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Finance Bill
Part 7 — Income tax, corporation tax and capital gains tax: general

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     (2)    This section applies in relation to the exercise of an option on or after 10th April

2003.

 159   Reporting limits and annual exempt amount

     (1)    The Taxation of Chargeable Gains Act 1992 (c. 12) is amended in accordance

with Schedule 28 to this Act.

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     (2)    In that Schedule—

                    Part 1 makes provision as to the cases in which a return of information

about chargeable gains is required,

                    Part 2 contains minor and consequential amendments of the provisions

relating to the annual exempt amount, and

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                    Part 3 provides for commencement.

 160   Taper relief: assets qualifying as business assets

     (1)    In Schedule A1 to the Taxation of Chargeable Gains Act 1992 (taper relief),

paragraph 5 (conditions for assets other than shares to qualify as business

assets) is amended as follows.

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     (2)    In sub-paragraph (1) (application of paragraph), after “in the case of the

disposal of any asset” insert “by an individual, the trustees of a settlement or

an individual’s personal representatives”.

     (3)    For sub-paragraphs (2) to (5) substitute—       

                       “(1A)                                The asset was a business asset at that time if at that time it was being

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used, wholly or partly, for the purposes of a trade carried on by—

                    (a)                   an individual or a partnership of which an individual was at

that time a member, or

                    (b)                   the trustees of a settlement or a partnership whose members

at that time included—

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                           (i)                          the                              trustees of a settlement, or

                           (ii)                         any one or more of the persons who at that time were

the trustees of a settlement (so far as acting in their

capacity as trustees), or

                    (c)                   the personal representatives of a deceased person or a

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partnership whose members at that time included—

                           (i)                          the personal representatives of a deceased person, or

                           (ii)                         any one or more of the persons who at that time were

the personal representatives of a deceased person (so

far as acting in their capacity as personal

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representatives).

                       (2)                                Where the disposal is made by an individual, the asset was a

business asset at that time if at that time it was being used, wholly or

partly, for the purposes of a trade carried on by—

                    (a)                   a company which at that time was a qualifying company by

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reference to that individual,

                    (b)                   a company which at that time was a member of a trading

group the holding company of which was at that time a

qualifying company by reference to that individual, or

                    (c)                   a partnership whose members at that time included a

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company within paragraph (a) or (b),

 

 

Finance Bill
Part 7 — Income tax, corporation tax and capital gains tax: general

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                                       or for the purposes of any office or employment held by that

individual with a person carrying on a trade.

                       (3)                Where the disposal is made by the trustees of a settlement, the asset

was a business asset at that time if at that time it was being used,

wholly or partly, for the purposes of a trade carried on by—

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                    (a)                   a company which at that time was a qualifying company by

reference to the trustees of the settlement or an eligible

beneficiary,

                    (b)                   a company which at that time was a member of a trading

group the holding company of which was at that time a

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qualifying company by reference to the trustees of the

settlement or an eligible beneficiary, or

                    (c)                   a partnership whose members at that time included a

company within paragraph (a) or (b),

                                       or for the purposes of any office or employment held by an eligible

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beneficiary with a person carrying on a trade.

                       (4)                Where the disposal is made by an individual’s personal

representatives, the asset was a business asset at that time if at that

time it was being used, wholly or partly, for the purposes of a trade

carried on by—

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                    (a)                   a company which at that time was a qualifying company by

reference to the deceased’s personal representatives,

                    (b)                   a company which at that time was a member of a trading

group the holding company of which was at that time a

qualifying company by reference to the deceased’s personal

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representatives, or

                    (c)                   a partnership whose members at that time included a

company within paragraph (a) or (b).

                       (5)                Where the disposal is made by an individual who acquired the asset

as legatee (as defined in section 64), the asset shall be taken to have

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been a business asset at that time if at that time it was—

                    (a)                   being held by the personal representatives of the deceased,

and

                    (b)                   being used, wholly or partly, for the purposes of a trade

carried on by—

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                           (i)                          a company which at that time was a qualifying

company by reference to the deceased’s personal

representatives,

                           (ii)                         a company which at that time was a member of a

trading group the holding company of which was at

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that time a qualifying company by reference to the

deceased’s personal representatives, or

                           (iii)                        a partnership whose members at that time included a

company within sub-paragraph (i) or (ii).”.

     (4)    The following amendments in Schedule A1 to the Taxation of Chargeable

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Gains Act 1992 (c. 12) are consequential on those above—

           (a)           in paragraphs 9(1)(a) and 19(1) for “paragraph 5(2) to (5)” substitute

“any provision of paragraph 5”;

           (b)           in paragraph 15(4)(a) for “paragraph 5(2)” substitute “paragraph 5(1)

and (2)”.

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Finance Bill
Part 7 — Income tax, corporation tax and capital gains tax: general

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     (5)    The amendments in this section apply to disposals on or after 6th April 2004

and as they so apply have effect in relation to periods of ownership on or after

that date.

 161   Earn-out rights to be treated as securities unless contrary election

     (1)    Section 138A of the Taxation of Chargeable Gains Act 1992 (use of earn-out

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rights for exchange of securities) is amended as follows.

     (2)    In subsection (2) (seller’s right to elect for earn-out right to be treated as

security of new company)—

           (a)           at the end of paragraph (a) insert “and”; and

           (b)           omit paragraph (c) (the seller’s right of election) and the word “and”

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immediately preceding it.

     (3)    After subsection (2) insert—

           “(2A)              Subsection (2) above does not have effect if the seller elects under this

section for the earn-out right not to be treated as a security of the new

company.”.

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     (4)    In subsection (4) (election for corresponding treatment where old right

extinguished in consideration of new right)—

           (a)           at the end of paragraph (c) insert “and”;

           (b)           omit paragraph (e) (right of election of person on whom the new right

is conferred) and the word “and” immediately preceding it; and

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           (c)           in the closing words, for “that person” substitute “the person on whom

the new right is conferred”.

     (5)    After subsection (4) insert—

           “(4A)              Subsection (4) above does not have effect if the person on whom the

new right is conferred elects under this section for it not to be treated as

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a security of the new company.”.

     (6)    The amendments made by this section have effect in relation to rights

conferred on or after 10th April 2003.

 162   Deferred unascertainable consideration: election for treatment of loss

     (1)    After section 279 of the Taxation of Chargeable Gains Act 1992 insert—

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       “279A             Deferred unascertainable consideration: election for treatment of loss

           (1)           Where—

                  (a)                 a person (“the taxpayer”) makes a disposal of a right to which

this section applies (see subsection (2) below),

                  (b)                 on that disposal an allowable loss (“the relevant loss”) would,

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apart from section 279C, accrue to him in any year (“the year of

the loss”), and

                  (c)                 the year of the loss is a year in which the taxpayer is within the

charge to capital gains tax (see section 279B(1)),

                         the taxpayer may make an election under this section for the relevant

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loss to be treated as accruing in an earlier year in accordance with

section 279C if condition 1 in subsection (3) below and condition 2 in

subsection (5) below are satisfied.

 

 

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Part 7 — Income tax, corporation tax and capital gains tax: general

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           (2)           This section applies to a right if each of the following conditions is

satisfied—

                  (a)                 the right was, in whole or in part, acquired by the taxpayer as

the whole or part of the consideration for a disposal (the

“original disposal”) by him of another asset (the “original

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asset”),

                  (b)                 the original disposal was made in a year (“the year of the

original disposal”) earlier than the year in which the disposal

mentioned in subsection (1)(a) above is made (“the year of the

right’s disposal”),

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                  (c)                 where the right was acquired by the taxpayer as the whole or

part of the consideration for two or more disposals (each of

which is accordingly an “original disposal”), the condition in

paragraph (b) above is satisfied with respect to each of those

disposals (the “original disposals”),

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                  (d)                 on the taxpayer’s acquisition of the right, there was no

corresponding disposal of it,

                  (e)                 the right is a right to unascertainable consideration (see section

279B(2) to (6)).

           (3)           Condition 1 for making an election in relation to the relevant loss is that

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a chargeable gain accrued to the taxpayer on any one or more of the

following events—

                  (a)                 the original disposal,

                  (b)                 an earlier disposal of the original asset by the taxpayer in the

year of the original disposal,

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                  (c)                 a later disposal of the original asset by the taxpayer in a year

earlier than the year of the right’s disposal,

                         or would have so accrued but for paragraph 2(2)(a) of Schedule 5B or

5C (postponement of original gain).

                         This subsection is subject to subsection (4) below.

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           (4)           If the right to which this section applies was acquired by the taxpayer

as the whole or part of the consideration for two or more original

disposals (including cases where there are two or more original assets

(the “original assets”))—

                  (a)                 any reference in subsection (3) above to the original disposal is

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a reference to any of the original disposals,

                  (b)                 any reference in that subsection to the original asset is a

reference to the asset which is the original asset in relation to

that original disposal, and

                  (c)                 any reference in that subsection to the year of the original

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disposal shall be construed accordingly.

           (5)           Condition 2 for making an election in relation to the relevant loss is that

there is a year (an “eligible year”)—

                  (a)                 which is earlier than the year of the loss but not earlier than the

year 1992-93,

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                  (b)                 in which a chargeable gain falling within subsection (3) above

or subsection (6) below accrued to the taxpayer, and

                  (c)                 for which, immediately before the election, there remains a

relevant amount on which capital gains tax is chargeable (see

subsection (7) below).

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Part 7 — Income tax, corporation tax and capital gains tax: general

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           (6)           A chargeable gain falling within this subsection accrues to the taxpayer

in a year if—

                  (a)                 in that year a chargeable gain (the “revived gain”) is treated as

accruing to the taxpayer in accordance with paragraphs 4 and 5

of Schedule 5B or 5C (chargeable gain accruing to person on

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chargeable event), and

                  (b)                 the gain which, in determining the amount of the revived gain

in accordance with those paragraphs, is the original gain

consists of or represents the whole or some part of a gain that

would have accrued as mentioned in subsection (3) above but

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for paragraph 2(2)(a) of Schedule 5B or 5C.

           (7)           For the purposes of subsection (5)(c) above, a year is one for which,

immediately before an election, there remains a relevant amount on

which capital gains tax is chargeable if, immediately before the making

of that election, there remains an amount in respect of which the

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taxpayer is chargeable to capital gains tax for the year—

                  (a)                 after taking account of any previous elections made by the

taxpayer under this section,

                  (b)                 after excluding any amounts that fall to be brought into account

for that year under section 2(4)(b) by virtue of section 2(5)(b),

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and

                  (c)                 on the assumption that no part of the relevant loss (or of any

other loss in respect of which an election under this section may

be, but has not been, made) falls to be deducted in consequence

of an election under this section from the chargeable gains

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accruing to the taxpayer in that year.

           (8)           In this section “year” means year of assessment.

           (9)           This section and sections 279B to 279D are to be construed as one.

       279B            Provisions supplementary to section 279A

           (1)           For the purposes of section 279A(1)(c) a person is within the charge to

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capital gains tax in any year if—

                  (a)                 he is chargeable to capital gains tax in respect of chargeable

gains accruing to him in that year, or

                  (b)                 on the assumption that there accrue to him in that year any

chargeable gains (excluding amounts in relation to which

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section 2(4)(a) applies), he would be so chargeable apart from—

                        (i)                        any deductions that fall to be made from the total

amount referred to in section 2(2), and

                        (ii)                       section 3 (annual exempt amount).

           (2)           Subsections (3) to (6) below have effect for the purposes of section

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279A(2)(e) (right to unascertainable consideration).

           (3)           A right is a right to unascertainable consideration if, and only if,—

                  (a)                 it is a right to consideration the amount or value of which is

unascertainable at the time when the right is conferred, and

                  (b)                 that amount or value is unascertainable at that time on account

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of its being referable, in whole or in part, to matters which are

uncertain at that time because they have not yet occurred.

                         This subsection is subject to subsections (4) to (6) below.

 

 

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Part 7 — Income tax, corporation tax and capital gains tax: general

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           (4)           The amount or value of any consideration is not to be regarded as being

unascertainable by reason only—

                  (a)                 that the right to receive the whole or any part of the

consideration is postponed or contingent, if the consideration

or, as the case may be, that part of it is, in accordance with

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section 48, brought into account in the computation of the gain

accruing to the taxpayer on the disposal of an asset, or

                  (b)                 in a case where the right to receive the whole or any part of the

consideration is postponed and is to be, or may be, to any extent

satisfied by the receipt of property of one description or

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property of some other description, that some person has a right

to select the property, or the description of property, that is to

be received.

           (5)           A right is not to be taken to be a right to unascertainable consideration

by reason only that either the amount or the value of the consideration

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has not been fixed, if—

                  (a)                 the amount will be fixed by reference to the value, and the value

is ascertainable, or

                  (b)                 the value will be fixed by reference to the amount, and the

amount is ascertainable.

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           (6)           A right which is by virtue of subsection (2) or (4) of section 138A (use of

earn-out rights for exchange of securities) assumed in accordance with

subsection (3)(a) of that section to be a security, within the definition in

section 132, is not to be regarded as a right to unascertainable

consideration.

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           (7)           For the purposes of section 279A, any question as to—

                  (a)                 whether a chargeable gain or a loss is one that accrues (or

would, apart from any particular provision, accrue) on a

particular disposal or a disposal of any particular description,

or

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                  (b)                 the time at which, or year in which, any particular disposal

takes place,

                         is to be determined without regard to section 10A(2) (chargeable gains

and losses accruing during temporary non-residence to be treated as

accruing in year of return).

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                         This subsection is subject to subsection (8) below.

           (8)           Subsection (7) above does not affect the determination of any

question—

                  (a)                 as to the year in which the chargeable gain or loss is, by virtue

of section 10A(2), to be treated as accruing (apart from section

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279C), or

                  (b)                 where (apart from section 279C) a loss is to be treated by virtue

of section 10A(2) as accruing in a particular year, whether the

loss is an allowable loss.

       279C Effect of election under section 279A

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           (1)           This section applies where an election is made under section 279A by

the taxpayer for the relevant loss to be treated as accruing in an earlier

year in accordance with this section.

 

 

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           (2)           Where this section applies, the relevant loss shall be treated for the

purposes of capital gains tax as if it were a loss accruing to the taxpayer

in the earliest year which is an eligible year (the “first eligible year”),

instead of in the year of the loss (but subject to, and in accordance with,

the following provisions of this section).

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           (3)           The amount of the relevant loss that falls to be deducted from

chargeable gains of the first eligible year in accordance with section

2(2)(a) is limited to the amount (the “first year limit”) found by taking

the following steps—

                                  Step 1: take the total amount of chargeable gains accruing to the

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taxpayer in the first eligible year,

                                  Step 2: exclude from that amount any amounts that fall to be

disregarded in accordance with section 2(4)(a) for that year,

                                  Step 3: deduct from the amount remaining any amounts in respect

of allowable losses (other than the relevant loss or any part of it)

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that fall to be deducted from that amount in accordance with

section 2(2) otherwise than by virtue of section 2(5)(aa)(i)

(taking account of any previous elections under section 279A).

                         The amount so found is the first year limit, unless the first eligible year

is a year in relation to which section 2(5)(aa) has effect, in which case the

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further steps in subsection (4) below must also be taken.

           (4)           Those further steps are—

                                  Step 4: add to the amount found by taking steps 1 to 3 in subsection

(3) above every amount which is treated by virtue of section 77

or 86 as an amount of chargeable gains accruing to the taxpayer

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for the first eligible year (the “attributed amounts”),

                                  Step 5: deduct from the resulting amount any amounts (other than

the relevant loss or any part of it) that fall to be deducted from

the attributed amounts in accordance with section 2(5)(aa)(i)

(taking account of any previous elections under section 279A).

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                         The amount so found is the first year limit in a case where section

2(5)(aa) applies in relation to the first eligible year.

           (5)           As respects any later year before the year of the loss, the relevant loss

(so far as not previously allowed as a deduction from chargeable gains

accruing in any previous year) falls to be deducted in accordance with

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section 2(2)(b) only if that later year is an eligible year.

           (6)           The amount of the relevant loss that falls to be deducted from

chargeable gains of that later eligible year in accordance with section

2(2)(b) is limited to the amount (the “later year limit”) in respect of

which the taxpayer would be chargeable to capital gains tax for that

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later year—

                  (a)                 on the assumption in subsection (7) below,

                  (b)                 taking account of any previous elections under section 279A,

and

                  (c)                 apart from the provisions specified in subsection (8) below.

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           (7)           The assumption is that no part of—

                  (a)                 the relevant loss, or

                  (b)                 any loss in respect of which an election under section 279A may

be, but has not been, made,

 

 

 
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