accordance with this Act from that chargeable gain or from that part. (6) For the application of this section to disposals of interests in shares, see section 169VJ. (7) In this Chapter a “qualifying person” means— (a) an individual, or (b) the trustees of a settlement. (169VD) (1) This section applies where— (a) a disposal (“the disposal concerned”) is made as mentioned in section 169VC(1), and (b) at the time immediately before the disposal, only some of the shares in the holding are qualifying shares. (2) Where this section applies, for the purposes of section 169VC(3) “the appropriate part” of the chargeable gain on the disposal is so much of that chargeable gain as is found by multiplying it by the appropriate fraction. (3) The appropriate fraction is— $$Q T$where—Q is the number of qualifying shares found under subsection (4), andT is the total number of shares disposed of in the disposal concerned.$ (4) The number of qualifying shares found under this subsection is— (a) all the qualifying shares in the holding at the time immediately before the disposal concerned, or (b) if less, such number of those qualifying shares as equals the number of shares disposed of in that disposal. (169VE) (1) This section applies where— (a) a particular disposal is made as mentioned in section 169VC(1)(a) (“the current disposal”), (b) there have been one or more previous disposals of shares from the holding mentioned in section 169VC(1) before the current disposal, and (c) it is necessary to determine for the purposes of this Chapter which shares are to be treated as in the holding immediately before the current disposal (and, accordingly, which shares are to be treated as having been disposed of in those previous disposals). (2) In the case of a previous disposal as regards which investors' relief has been claimed or is being claimed, the shares to be treated as disposed of in that previous disposal are to be determined in accordance with the rules in section 169VF. (3) In the case of a previous disposal not falling within subsection (2), the shares to be treated as disposed of in that previous disposal are to be determined in accordance with the rules in section 169VG. (169VF) (1) The rules referred to in section 169VE(2) are as follows; and in this section “the disposal concerned” means the previous disposal mentioned in section 169VE(2). (2) There are to be treated as having been disposed of in the disposal concerned— (a) all the qualifying shares in the holding at the time immediately before that disposal (“the material time”), or (b) if less, such number of those qualifying shares as equals the number of shares disposed of in that disposal. (3) If— (a) the number of qualifying shares in the holding at the material time was less than the total number of shares disposed of, and (b) excluded shares were in the holding at the material time, the available excluded shares are also to be treated as having been disposed of. (4) “The available excluded shares” means— (a) all the excluded shares in the holding at the material time, or (b) if less, such number of those excluded shares as is equal to the difference between— (i) the total number of shares disposed of, and (ii) the number of qualifying shares in the holding at the material time. (5) If the number of shares treated under subsections (2) to (4) as disposed of in the disposal concerned is less than the total number of shares disposed of, such number of the potentially qualifying shares in the holding at the material time as is equal to the difference are also to be treated as having been disposed of. (6) Where the number of potentially qualifying shares in the holding at the material time exceeds the difference mentioned in subsection (5), under that subsection potentially qualifying shares acquired later are to be treated as disposed of in preference to ones acquired earlier. (7) In this section “disposed of” (without more) means disposed of in the disposal concerned. (169VG) (1) The rules referred to in section 169VE(3) are as follows; and in this section “the disposal concerned” means the previous disposal mentioned in section 169VE(3). (2) If any excluded shares were in the holding at the time immediately before the disposal concerned (“the material time”), the maximum number of excluded shares are to be treated as having been disposed of in the disposal concerned. (3) “The maximum number of excluded shares” means— (a) all the excluded shares in the holding at the material time, or (b) if less, such number of those excluded shares as is equal to the number of shares disposed of. (4) If— (a) there were no excluded shares in the holding at the material time, or the number of such shares was less than the total number of shares disposed of, and (b) potentially qualifying shares were in the holding at the material time, the available potentially qualifying shares are to be treated as having been disposed of. (5) “The available potentially qualifying shares” means— (a) all the potentially qualifying shares in the holding at the material time, or (b) if less, such number of those potentially qualifying shares as is equal to the difference between— (i) the total number of shares disposed of, and (ii) the number of excluded shares in the holding at the material time. (6) Where the number of potentially qualifying shares in the holding at the material time exceeds the difference mentioned in subsection (5), potentially qualifying shares acquired later are to be treated as disposed of in preference to ones acquired earlier. (7) If the number of shares treated under subsections (2) to (5) as disposed of in the disposal concerned is less than the total number of shares disposed of, such number of the qualifying shares in the holding at the material time as is equal to the difference are to be treated as having been disposed of. (8) In this section “disposed of” (without more) means disposed of in the disposal concerned. (169VH) (1) Where a disposal falling within section 169VC(1)(a) and (b) is made by the trustees of a settlement, section 169VC does not apply to the disposal unless there is at least one individual who is an eligible beneficiary in respect of the disposal. (2) For the purposes of this section, an individual is an “eligible beneficiary” in respect of the disposal if— (a) at the time immediately before the disposal, the individual has under the settlement an interest in possession in settled property that includes or consists of the holding of shares mentioned in section 169VC(1), (b) the individual has had such an interest in possession under the settlement throughout the period of 3 years ending with the date of the disposal, (c) at no time in that period has the individual been a relevant employee in respect of the company that issued the shares (within the meaning given by section 169VW), and (d) the individual has (by the time of the claim under section 169VC in respect of the disposal) elected to be treated as an eligible beneficiary in respect of the disposal. (3) For the purposes of subsection (2)(d), an individual elects to be treated as an eligible beneficiary in respect of a disposal if the individual tells the trustees (by whatever means) that he or she wishes to be so treated; and an election under subsection (2)(d) may be withdrawn by the individual at any time until the claim is made. (4) In this section “interest in possession” does not include an interest in possession for a fixed term. (5) In relation to a disposal made by the trustees of a settlement, any reference in section 169VB(2)(g) to the investor is to be read as a reference to any trustee of the settlement. (169VI) (1) Subsection (2) applies where— (a) a disposal falling within section 169VC(1)(a) and (b) is made by the trustees of a settlement, (b) section 169VC applies to the disposal by reason of there being at least one individual who is an eligible beneficiary in respect of the disposal (see section 169VH), and (c) at the time immediately before the disposal, there are two or more persons each of whom has under the settlement an interest in possession in the settled property. (2) In such a case the reference in section 169VC(2) to the relevant gain is to be read as a reference— (a) to the eligible beneficiary's share of the relevant gain (see subsections (3) to (6)), or (b) if there is more than one individual who is an eligible beneficiary in respect of the disposal, to so much of the relevant gain as is equal to the aggregate of the eligible beneficiaries' shares of that gain. (3) In this section— - “eligible beneficiary” has the meaning given by section 169VH(2); - “relevant gain” has the meaning given by section 169VC(3); - “the settled property” means settled property that includes or consists of the holding of shares mentioned in section 169VC(1). (4) Subsection (5) applies to determine for the purposes of this Chapter, in relation to any individual who is an eligible beneficiary in respect of a disposal within section 169VC(1) made by the trustees of a settlement, that individual's share of the relevant gain. (5) That individual's share of the relevant gain on the disposal is so much of the relevant gain on the disposal as bears to the whole of that gain the same proportion as X bears to Y, where— - X is the interest in possession (other than for a fixed term) which, at the time immediately before the disposal, that individual has under the settlement in the income from the holding of shares mentioned in section 169VC(1), and - Y is all the interests in that income that persons (including that individual) with interests in possession in that holding have under the settlement at that time. (169VJ) (1) In section 169VC(1)(a), the reference to the case where a qualifying person disposes of a holding, or part of a holding, of shares in a company includes the case where a qualifying person disposes of an interest in a relevant holding. (2) In this section a “relevant holding” means either— (a) a number of shares in a company which are of the same class and were acquired in the same capacity jointly by the same two or more persons including the qualifying person, or (b) a number of shares in a company which are of the same class and were acquired in the same capacity by the qualifying person solely. (3) In this section— (a) “an interest” in a relevant holding means any interests of the qualifying person, in any of the shares in the relevant holding, which are by virtue of section 104 to be regarded as a single asset, and (b) references to an interest include part of an interest. (4) Where section 169VC(1) applies by reason of this section, section 169VD(3) and (4) have effect as if any reference to the number of shares disposed of were a reference to the number of shares an interest in which is disposed of. (5) In relation to a disposal by the trustees of a settlement of an interest in a relevant holding falling within subsection (2)(a), sections 169VH(2) and 169VI(3) and (5) have effect as if any reference to the holding of shares mentioned in section 169VC(1) were to the interest disposed of. (6) In accordance with subsection (1)— (a) in sections 169VN(1)(d), 169VP(1)(d) and 169VS(1)(d) (reorganisations), any reference to a disposal of all or part of a holding includes a disposal by the qualifying person of an interest in the holding, and (b) the reference in section 169VT(2) to a disposal of the original shares is to be read, in relation to a case where the original shares fall within subsection (2)(a) above, as a reference to a disposal of the qualifying person's interest in those shares. (169VK) (1) This section applies if, on a disposal within section 169VC(1) made by an individual (“the individual concerned”), the aggregate of— (a) the amount of the relevant gain on the disposal (“the gain in question”), (b) the total amount of any gains that, in relation to earlier disposals by the individual concerned, were charged at the rate in section 169VC(2), and (c) the total amount of any reckonable trust gains that, on any previous trust disposals in respect of which the individual concerned was an eligible beneficiary, were charged at the rate in section 169VC(2), exceeds £10 million. (2) The rate in section 169VC(2) applies only to so much (if any) of the gain in question as, when added to the aggregate of the total amounts mentioned in subsection (1)(b) and (c), does not exceed £10 million. (3) Section 4 (rates of capital gains tax) applies to so much of the gain in question as is not subject to the rate in section 169VC(2). (4) In this section— - “eligible beneficiary”, in relation to a disposal, is to be read in accordance with section 169VH(2); - “reckonable trust gain”, in relation to a trust disposal in respect of which the individual concerned was an eligible beneficiary, means— 1. if section 169VI(1)(c) applied in relation to the disposal, that individual's share of the relevant gain on that disposal, within the meaning given by section 169VI(4) and (5); 2. otherwise, the relevant gain on that disposal; - “the relevant gain”, in relation to a disposal, has the meaning given by section 169VC(3); - “trust disposal” means a disposal by the trustees of a settlement. (169VL) (1) This section applies where— (a) a disposal (“the disposal in question”) is made by the trustees of a settlement, (b) that disposal is within section 169VC(1), and (c) there is an excess amount in relation to an individual who is an eligible beneficiary in respect of the disposal in question (“the individual concerned”). (2) For the purposes of this section there is an “excess amount” in relation to the individual concerned if the aggregate of— (a) the amount of the current gain, (b) the total amount of any gains that, in relation to earlier disposals made by the individual concerned, were charged at the rate in section 169VC(2), and (c) the total amount of any reckonable trust gains that, on any previous trust disposals in respect of which the individual concerned was an eligible beneficiary, were charged at the rate in section 169VC(2), exceeds £10 million. (3) The rate in section 169VC(2) applies to the current gain only to the extent (if any) that the current gain when added to the aggregate of the total amounts mentioned in subsection (2)(b) and (c) does not exceed £10 million. (4) Section 4 (rates of capital gains tax) applies to so much of the current gain as is not subject to the rate in section 169VC(2). (5) In this section— - “the current gain” means the reckonable trust gain on the disposal in question; - “eligible beneficiary”, in relation to a disposal, is to be read in accordance with section 169VH(2); - “reckonable trust gain”, in relation to any trust disposal in respect of which the individual concerned is an eligible beneficiary, means— 1. if section 169VI(1)(c) applies in relation to the disposal, that individual's share of the relevant gain on that disposal, within the meaning given by section 169VI(4) and (5); 2. otherwise, the relevant gain on that disposal; - “the relevant gain”, in relation to a disposal, has the meaning given by section 169VC(3); - “trust disposal” means a disposal by the trustees of a settlement. (169VM) (1) Any claim for investors' relief must be made— (a) in the case of a disposal by an individual, by that individual; (b) in the case of a disposal by the trustees of a settlement, jointly by— (i) the trustees, and (ii) the eligible beneficiary in respect of the disposal, within the meaning given by section 169VH(2) (or, if more than one, all those eligible beneficiaries). (2) Any claim for investors' relief in respect of a disposal must be made on or before the first anniversary of the 31 January following the tax year in which the disposal is made. (169VN) (1) This section applies where— (a) there is a reorganisation within the meaning of section 126, (b) immediately before the reorganisation, a qualifying person holds ordinary shares which, in relation to that reorganisation, are original shares within the meaning of section 126, (c) on the reorganisation that person does not give or become liable to give any consideration for, or for any part of, a new holding, and (d) at a time after the reorganisation, there is a disposal of all or part of a new holding. (2) In this section a “new holding” means— (a) the holding that immediately after the reorganisation is (in relation to the original shares) the new holding within the meaning of section 126, or (b) where the new holding within the meaning of section 126 consists of two or more actual holdings, any of those actual holdings. (3) Subsections (4) and (5) apply for the purposes of determining (for any purpose of this Chapter) the status of shares that immediately before the disposal mentioned in subsection (1)(d) are in the new holding mentioned there (“the new holding concerned”). (4) Where a number of the original shares were— (a) subscribed for by the qualifying person, (b) issued on a particular date (“the relevant issue date”), and (c) held continuously by that person for a particular period ending immediately before the reorganisation (“the period concerned”), the following assumption is to be made. (5) That assumption is that an appropriate number of the new shares were— (a) subscribed for by the qualifying person, (b) issued on the relevant issue date, and (c) had by the time immediately after the reorganisation already been held continuously by that person for the period concerned. (6) In subsections (4) and (5)— - “the appropriate number” has the meaning given by section 169VO; - “the original shares” means the shares held by the qualifying person immediately before the reorganisation that were original shares in relation to the reorganisation; - “the new shares” means the shares that immediately after the reorganisation were in the new holding concerned (including such, if any, of the original shares as remained after the reorganisation and were in that holding). (7) In this section a reference to the “status” of a share is to whether it is qualifying, potentially qualifying or excluded. (8) Section 169VE applies to determine, for the purposes of this Chapter, which shares are included in a holding immediately before a reorganisation as it applies for the purposes of determining which shares are included in a holding immediately before a particular disposal. (9) References in this section to consideration are to be read in accordance with section 128(2). (169VO) (1) The “appropriate number” for the purposes of section 169VN(5) is the number found by multiplying the number of shares that are in the new holding concerned immediately after the reorganisation by the fraction— $$A B$where—A is the number of the original shares that were—subscribed for by the qualifying person,issued on the relevant issue date, andcontinuously held by that person for the period concerned, andB is the total number of the original shares.$ (2) In this section— - “the new holding concerned” has the meaning given by section 169VN(3); - “the original shares” has the meaning given by section 169VN(6); - “the relevant issue date” has the meaning given by section 169VN(4); - “the period concerned” has the meaning given by section 169VN(4). (169VP) (1) This section applies where— (a) there is a reorganisation within the meaning of section 126, (b) immediately before the reorganisation, a qualifying person holds ordinary shares which, in relation to that reorganisation, are original shares within the meaning of section 126, (c) on the reorganisation that person gives or becomes liable to give consideration for shares ( “ shares issued for consideration ”) which— (i) are issued to that person on the reorganisation, and (ii) immediately after the reorganisation are in a new holding, and (d) at a time after the reorganisation, there is a disposal of all or part of that new holding. (2) In this section a “new holding” means— (a) the holding that immediately after the reorganisation is (in relation to the original shares) the new holding within the meaning of section 126, or (b) where the new holding within the meaning of section 126 consists of two or more actual holdings, any of those actual holdings. (3) In determining, for any purpose of this Chapter, the status of shares that immediately before the disposal mentioned in subsection (1)(d) are in the new holding mentioned there— (a) the date of issue of the shares issued for consideration is to be taken to be their actual date of issue (rather than the date of issue of any of the original shares), and (b) in relation to any part of the new holding for which consideration was not given, sections 169VN(3) to (6) and 169VO apply but as if any reference to the new holding concerned were to that part of the new holding. (4) Section 169VN(3) to (6) and 169VO also apply in relation to any other holding which is a new holding in relation to the reorganisation and as respects which the person did not, on the reorganisation, give or become liable to give any consideration. (5) In this section a reference to the “status” of a share is to whether it is qualifying, potentially qualifying or excluded. (6) References in this section to consideration are to be read in accordance with section 128(2). (169VQ) (1) This section applies where section 135 applies in relation to an issue of shares in a company (“company B”) in exchange for shares in another company (“company A”). (2) For the purposes of sections 169VN to 169VP— (a) companies A and B are to be treated as if they were the same company, and (b) the exchange of shares is to be treated as if it were a reorganisation of that company's share capital. (169VR) (1) This section applies where— (a) section 136 applies in relation to an arrangement between a company (“company A”) and the persons holding shares, or any class of shares, in company A, under which another company (“company B”) issues shares to those persons, and (b) under section 136(2)(a) those persons are treated as exchanging shares in company A for the shares held by them in consequence of the arrangement. (2) For the purposes of sections 169VN to 169VP— (a) companies A and B are to be treated as if they were the same company, and (b) the exchange of shares is to be treated as if it were a reorganisation of that company's share capital. (3) In the following provisions of this Chapter, any reference to an exchange of shares includes anything that section 136(2)(a) treats as an exchange of shares. (169VS) (1) This section applies where— (a) an ordinary share (“the original share”) is subscribed for by a qualifying person (“the investor”); (b) the conditions in section 169VB(2)(c) and (d) are met in relation to the original share, (c) the share is involved in an exchange of shares treated under section 169VQ or 169VR as a reorganisation of share capital, and accordingly is included in the original shares within the meaning of section 169VN(6), and (d) subsequently there is a disposal of all or part of a holding of shares that in relation to that exchange is a new holding within the meaning given by section 169VN(2). (2) As respects a share which is in that holding immediately before that disposal, the conditions in section 169VB(2)(f) and (g) are to be regarded as met if (and only if)— (a) in relation to the period beginning with the issue of the original share and ending with the exchange of shares, those conditions were met by the original share, and (b) in relation to the period beginning with the exchange of shares and ending with the disposal, those conditions were met by a share representing the original share. (3) Accordingly— (a) in section 169VB(2)(f) and (g) as they apply to the original share, any reference to the share-holding period is to be read as to the period mentioned in subsection (2)(a) above, and (b) in section 169VB(2)(f) and (g) as they apply to a share representing the original share, any reference to the share-holding period is to be read as to the period mentioned in subsection (2)(b) above. (4) In subsection (1)(c) “the share” includes a share that, following a reorganisation or following an exchange of shares in relation to which section 169VQ or 169VR applies, represents the original share, and subsections (2) and (3) apply in such a case with the necessary modifications. (169VT) (1) This section applies where— (a) there is— (i) a reorganisation (within the meaning of section 126), or (ii) an exchange of shares which is treated as such a reorganisation by virtue of section 135 or 136, and (b) the original shares and the new holding 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 investors' relief may be made as if the reorganisation or exchange of shares involved a disposal of the original shares; and if such a claim is made section 127 and sections 169VN to 169VS do not apply. (3) Any election under this section must be made— (a) if the reorganisation or exchange of shares would (apart from section 127) involve a disposal by the trustees of a settlement, jointly by— (i) the trustees, and (ii) the person who if the disposal were made would be the eligible beneficiary in respect of the disposal, within the meaning given by section 169VH(2) (or, if more than one, all the persons who would be such eligible beneficiaries); (b) otherwise, by the individual concerned. (4) Any 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 or exchange of shares takes place. (5) In this section “the original shares” and “the new holding” have the meaning given by section 126. (169VU) (1) For the purposes of this Chapter (other than this subsection) a person “subscribes for” a share in a company if— (a) that person subscribes for the share, (b) the share is issued to that person by the company for consideration consisting wholly of cash, (c) the share is fully paid up at the time it is issued, (d) the share is subscribed for, and issued, for genuine commercial reasons and not as part of arrangements the main purpose, or one of the main purposes, of which is to secure a tax advantage to any person, and (e) the share is subscribed for, and issued, by way of a bargain at arm's length. (2) In subsection (1) “arrangements” and “tax advantage” have the same meaning as in section 16A. (3) If— (a) an individual (“A”) subscribed for, or is treated under this subsection as having subscribed for, any shares, (b) A transferred the shares to another individual (“B”) during their lives, and (c) A was living together with B as B's spouse or civil partner at the time of the transfer, B is to be treated for the purposes of this Chapter as having subscribed for the shares. (4) Accordingly, for the purposes of this Chapter any period for which A held the shares continuously is to be added to, and treated as part of, the period for which B held the shares continuously. (5) In this Chapter, apart from subsections (3) and (4), references to a person's having subscribed for a share include the person's having subscribed for the share jointly with any other person (and references to a person's holding a share or to a share being issued to a person are to be read accordingly). (169VV) (1) In this Chapter “trading company” and “the holding company of a trading group” have the same meaning as in section 165 (see section 165A). (2) For the purposes of this Chapter a company is not to be regarded as ceasing to be a trading company, or the holding company of a trading group, merely because of anything done in consequence of— (a) the company, or any of its subsidiaries, being in administration or receivership, or (b) a resolution having been passed, or an order made, for the winding up of the company or any of its subsidiaries. (3) But subsection (2) applies only if— (a) the entry into administration or receivership, or the resolution or order for winding up, and (b) everything done as a result of the company concerned being in administration or receivership, or as a result of that resolution or order, is for genuine commercial reasons and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax. (169VW) (1) This section applies to determine for the purposes of— (a) section 169VB(2)(g), or (b) section 169VH(2)(c), whether a particular person has at any time in the relevant period been a “relevant employee” in respect of the issuing company. (2) A person who has at any time in the relevant period been an officer or employee of— (a) the issuing company, or (b) a connected company, is to be regarded as having at that time been a relevant employee in respect of the issuing company, but this is subject to subsections (3) and (5). (3) If— (a) a person is an unremunerated director of the issuing company or a connected company at any time in the relevant period, and (b) the condition in subsection (4) is met, the fact that the person holds that directorship at that time does not make the person a relevant employee in respect of the issuing company at that time. (4) The condition referred to in subsection (3) is that at no time before the relevant period had the person mentioned in that subsection, or a person connected with that person, been— (a) connected with the issuing company, or (b) involved in carrying on (whether on the person's own account or as a partner, director or employee) the whole or any part of the trade, business or profession carried on by the issuing company or a company connected with that company. (5) If— (a) a person becomes an employee of the issuing company or a connected company at a time which is— (i) within the relevant period, but (ii) not within the first 180 days of that period, (b) at the beginning of the relevant period, there was no reasonable prospect that the person would become such an employee within the relevant period, and (c) the person is not at any time in the relevant period a director of the issuing company or a connected company, that employment of the person does not make the person a relevant employee in respect of the issuing company at any time in the relevant period. (6) For the purposes of subsection (5) there is a “reasonable prospect” of a thing if it is more likely than not. (7) In this section— - “director” is to be read in accordance with section 452 of CTA 2010, - “connected company” means a company which at any time in the relevant period is connected with the issuing company (and it does not matter for this purpose whether that time is a time when the person in question is an officer or employee of either company); - “the issuing company” means the company mentioned in (as the case may be) section 169VB(2)(g) or section 169VH(2)(c); - “the relevant period” means the period mentioned in (as the case may be) section 169VB(2)(g) or section 169VH(2)(c); - “unremunerated director” has the meaning given by section 169VX. (169VX) (1) For the purposes of section 169VW a person (“the person concerned”) is an “unremunerated director” of the issuing company or a connected company at a particular time in the relevant period if that person is a director of that company at that time and— (a) does not receive in the relevant period any disqualifying payment from the issuing company or a related person, and (b) is not entitled to receive any such payment in respect of that period or any part of it. (2) In this section “disqualifying payment” means any payment other than— (a) a payment or reimbursement of travelling or other expenses wholly, exclusively and necessarily incurred by the person concerned in the performance of his or her duties as a director, (b) any interest which represents no more than a reasonable commercial return on money lent to the issuing company or a related person, (c) any dividend or other distribution which does not exceed a normal return on the investment to which the dividend or distribution relates, (d) any payment for the supply of goods which does not exceed their market value, (e) any payment of rent for any property occupied by the issuing company or a related person which does not exceed a reasonable and commercial rent for the property, or (f) any necessary and reasonable remuneration which is— (i) paid for qualifying services that are provided to the issuing company or a related person in the course of a trade or profession carried on wholly or partly in the United Kingdom, and (ii) taken into account in calculating for tax purposes the profits of that trade or profession. (3) In this section a “related person” means— (a) a connected company of which the person concerned is a director, or (b) any person connected with the issuing company or with a company within paragraph (a). (4) In this section any reference to a payment to the person concerned includes a payment made to that person indirectly or to that person's order or for that person's benefit. (5) In this section “qualifying services” means services which are— (a) not secretarial or managerial services, and (b) not services of a kind provided by the person to whom they are provided. (6) In this section the following expressions have the same meaning as in section 169VW— - “connected company”; - “director”; - “issuing company”; - “relevant period”. (169VY) In this Chapter— - “employee” (except in the expression “relevant employee”, which is to be read in accordance with section 169VW) has the meaning given by section 4 of ITEPA 2003; - “employment” has the meaning given by section 4 of ITEPA 2003; - “exchange of shares” is to be read in accordance with section 169VR(3); - “excluded share” has the meaning given by section 169VB; - a “holding” of shares in a company means a holding of such shares which by virtue of section 104(1) is to be regarded as a single asset; - “investors' relief” has the meaning given by section 169VA(3); - “office” has the meaning given by section 5(3) of ITEPA 2003; - “ordinary shares”, in relation to a company, means any shares forming part of the company's ordinary share capital (within the meaning given by section 989 of ITA 2007); - “potentially qualifying share” has the meaning given by section 169VB; - “qualifying person” has the meaning given by section 169VC(7); - “qualifying share” has the meaning given by section 169VB; - “subscribe” is to be read in accordance with section 169VU; - “trading company” and “the holding company of a trading group” are to be read in accordance with section 169VV.

3

After Schedule 7ZA of TCGA 1992 (inserted by Schedule 13) insert—