Income Tax Act 2007 (c. 3)

(The document as of February, 2008)

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(a)

in subsection (1)(a), in accordance with section 416(2) to (6),

(b)

in subsection (2)(a), in accordance with section 840,

"qualifying subsidiary" is to be read in accordance with section 191 of ITA 2007. "

125 After section 576D insert--

" 576E The qualifying subsidiaries requirement

(1) The qualifying subsidiaries requirement is that any subsidiary that the company has must be a qualifying subsidiary of the company.

(2) In this section "qualifying subsidiary" is to be read in accordance with section 191 of ITA 2007. "

126 After section 576E insert--

" 576F The property managing subsidiaries requirement

(1) The property managing subsidiaries requirement is that any property managing subsidiary that the company has must be a qualifying 90% subsidiary of the company.

(2) In this section--

"property managing subsidiary" has the meaning given by section 188(2) of ITA 2007,
"qualifying 90% subsidiary" has the meaning given by section 190 of that Act. "

127 After section 576F insert--

" 576G The gross assets requirement

(1) The gross assets requirement in the case of a single company is that the value of the company's gross assets--

(a) must not exceed £7 million immediately before the shares in respect of which the relief is claimed under this Chapter are issued, and

(b) must not exceed £8 million immediately afterwards.

(2) The gross assets requirement in the case of a parent company is that the value of the group assets--

(a) must not exceed £7 million immediately before the shares in respect of which the relief is claimed under this Chapter are issued, and

(b) must not exceed £8 million immediately afterwards.

(3) The value of the group assets means the aggregate of the values of the gross assets of each of the members of the group, disregarding any that consist in rights against, or shares in or securities of, another member of the group.

(4) In this section--

"group" means a parent company and its qualifying subsidiaries,
"parent company" means a company that has one or more qualifying subsidiaries,
"qualifying subsidiary" is to be read in accordance with section 191 of ITA 2007, and
"single company" means a company that does not have one or more qualifying subsidiaries. "

128 After section 576G insert--

" 576H The unquoted status requirement

(1) The unquoted status requirement is that, at the time ("the relevant time") at which the shares in respect of which the relief is claimed under this Chapter are issued--

(a) the company must be an unquoted company,

(b) there must be no arrangements in existence for the company to cease to be an unquoted company, and

(c) there must be no arrangements in existence for the company to become a subsidiary of another company ("the new company") by virtue of an exchange of shares, or shares and securities, if--

(i) section 576J applies in relation to the exchange, and

(ii) arrangements have been made with a view to the new company ceasing to be an unquoted company.

(2) The arrangements referred to in subsection (1)(b) and (c)(ii) do not include arrangements in consequence of which any shares, stocks, debentures or other securities of the company or the new company are at any subsequent time--

(a) listed on a stock exchange that is a recognised stock exchange by virtue of an order made under section 1005 of ITA 2007, or

(b) listed on an exchange, or dealt in by any means, designated by an order made for the purposes of section 184(3)(b) or (c) of that Act,

if the order was made after the relevant time.

(3) In this section--

"arrangements" includes any scheme, agreement or understanding, whether or not legally enforceable,
"debenture" has the meaning given by section 744 of the Companies Act 1985,
"unquoted company" has the meaning given by section 184(2) of ITA 2007. "

129 After section 576H insert--

" 576I Power to amend requirements by Treasury order

The Treasury may by order make such amendments of sections 576B to 576H as they consider appropriate. "

130 After section 576I insert--

" Qualifying trading companies: supplementary provisions

576J Relief after an exchange of shares for shares in another company

(1) This section and section 576K apply in relation to shares if--

(a) a company ("the new company") in which the only issued shares are subscriber shares acquires all the shares ("old shares") in another company ("the old company"),

(b) the consideration for the old shares consists wholly of the issue of shares ("new shares") in the new company,

(c) the consideration for the new shares of each description consists wholly of old shares of the corresponding description,

(d) new shares of each description are issued to the holders of old shares of the corresponding description in respect of and in proportion to their holdings, and

(e) by virtue of section 127 of the 1992 Act as applied by section 135(3) of that Act (company reconstructions etc), the exchange of shares is not to be treated as involving a disposal of the old shares or an acquisition of the new shares.

In this subsection references to shares, except the first and that in the expression "subscriber shares", include securities.

(2) For the purposes of this Chapter the exchange of shares is not regarded as involving any disposal of the old shares or any acquisition of the new shares.

(3) Nothing in section 576D (the control and independence requirement) applies in relation to such an exchange of shares, or shares and securities, as is mentioned in subsection (1), or arrangements with a view to such an exchange.

(4) For the purposes of this section old shares and new shares are of a corresponding description if, on the assumption that they were shares in the same company, they would be of the same class and carry the same rights.

(5) References in section 576K to "old shares", "new shares", "the old company" and "the new company" are to be read in accordance with this section. "

131 After section 576J insert--

" 576K Substitution of new shares for old shares

(1) Subsection (2) applies if, in the case of any new shares held by a company or by a nominee for a company, the old shares for which they were exchanged were shares that had been subscribed for by the company ("the investor").

(2) This Chapter has effect as if--

(a) the new shares had been subscribed for by the investor at the time when, and for the amount for which, the old shares were subscribed for by the investor,

(b) the new shares had been issued by the new company at the time when the old shares were issued to the investor by the old company, and

(c) any requirements of this Chapter which were met at any time before the exchange by the old company had been met at that time by the new company.

(3) Section 573(6) applies for the purposes of this section. "

132 After section 576K insert--

" Supplemental

576L Interpretation of Chapter

(1) In this Chapter (subject to subsections (2) to (5))--

"excluded company" means a company which--
(a)
has a trade which consists wholly or mainly of dealing in land, in commodities or futures or in shares, securities or other financial instruments,
(b)
has a trade which is not carried on on a commercial basis and in such a way that profits in the trade can reasonably be expected to be realised,
(c)
is a holding company of a group other than a trading group, or
(d)
is a building society or a registered industrial and provident society,
"group" (except in sections 576B and 576G) means a company which has one or more 51% subsidiaries together with that or those subsidiaries,
"holding company" means a company whose business consists wholly or mainly in the holding of shares or securities of companies which are its 51% subsidiaries,
"investment company" has the meaning given by section 130 except that it does not include the holding company of a trading group,
"registered industrial and provident society" means a society registered or treated as registered under the Industrial and Provident Societies Act 1965 or the Industrial and Provident Societies Act (Northern Ireland) Act 1969,
"shares"--
(a)
includes stock, but
(b)
does not include shares or stock not forming part of a company's ordinary share capital,
"trading company" means a company other than an excluded company which is--
(a)
a company whose business consists wholly or mainly of the carrying on of a trade or trades, or
(b)
the holding company of a trading group, and
"trading group" means a group the business of whose members, when taken together, consists wholly or mainly in the carrying on of a trade or trades.

(2) Except as provided by subsection (3), paragraph (b) of the definition of "shares" in subsection (1) does not apply in the definition of "excluded company" in subsection (1) or in section 576J(1) to (4).

(3) Paragraph (b) of that definition applies in relation to the first reference to "shares" in section 576J(1).

(4) The definition of "shares" in subsection (1) does not apply in sections 576B(5)(a), 576G(3) and 576H(1)(c) and (2).

(5) For the purposes of the definition of "trading group" in subsection (1), any trade carried on by a subsidiary which is an excluded company is treated as not constituting a trade. "

133 Omit section 581A (interest on foreign currency securities etc).

134 (1) Amend section 582 (funding bonds issued in respect of interest on certain debts) as follows.

(2) In subsection (1)(b) omit the words from "or section" to "income tax purposes)".

(3) For subsections (2) and (2A) substitute--

" (2) Subsection (2A) applies if an issue of funding bonds is treated as a payment of interest as mentioned in subsection (1)(a) and--

(a) the person by or through whom the bonds are issued is required to retain bonds under section 939(2) of ITA 2007, but

(b) it is impracticable for the person to do so.

(2A) In that case, tax in respect of the amount of interest treated by virtue of subsection (1)(a) as having been paid by the issue of the bonds shall be charged under Case VI of Schedule D for the chargeable period in which the bonds are issued on the persons receiving or entitled to the bonds. "

135 Omit section 582A (designated international organisations: miscellaneous exemptions).

136 Omit section 587A (new issues of securities: extra return).

137 (1) Amend section 587B (gifts of shares, securities and real property to charities etc) as follows.

(2) In subsection (1)--

(a) for "Subsections (2) and (3) below apply" substitute "Subsection (2) below applies", and

(b) for "an individual, or a company which is not itself a charity," substitute "a company which is not itself a charity".

(3) In subsection (2)--

(a) omit paragraph (a)(i),

(b) in paragraph (a)(ii) omit "in the case of a disposal by a company,",

(d) omit the words from "but paragraph (a)(i)" to the end.

(4) Omit subsection (3).

(5) In subsection (5)--

(a) for "the person" substitute "the company", and

(b) for "him" substitute "it".

(6) In subsection (6) for "person" substitute "company".

(7) In subsection (7)(a) for "person" substitute "company".

(8) In subsection (8)(a) for "subsections (2) and (3)" substitute "subsection (2)".

(9) In subsection (8B)(a)--

(a) for "the person" substitute "the company", and

(b) for "him" substitute "it".

(10) In subsection (9)--

(a) for the definitions of "authorised unit trust" and "open-ended investment company" substitute--

" "authorised unit trust" has the meaning given by section 468; " ,

(b) in the definition of "charity" for "each of the bodies mentioned in section 507(1);" substitute " --

(a) the Trustees of the National Heritage Memorial Fund;

(b) the Historic Buildings and Monuments Commission for England; and

(c) in the definition of "the incidental costs of making the disposal to the person making it" for "person" substitute "company", and

(d) after the definition of "offshore fund" insert--

" "open-ended investment company" is to be read in accordance with section 468A(2) to (4); " .

(11) In subsection (9B)--

(a) for "person", in both places where it occurs, substitute "company", and

(b) for "his", in both places where it occurs, substitute "its".

(12) In subsection (9C)--

(a) for "a person, who" substitute "a company, which", and

(b) for "the person" substitute "the company".

(13) In subsection (12) for "section 587C" substitute "sections 587BA and 587C".

138 After section 587B insert--

" 587BA Qualifying interests in land held jointly

(1) This section applies for the purposes of section 587B where a qualifying investment is a qualifying interest in land.

(2) Where two or more persons ("the owners")--

(a) are jointly beneficially entitled to the qualifying interest in land, or

(b) are, taken together, beneficially entitled in common to the qualifying interest in land,

relief under section 587B is available if at least one of the owners is a qualifying company and all the owners dispose of the whole of their beneficial interests in the qualifying interest in land to the charity.

(3) Subsection (4) applies if one or more of the owners is not a company.

(4) For the purpose of determining whether the owners' beneficial interests are disposed of as mentioned in subsection (2), section 587B(9B) and (9C) applies as if references to a company included a reference to a person who is not a company.

(5) Relief under section 587B is available to each of the owners which is a qualifying company.

(6) If one or more of the owners is an individual--

(a) the relevant amount is taken to be the relievable amount calculated for the purposes of Chapter 3 of Part 8 of ITA 2007, and

(b) the amount of relief under section 587B to be given to a qualifying company is such share of the relievable amount as is allocated to the company by the agreement mentioned in section 442(5) of ITA 2007.

(7) Subsections (8) to (12) apply if none of the owners is an individual.

(8) The amount of relief under section 587B to be given to a qualifying company is such share of the relevant amount as is allocated to the company by an agreement made between those owners which are qualifying companies.

(9) Calculate the relevant amount as if--

(a) the owners were a single qualifying company, and

(b) the disposals of the owners' beneficial interests were a single disposal by that single company of the whole of the beneficial interest in the qualifying interest in land.

(10) In particular, for the purposes of section 587B(7) calculate the consideration for which the disposal is made by virtue of section 257(2)(a) of the 1992 Act by--

(a) calculating, for each owner, the consideration for which the disposal of the owner's beneficial interest is so made, and

(b) adding together all the consideration calculated under paragraph (a).

(11) If one or more of the owners is not a qualifying company, in calculating the relevant amount make just and reasonable adjustments to reduce the relevant amount to reflect the fact that relief under section 587B is not available to that owner or to those owners.

(12) If one or more of the owners is within paragraph (b) of section 587B(8), in calculating the relevant amount make just and reasonable adjustments to reduce the relevant amount to reflect the requirements of sub-paragraph (ii) of that paragraph.

(13) A company is a qualifying company if--

(a) it is not itself a charity, and

(b) it is not within section 587B(8)(a). "

139 (1) Amend section 587C (supplementary provision for gifts of real property) as follows.

(2) Omit subsections (2) and (3).

(3) In subsection (4)--

(a) for "person" substitute "company", and

(b) for "he" substitute "it".

(4) In subsection (6)--

(a) for "person (or each of the persons) who made the disposal to the charity" substitute "following", and

(b) at the end insert--

" (a) in a case to which section 587BA does not apply, the company which made the disposal, and

(b) in a case to which section 587BA applies, each qualifying company which is an owner. "

(5) In subsection (8) for the words from "the person" to "of them)" substitute "a person mentioned in subsection (8A)".

(6) After that subsection insert--

" (8A) The persons are--

(a) in a case to which section 587BA does not apply--

(i) the company which made the disposal, or

(ii) a person connected with that company, and

(b) in a case to which section 587BA applies--

(i) a person who is an owner, or

(ii) a person connected with such a person. "

(7) In subsection (10)--

(a) omit paragraph (a) and the "and" immediately after it, and

(b) in paragraph (b) omit "in the case of a company,".

140 In section 615(3) (exemption from tax in respect of certain pensions) for "section 349(1)" substitute "Chapter 6 of Part 15 of ITA 2007 (deduction from annual payments and patent royalties)".

141 In section 657(2)(b) (purchased life annuities to which section 656 applies) after "or 273" insert "of this Act or section 459 of ITA 2007".

142 In section 658(4)(b) (supplementary) omit "(notwithstanding anything in section 348)".

143 In section 659E(1) (treatment of income from property investment LLPs) at the end insert "(see section 1004 of ITA 2007)".

144 Omit section 660C(3) (nature of charge on settlor).

145 Omit sections 685A to 687 (liability of trustees).

146 (1) Amend section 687A (discretionary payments made by trustees to companies) as follows.

(2) In subsection (1) for paragraph (b) substitute--

" (b) sections 494 and 495 of ITA 2007 apply in relation to the payment; " .

(3) In subsection (2)(a) for "charity" substitute "charitable company".

(4) In subsection (3)--

(a) in paragraph (a)(iii) for "paragraph 5(1) of Schedule 16" substitute "section 952 of ITA 2007 (set off of income tax suffered against income tax payable)", and

(b) in paragraph (c) for "section 687(2)" substitute "section 494 of ITA 2007".

(5) In the sidenote for "Payments to companies under section 687" substitute "Discretionary payments by trustees to companies".

147 Omit section 689A (disregard of trustees' expenses where beneficiary non-UK resident).

148 (1) Amend section 689B (order in which trustees' expenses are to be set against income) as follows.

(2) In subsection (3) for the words from "to which section 1A applies" to the end substitute "of the trustees which is savings income (within the meaning of section 18 of ITA 2007)."

(3) Omit subsection (4).

(4) At the end insert--

" (5) This section applies for corporation tax purposes only. "

149 Omit sections 690 to 694.

150 Omit section 698A.

151 In section 699A(4)(b) (untaxed sums comprised in the income of the estate) for "lower rate" substitute "savings rate".

152 In section 701(3A) (interpretation of sections 695 to 700) for "lower rate", wherever it occurs, substitute "savings rate".

153 In the heading for Chapter 1 of Part 17 (cancellation of tax advantages from certain transactions in securities) for "TAX" substitute "CORPORATION TAX".

154 (1) Amend section 703 (cancellation of tax advantage) as follows.

(2) In subsection (1)--

(a) for "person" substitute "company",

(b) for "tax", in both places where it occurs, substitute "corporation tax",

(d) for "him" substitute "it".

(3) In subsection (2)--

(a) for "tax" substitute "corporation tax",

(b) for "person" substitute "company", and

(4) In subsection (3)--

(a) for "tax advantage", in both places where it occurs, substitute "corporation tax advantage",

(b) for "person" substitute "company",

(d) omit "in the case of corporation tax", and

(e) for "liability to tax" substitute "liability to corporation tax".

(5) Omit subsection (3A).

(6) In subsection (9)--

(a) for "person", in both places where it occurs, substitute "company",

(b) for "him", wherever it occurs, substitute "it", and

(7) In subsection (10) for "person" substitute "company".

(8) Omit subsection (11).

(9) In subsection (12)--

(a) for "tax advantage", in both places where it occurs, substitute "corporation tax advantage",

(b) for "chargeable period", in the second place where it occurs, substitute "accounting period", and

(10) In the sidenote for "tax" substitute "corporation tax".

155 (1) Amend section 704 (the prescribed circumstances) as follows.

(2) After "The circumstances mentioned in section 703(1) are" insert "as follows (and in this section references to "the section 703(1) company" are references to the company referred to in that section)".

(3) In paragraph A--

(a) for "person in question" substitute "section 703(1) company",

(b) in paragraph (a) for "tax" substitute "corporation tax", and

(4) In paragraph B(1)--

(a) for "person in question" substitute "section 703(1) company", and

(b) for "him", wherever it occurs, substitute "it".

(5) In paragraph B(2) for "tax advantage" substitute "corporation tax advantage".

(6) In paragraph C(1)--

(a) for "person in question", in both places where it occurs, substitute "section 703(1) company",

(b) at the end of sub-paragraph (b) add "or section 687 of ITA 2007", and

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