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Finance Bill
Schedule 38 — Sale and repurchase of securities etc

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                    (b)                   the company is the interim holder and the second sum

exceeds the first sum,

                              the amount of the excess shall be treated for the purposes of the

Corporation Tax Acts as an exchange gain (within the meaning of

Chapter 2 of Part 4 of the Finance Act 1996 (loan relationships))

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arising to the company from the relationship.

              (5)             Where a company has a relationship to which this section applies

and—

                    (a)                   the company is the repurchaser and the second sum exceeds

the first sum; or

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                    (b)                   the company is the interim holder and the first sum exceeds

the second sum,

                              the amount of the excess shall be treated for the purposes of the

Corporation Tax Acts as an exchange loss (within the meaning of

Chapter 2 of Part 4 of the Finance Act 1996 (loan relationships))

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arising to the company from the relationship.

              (6)             Where an exchange gain or loss is treated by virtue of subsection (4)

or (5) above as arising to a company from a relationship to which this

section applies—

                    (a)                   Chapter 2 of Part 4 of the Finance Act 1996 shall have effect in

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relation to the exchange gain or loss as it would have effect if

it were an exchange gain or loss (as the case may be) arising

to the company from a loan relationship to which it is a party;

but

                    (b)                   the only debits and credits to be brought into account for the

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purposes of that Chapter by virtue of this section in respect of

the relationship to which this section applies are those

relating to the exchange gains and losses,

                              and, subject to paragraph (b) above, references in the Corporation

Tax Acts to a loan relationship accordingly include a reference to a

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relationship to which this section applies.

              (7)             Where a company has a relationship to which this section applies,

the repurchase price shall be treated for the purposes of the Tax Acts

(other than this section and sections 730A, 737A and 737C) and (in

cases where section 263A of the 1992 Act does not apply) for the

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purposes of the 1992 Act—

                    (a)                   in a case where an exchange gain arises to the company by

virtue of subsection (4)(a) above or an exchange loss arises to

the company by virtue of subsection (5)(b) above, as

increased by the amount by which the first sum exceeds the

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second sum, and

                    (b)                   in a case where an exchange gain arises to the company by

virtue of subsection (4)(b) above or an exchange loss arises to

the company by virtue of subsection (5)(a) above, as reduced

by the amount by which the second sum exceeds the first

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sum.

              (8)             Any question whether debits or credits brought into account in

accordance with subsection (6) above in relation to any company—

                    (a)                   are to be brought into account under section 82(2) of the

Finance Act 1996 (trading loan relationships); or

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Finance Bill
Schedule 38 — Sale and repurchase of securities etc

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                    (b)                   are to be treated as non-trading debits or credits,

                              shall be determined (subject to Schedule 11 to that Act (insurance

companies)) according to the extent (if any) to which the company is

a party to the repurchase in the course of activities forming an

integral part of a trade carried on by that company.

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              (9)             To the extent that debits or credits fall to be brought into account by

a company under section 82(2) of that Act in the case of a relationship

to which this section applies, the company shall be regarded for the

purposes of Chapter 2 of Part 4 of the Finance Act 1996 as being a

party to the relationship for the purposes of a trade carried on by the

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company.

              (10)            Except where regulations under section 737E otherwise provide, this

section does not apply if—

                    (a)                   the agreement or agreements under which provision is made

for the sale and repurchase are not such as would be entered

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into by persons dealing with each other at arm’s length; or

                    (b)                   all of the benefits and risks arising from fluctuations, before

the repurchase takes place, in the market value of the

securities sold accrue to, or fall on, the interim holder.

              (11)            Where—

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                    (a)                   the repurchase price is more than the sale price, so that by

virtue of section 730A(2)(a) a payment of interest is treated as

made by the repurchaser on a deemed loan from the interim

holder; but

                    (b)                   the payment of interest is treated as made to a person other

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than the interim holder,

                              references to the “interim holder” in subsections (1), (4) and (5) above

shall be read as references to the person to whom the payment of

interest is treated as made.

              (12)            Any reference in this section to the “relevant foreign currency

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equivalent” of an amount is, in the case of any company, a reference

to the amount’s equivalent expressed in the relevant foreign

currency (within the meaning of section 93 of the Finance Act 1993)

in relation to the company.

              (13)            Expressions used in this section and in section 730A have the same

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meaning in this section as in that section.”.

  13      (1)      Section 737E of the Taxes Act 1988 (power to modify sections 727A, 730A

and 737A to 737C) is amended as follows.

          (2)      In subsections (1) and (2), after “730A” insert “, 730BB”.

          (3)      In subsection (3), after “730A” insert “or 730BB”.

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          (4)      In consequence of the amendments made by this paragraph, the sidenote

becomes “Power to modify sections 727A, 730A, 730BB and 737A to 737C”.

  14       In section 100 of the Finance Act 1996 (c. 8) (exchange gains and losses on

debts etc not arising from the lending of money), after subsection (2) insert—

              “(2A)                Where—

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Finance Bill
Schedule 38 — Sale and repurchase of securities etc

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                    (a)                   a company has a relationship to which section 730BB of the

Taxes Act 1988 applies (exchange gains and losses on sale

and repurchase of securities),

                    (b)                   in the case of that relationship the circumstances mentioned

in section 730A(1)(b) of that Act are such as to give rise to a

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money debt, and

                    (c)                                         the company stands, or has stood, in the position of a creditor

or debtor as respects that money debt,

                              the company shall not be regarded for the purposes of the

Corporation Tax Acts as having, by reason of that money debt, a

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relationship to which this section applies, so far as relating to

exchange gains and losses.”.

Exceptions

  15       In section 727A(1) of the Taxes Act 1988 (accrued income scheme not to

apply to transfers of securities under repo agreements), insert at the end

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“except in a case where section 730A of the Taxes Act 1988 is prevented from

applying by subsection (8) of that section.”.

  16       In section 730A(8)(b) of the Taxes Act 1988 (treatment of price differential on

sale and repurchase: exclusion of cases where all benefits or risks are for

interim holder), for “benefits or risks” substitute “benefits and risks”.

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  17       In section 737C(11A) of the Taxes Act 1988 (purposes for which deemed

increase of repurchase price has effect), insert at the end “or where that

section is prevented from applying by subsection (8) of that section.”.

  18      (1)      Paragraph 15 of Schedule 9 to the Finance Act 1996 (c. 8) (repo transactions

not related transactions for purposes of loan relationship provisions) is

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amended as follows.

          (2)      In sub-paragraph (3), after “means” insert “(subject to sub-paragraph (3A))”.

          (3)      After that sub-paragraph insert—

                           “(3A)                  Arrangements are not repo or stock-lending arrangements if they

are excluded from section 730A of the Taxes Act 1988 by

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subsection (8) of that section.”.

Connected persons

  19       In paragraph 15(3)(b) of Schedule 9 to the Finance Act 1996 (repo

transactions not related transactions for purposes of loan relationship

provisions), omit “, or a person connected with him,”.

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Correction of section 730A(6B) of the Taxes Act 1988

  20       In section 730A(6B) of the Taxes Act 1988 (trading loan relationship debits

and credits falling to be brought into account under section 82(2))—

              (a)             for “section 82(2) above” substitute “section 82(2) of the Finance Act

1996”, and

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              (b)             for “the Finance Act 1996” substitute “that Act”.

 

 

Finance Bill
Schedule 39 — Relevant discounted securities: withdrawal of relief for costs and losses, etc

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Commencement

  21      (1)      Paragraph 1 has effect in relation to repurchase prices becoming due on or

after 9th April 2003.

          (2)      Paragraphs 2 to 19 have effect in relation to agreements to sell securities

made on or after 9th April 2003.

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          (3)      Paragraph 20 has effect in relation to accounting periods beginning on or

after 1st October 2002.

Schedule 39

Section 182

 

Relevant discounted securities: withdrawal of relief for costs and losses, etc

Withdrawal of relief for incidental costs

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  1       (1)      In Schedule 13 to the Finance Act 1996 (discounted securities: income tax

provisions), paragraph 1 (charge to tax on realised profit comprised in

discount) is amended as follows.

          (2)      In sub-paragraph (2) (meaning of “realising the profit” from the discount on

a relevant discounted security) at the end of paragraph (b) insert “(no

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account being taken of any costs incurred in connection with the transfer or

redemption of the security or its acquisition)”.

          (3)      In sub-paragraph (3)(a) (calculation of profit) omit “reduced by the amount

of any relevant costs”.

          (4)      Omit sub-paragraph (4) (meaning of “relevant costs”).

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Withdrawal of relief for losses

  2        Omit paragraph 2 of that Schedule (income tax relief for losses on

discounted securities).

Withdrawal of loss relief: exception for strips of government securities

  3        After paragraph 14 of that Schedule (gilt strips) insert—

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“Strips of government securities: losses

          14A                 (1)                  A person who sustains a loss in any year of assessment from the

discount on a strip shall be entitled to relief from income tax on an

amount of his income for that year equal to the amount of the loss.

                           (2)                  The relief is due only if the person makes a claim before the end of

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twelve months from the 31st January following that year.

                           (3)                  For the purposes of this paragraph a person sustains a loss from

the discount on a strip where—

                      (a)                     he transfers the strip or becomes entitled, as the person

holding it, to any payment on its redemption, and

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                      (b)                     the amount paid by him for the strip exceeds the amount

payable on the transfer or redemption (no account being

 

 

Finance Bill
Schedule 39 — Relevant discounted securities: withdrawal of relief for costs and losses, etc

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taken of any costs incurred in connection with the transfer

or redemption of the strip or its acquisition).

                                             The loss shall be taken to be equal to the amount of the excess, and

to be sustained in the year of assessment in which the transfer or

redemption takes place.

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                           (4)                  In sub-paragraph (3) above the reference to a transfer in paragraph

(a) includes a reference to a deemed transfer under paragraph

14(4) above (and paragraph (b) shall be read accordingly).

                           (5)                  This paragraph does not apply in the case of—

                      (a)                     any transfer of a strip for the time being held under a

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settlement the trustees of which are not resident in the

United Kingdom, or

                      (b)                     any redemption of a strip which is so held immediately

before its redemption.”.

Extension of provisions about strips to strips of foreign government securities

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  4        In the definition of “strip” in paragraph 15(1) of that Schedule, for “is a strip

of a gilt-edged security” substitute “is a strip of a security, or would be if that

section had effect with the substitution in subsection (1B) of “issued by or on

behalf of the government of any territory” for “issued under the National

Loans Act 1968””.

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Consequential amendments

  5       (1)      In paragraph 6 of that Schedule (trustees and personal representatives)—

              (a)             in sub-paragraph (3) for “paragraphs 1(1) and 2(1) above do not

apply” substitute “paragraph 1(1) above does not apply”;

              (b)             omit sub-paragraphs (4) to (6).

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          (2)      Omit the following provisions of that Schedule—

              (a)             paragraph 7 (treatment of losses where income exempt);

              (b)             paragraph 9A (securities issued to connected person etc at price in

excess of market value: transfer to connected person);

              (c)             paragraph 11 (accrued income scheme).

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          (3)      In paragraph 14 of that Schedule (gilt strips)—

              (a)             for the heading substitute “Strips of government securities”;

              (b)             in sub-paragraphs (2) and (3), omit the words “gilt-edged”;

              (c)             in sub-paragraph (4), omit the words after paragraph (c).

          (4)      In section 710(3) of the Taxes Act 1988 (categories of security not included in

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accrued income scheme) after paragraph (e) insert—

                    “(f)                      any relevant discounted security within the meaning of

Schedule 13 to the Finance Act 1996 (see paragraphs 3 and

14(1) of that Schedule).”.

Commencement and transitional provisions

40

  6       (1)      Subject to sub-paragraph (2)—

              (a)             the amendments made by paragraphs 1 and 5(3)(c) apply in relation

to costs incurred on or after 27th March 2003;

 

 

Finance Bill
Schedule 40 — Acquisition by company of its own shares

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              (b)             the amendments made by paragraphs 2, 3 and 5(1), (2) and (4) apply

in relation to any loss sustained from the discount on a relevant

discounted security transferred or redeemed on or after that date;

              (c)             the amendments made by paragraphs 4 and 5(3)(a) and (b) apply in

relation to any security acquired on or after that date.

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          (2)      The amendments mentioned in sub-paragraph (1)(a) and (b) do not apply in

relation to costs incurred, or losses sustained, on the transfer or redemption

of a relevant discounted security if—

              (a)             the person transferring or redeeming the security held it

continuously since a time before 27th March 2003, and

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              (b)             the security was listed on a recognised stock exchange at any time

before that date.

          (3)      No losses may be carried forward under paragraph 6(6) of Schedule 13 to the

Finance Act 1996 (c. 8) to any year of assessment after 2002-03.

Schedule 40

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Section 195

 

Acquisition by company of its own shares

Venture capital trusts

  1        In Schedule 15B to the Taxes Act 1988 (venture capital trusts: relief from

income tax), in paragraph 1 (entitlement to claim relief on investment), after

sub-paragraph (9) insert—

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                           “(10)                  An individual is not eligible for relief under this Part of this

Schedule by reference to any shares which are treated as issued to

him by virtue of section 195(8) of the Finance Act 2003 (tax

treatment of disposal by company of its own shares).

                           (11)                  Where a company which is a venture capital trust issues to any

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individual eligible shares to which sub-paragraph (10) above

applies, it must—

                      (a)                     at the time of the issue of those shares, give that individual

a notice stating that he is not eligible for relief under this

Part of this Schedule by reference to those shares, and

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                      (b)                     no later than three months after the issue of those shares,

give a copy of that notice to an officer of the Board.”.

Stamp duty and stamp duty reserve tax

  2        In section 66 of the Finance Act 1986 (c. 41) (stamp duty: company’s

purchase of own shares)—

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              (a)             in subsection (2)—

                    (i)                   for “The return which relates to the shares” substitute “Any

return which relates to any of the shares”,

                    (ii)                  after “169” insert “(1) or (1B)”, and

                    (iii)                 after “transferring the shares” insert “to which it relates”,

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Finance Bill
Schedule 40 — Acquisition by company of its own shares

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              (b)             after that subsection insert—

                    “(2A)                      Any return which relates to the cancellation of any of the

shares purchased and is delivered to the registrar of

companies under section 169A of the Companies Act 1985

shall be chargeable under this subsection with stamp duty of

5

£5.”, and

              (c)             in subsection (3), after “169” insert “(1) or (1B)”.

  3        In section 90 of that Act (exemptions from stamp duty reserve tax), after

subsection (7) insert—

              “(7A)                Section 87 above does not apply as regards an agreement to transfer

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any shares in a company which are held by the company (whether in

accordance with section 162A of the Companies Act 1985 (treasury

shares) or otherwise).”.

  4       (1)      Section 92 of that Act (stamp duty reserve tax: repayment or cancellation of

tax) is amended as follows.

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          (2)      After subsection (1B) insert—

              “(1C)                If, as regards an agreement to transfer shares in a company to that

company (“the own-shares agreement”)—

                    (a)                   tax is charged under section 87 above, and

                    (b)                   it is proved to the Board’s satisfaction that at a time in the

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period of six years beginning on the relevant day (as defined

in section 87(3)) the conditions mentioned in subsection (1D)

have been fulfilled in respect of those shares,

                              subsections (2) to (4A) apply.

              (1D)                The conditions referred to in subsection (1C) are—

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                    (a)                   that, in relation to the transfer made in pursuance of the own-

shares agreement, a return has been made in respect of each

of those shares in accordance with section 169(1) or (1B) of the

Companies Act 1985 (c. 6) (disclosure by company of

purchase of own shares), and

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                    (b)                   that any such return has been duly stamped in accordance

with section 66.”.

          (3)      In subsection (2), after “subsection (1)” insert “or, as the case may be, (1C)”.

  5        In Schedule 13 to the Finance Act 1999 (c. 16) (stamp duty: instruments

chargeable and rates of duty), in Part 1 (conveyance or transfer on sale), in

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paragraph 1 (stamp duty charge), after sub-paragraph (2) insert—

                           “(3)                  Sub-paragraph (1) is subject to sub-paragraphs (4) to (6).

                           (4)                  Where a company acquires any shares in itself by virtue of section

162 of the Companies Act 1985 (power of company to purchase

own shares) or otherwise, sub-paragraph (1) does not apply to any

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instrument by which the shares are transferred to the company.

                           (5)                  Where a company holds any shares in itself by virtue of section

162A of that Act (treasury shares) or otherwise, any instrument to

which sub-paragraph (6) applies is to be treated for the purposes

of this Schedule as a conveyance otherwise than on sale, and

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paragraph 16 applies accordingly.

 

 

 
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