Taxation of Chargeable Gains Act 1992 (c. 12)

(The document as of February, 2008)

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Exceptions from section 86

3 Section 86 does not apply if the settlor dies in the year.

4 (1) This paragraph applies where for the purposes of section 86(1)(d) the settlor has no interest in the settlement at any time in the year except for one of the following reasons, namely, that--

(a) property is, or will or may become, applicable for the benefit of or payable to one of the persons falling within paragraph 2(3)(b) to (d) above,

(b) income is, or will or may become, applicable for the benefit of or payable to one of those persons, or

(2) This paragraph also applies where sub-paragraph (1) above is fulfilled by virtue of 2 or all of paragraphs (a) to (c) being satisfied by reference to the same person.

(3) Where this paragraph applies, section 86 does not apply if the person concerned dies in the year.

(4) In a case where--

(a) this paragraph applies, and

(b) the person concerned falls within paragraph 2(3)(b) or (d) above,

section 86 does not apply if during the year the person concerned ceases to be married to the settlor or child concerned (as the case may be).

5 (1) This paragraph applies where for the purposes of section 86(1)(d) the settlor has no interest in the settlement at any time in the year except for the reason that there are 2 or more persons, each of whom--

(a) falls within paragraph 2(3)(b) to (d) above, and

(b) stands to gain for the reason stated in sub-paragraph (2) below.

(2) The reason is that--

(a) property is, or will or may become, applicable for his benefit or payable to him,

(b) income is, or will or may become, applicable for his benefit or payable to him,

(d) 2 or all of paragraphs (a) to (c) above apply in his case.

(3) Where this paragraph applies, section 86 does not apply if each of the persons concerned dies in the year.

Right of recovery

6 (1) This paragraph applies where any tax becomes chargeable on, and is paid by, a person in respect of gains treated as accruing to him in a year under section 86(4).

(2) The person shall be entitled to recover the amount of the tax from any person who is a trustee of the settlement.

(3) For the purposes of recovering that amount, the person shall also be entitled to require an inspector to give him a certificate specifying--

(a) the amount of the gains concerned, and

(b) the amount of tax paid,

and any such certificate shall be conclusive evidence of the facts stated in it.

Meaning of "settlor"

7 For the purposes of section 86 and this Schedule, a person is a settlor in relation to a settlement if the settled property consists of or includes property originating from him.

Meaning of "originating"

8 (1) References in section 86 and this Schedule to property originating from a person are references to--

(a) property provided by that person;

(b) property representing property falling within paragraph (a) above;

(c) so much of any property representing both property falling within paragraph (a) above and other property as, on a just apportionment, can be taken to represent property so falling.

(2) References in this Schedule to income originating from a person are references to--

(a) income from property originating from that person;

(b) income provided by that person.

(3) Where a person who is a settlor in relation to a settlement makes reciprocal arrangements with another person for the provision of property or income, for the purposes of this paragraph--

(a) property or income provided by the other person in pursuance of the arrangements shall be treated as provided by the settlor, but

(b) property or income provided by the settlor in pursuance of the arrangements shall be treated as provided by the other person (and not by the settlor).

(4) For the purposes of this paragraph--

(a) where property is provided by a qualifying company controlled by one person alone at the time it is provided, that person shall be taken to provide it;

(b) where property is provided by a qualifying company controlled by 2 or more persons (taking each one separately) at the time it is provided, those persons shall be taken to provide the property and each one shall be taken to provide an equal share of it;

(c) where property is provided by a qualifying company controlled by 2 or more persons (taking them together) at the time it is provided, the persons who are participators in the company at the time it is provided shall be taken to provide it and each one shall be taken to provide so much of it as is attributed to him on the basis of a just apportionment;

but where a person would be taken to provide less than one-twentieth of any property by virtue of paragraph (c) above and apart from this provision, he shall not be taken to provide any of it by virtue of that paragraph.

(5) For the purposes of sub-paragraph (4) above a qualifying company is a close company or a company which would be a close company if it were resident in the United Kingdom.

(6) For the purposes of this paragraph references to property representing other property include references to property representing accumulated income from that other property.

(7) For the purposes of this paragraph property or income is provided by a person if it is provided directly or indirectly by the person.

(8) For the purposes of this paragraph the question whether a company is controlled by a person or persons shall be construed in accordance with section 416 of the Taxes Act; but in deciding that question for those purposes no rights or powers of (or attributed to) an associate or associates of a person shall be attributed to him under section 416(6) if he is not a participator in the company.

(9) In this paragraph "participator" has the meaning given by section 417(1) of the Taxes Act.

(10) The preceding provisions of this paragraph shall apply to determine whether shares originate from the settlor for the purposes of paragraph 1(3)(a) above as they apply to determine whether property of any kind originates from a person.

Qualifying settlements, and commencement

9 (1) A settlement created on or after 19th March 1991 is a qualifying settlement for the purposes of section 86 and this Schedule in--

(a) the year of assessment in which it is created, and

(b) subsequent years of assessment.

(2) A settlement created before 19th March 1991, and as regards which any of the 4 conditions set out in sub-paragraphs (3) to (6) below becomes fulfilled, is a qualifying settlement for the purposes of section 86 and this Schedule in--

(a) the year of assessment in which any of those conditions becomes fulfilled, and

(b) subsequent years of assessment.

(3) The first condition is that on or after 19th March 1991 property or income is provided directly or indirectly for the purposes of the settlement--

(a) otherwise than under a transaction entered into at arm's length, and

(b) otherwise than in pursuance of a liability incurred by any person before that date;

but if the settlement's expenses relating to administration and taxation for a year of assessment exceed its income for the year, property or income provided towards meeting those expenses shall be ignored for the purposes of this condition if the value of the property or income so provided does not exceed the difference between the amount of those expenses and the amount of the settlement's income for the year.

(4) The second condition is that--

(a) the trustees become on or after 19th March 1991 neither resident nor ordinarily resident in the United Kingdom, or

(b) the trustees, while continuing to be resident and ordinarily resident in the United Kingdom, become on or after 19th March 1991 trustees who fall to be regarded for the purposes of any double taxation relief arrangements as resident in a territory outside the United Kingdom.

(5) The third condition is that on or after 19th March 1991 the terms of the settlement are varied so that any person falling within sub-paragraph (7) below becomes for the first time a person who will or might benefit from the settlement.

(6) The fourth condition is that--

(a) on or after 19th March 1991 a person falling within sub-paragraph (7) below enjoys a benefit from the settlement for the first time, and

(b) the person concerned is not one who (looking only at the terms of the settlement immediately before 19th March 1991) would be capable of enjoying a benefit from the settlement on or after that date.

(7) Each of the following persons falls within this sub-paragraph--

(a) a settlor;

(b) the spouse of a settlor;

(d) the spouse of any such child;

(e) a company controlled by a person or persons falling within paragraphs (a) to (d) above;

(f) a company associated with a company falling within paragraph (e) above.

(8) In sub-paragraph (7) above "child" includes a step-child.

(9) For the purposes of sub-paragraph (7) above the question whether a company is controlled by a person or persons shall be construed in accordance with section 416 of the Taxes Act; but in deciding that question for those purposes no rights or powers of (or attributed to) an associate or associates of a person shall be attributed to him under section 416(6) if he is not a participator in the company.

(10) For the purposes of sub-paragraph (7) above the question whether one company is associated with another shall be construed in accordance with section 416 of the Taxes Act; but where in deciding that question for those purposes it falls to be decided whether a company is controlled by a person or persons, no rights or powers of (or attributed to) an associate or associates of a person shall be attributed to him under section 416(6) if he is not a participator in the company.

(11) In sub-paragraphs (9) and (10) "participator" has the meaning given by section 417(1) of the Taxes Act.

Information

10 An inspector may by notice require any person who is or has been a trustee of, a beneficiary under, or a settlor in relation to, a settlement to give him within such time as he may direct (which must not be less than 28 days beginning with the day the notice is given) such particulars as he thinks necessary for the purposes of section 86 and this Schedule and specifies in the notice.

11 (1) This paragraph applies if--

(a) a settlement has been created before 19th March 1991,

(b) on or after that date a person transfers property to the trustees otherwise than under a transaction entered into at arm's length and otherwise than in pursuance of a liability incurred by any person before that date,

(c) the trustees are not resident or ordinarily resident in the United Kingdom at the time the property is transferred, and

(d) the transferor knows, or has reason to believe, that the trustees are not so resident or ordinarily resident.

(2) Before the expiry of the period of 12 months beginning with the relevant day, the transferor shall deliver to the Board a return which--

(a) identifies the settlement, and

(b) specifies the property transferred, the day on which the transfer was made, and the consideration (if any) for the transfer.

(3) For the purposes of sub-paragraph (2) above the relevant day is the later of--

(a) the day on which the transfer is made, and

(b) 25th July 1991 (the day on which the Finance Act 1991 was passed).

12 (1) This paragraph applies if a settlement is created on or after 19th March 1991, and at the time it is created--

(a) the trustees are not resident or ordinarily resident in the United Kingdom, or

(b) the trustees are resident or ordinarily resident in the United Kingdom but fall to be regarded for the purposes of any double taxation relief arrangements as resident in a territory outside the United Kingdom.

(2) Any person who--

(a) is a settlor in relation to the settlement at the time it is created, and

(b) at that time fulfils the condition mentioned in sub-paragraph (4) below,

shall, before the expiry of the period of 3 months beginning with the relevant day, deliver to the Board a return specifying the particulars mentioned in sub-paragraph (5) below.

(3) Any person who--

(a) is a settlor in relation to the settlement at the time it is created,

(b) at that time does not fulfil the condition mentioned in sub-paragraph (4) below, and

shall, before the expiry of the period of 12 months beginning with the relevant day, deliver to the Board a return specifying the particulars mentioned in sub-paragraph (5) below.

(4) The condition is that the person concerned is domiciled in the United Kingdom and is either resident or ordinarily resident in the United Kingdom.

(5) The particulars are--

(a) the day on which the settlement was created;

(b) the name and address of the person delivering the return;

(6) For the purposes of sub-paragraph (2) above the relevant day is the later of--

(a) the day on which the settlement is created, and

(b) 25th July 1991 (the day on which the Finance Act 1991 was passed).

(7) For the purposes of sub-paragraph (3) above the relevant day is the later of--

(a) the day on which the person first fulfils the condition after the settlement is created, and

(b) 25th July 1991 (the day on which the Finance Act 1991 was passed).

13 (1) This paragraph applies if--

(a) the trustees of a settlement become at any time ("the relevant time") on or after 19th March 1991 neither resident nor ordinarily resident in the United Kingdom, or

(b) the trustees of a settlement, while continuing to be resident and ordinarily resident in the United Kingdom, become at any time ("the relevant time") on or after 19th March 1991 trustees who fall to be regarded for the purposes of any double taxation relief arrangements as resident in a territory outside the United Kingdom.

(2) Any person who was a trustee of the settlement immediately before the relevant time shall, before the expiry of the period of 12 months beginning with the relevant day, deliver to the Board a return specifying--

(a) the day on which the settlement was created,

(b) the name and address of each person who is a settlor in relation to the settlement immediately before the delivery of the return, and

(3) For the purposes of sub-paragraph (2) above the relevant day is the later of--

(a) the day when the relevant time falls, and

(b) 25th July 1991 (the day on which the Finance Act 1991 was passed).

14 (1) Nothing in paragraph 11, 12 or 13 above shall require information to be contained in the return concerned to the extent that--

(a) before the expiry of the period concerned the information has been provided to the Board by any person in pursuance of the paragraph concerned or of any other provision, or

(b) after the expiry of the period concerned the information falls to be provided to the Board by any person in pursuance of any provision other than the paragraph concerned.

(2) Nothing in paragraph 11, 12 or 13 above shall require a return to be delivered if--

(a) before the expiry of the period concerned all the information concerned has been provided to the Board by any person in pursuance of the paragraph concerned or of any other provision, or

(b) after the expiry of the period concerned all the information concerned falls to be provided to the Board by any person in pursuance of any provision other than the paragraph concerned.

Sections 163, 164.

SCHEDULE 6 Retirement relief etc.

Part I Interpretation

1 (1) This paragraph and paragraphs 2 and 3 below have effect for the purposes of this Schedule and sections 163 and 164.

(2) In the provisions referred to above--

"commercial association of companies" means a company together with such of its associated companies, within the meaning of section 416 of the Taxes Act, as carry on businesses which are of such a nature that the businesses of the company and the associated companies taken together may be reasonably considered to make up a single composite undertaking;
"family company" means, in relation to an individual, a company the voting rights in which are--
(i)
as to not less than 25 per cent. exercisable by the individual, or
(ii)
as to more than 50 per cent. exercisable by the individual or a member of his family and, as to not less than 5 per cent. exercisable by the individual himself;
"family" means, in relation to an individual, the husband or wife of the individual and a relative of the individual or of the individual's husband or wife and, for this purpose, "relative" means brother, sister, ancestor or lineal descendant;
"full-time working director", in relation to one or more companies, means a director who is required to devote substantially the whole of his time to the service of that company or, as the case may be, those companies taken together, in a managerial or technical capacity;
"group of companies" means a company which has one or more 51 per cent. subsidiaries, together with those subsidiaries;
"holding company" means a company whose business (disregarding any trade carried on by it) consists wholly or mainly of the holding of shares or securities of one or more companies which are its 51 per cent. subsidiaries;
"permitted period" means a period of one year or such longer period as the Board may, in any particular case, by notice allow;
"trade", "profession", "vocation", "office" and "employment" have the same meaning as in the Income Tax Acts;
"trading company" means a company whose business consists wholly or mainly of the carrying on of a trade or trades;
"trading group" means a group of companies the business of whose members, taken together, consists wholly or mainly of the carrying on of a trade or trades.

(3) For the purposes of sub-paragraph (2) above, voting rights exercisable by trustees of a settlement are to be treated as voting rights exercisable by a member of the family of an individual if--

(a) the individual or any member of his family is a beneficiary under the settlement; and

(b) no one, other than the individual or a member of his family, is for the time being entitled under the settlement to receive any capital or income of the settled property; and

(c) the terms of the settlement are such that no one other than the individual or a member of his family can become entitled to capital or income except upon the failure (for whatever reason) of the individual or a member of his family to become so entitled.

(4) Any reference in sub-paragraph (3) above to a person being or becoming entitled to any capital or income of the settled property includes a reference to a person--

(a) whose entitlement is subject to a power which could be so exercised as to require all or any of the capital or income in question to be paid to some other person; or

(b) whose entitlement depends upon his exercising a power in his own favour.

2 (1) For the purposes of the provisions referred to in paragraph 1(1) above, where, as part of a reorganisation, within the meaning of section 126, there is a disposal of shares or securities of a company and, apart from this sub-paragraph, the shares disposed of and the new holding (as defined in that section) would fall to be treated, by virtue of section 127, as the same asset, section 127 shall not apply if the individual concerned so elects or, in the case of a trustees' disposal, if the trustees and the individual concerned jointly so elect; and an election under this sub-paragraph shall be made by notice given to the Board not more than 2 years after the end of the year of assessment in which the disposal occurred.

(2) In sub-paragraph (1) above, the reference to a reorganisation, within the meaning of section 126, includes a reference to an exchange of shares or securities which is treated as such a reorganisation by virtue of section 135(3).

3 (1) A person who has been concerned in the carrying on of a business shall be treated as having retired on ill-health grounds if, on production of such evidence as the Board may reasonably require, the Board are satisfied--

(a) that he has ceased to be engaged in and, by reason of ill-health, is incapable of engaging in work of the kind which he previously undertook in connection with that business; and

(b) that he is likely to remain permanently so incapable.

(2) In sub-paragraph (1) above, the reference to a person being concerned in the carrying on of a business is a reference to his being so concerned personally or as a member of a partnership carrying on the business; and the business which is relevant for the purposes of the provisions referred to in paragraph 1(1) above is that referred to--

(a) in subsection (3) or subsection (4) of section 163 in relation to a material disposal of business assets;

(b) in subsection (5) of section 164 in relation to a trustees' disposal; and

(3) A person who has been a full-time working director of a company or of two or more companies shall be treated as having retired on ill-health grounds if, on production of such evidence as the Board may reasonably require, the Board are satisfied--

(a) that he has ceased to serve and, by reason of ill-health, is incapable of serving that company or, as the case may be, those companies in a managerial or technical capacity; and

(b) that he is likely to remain permanently incapable of serving in such a capacity that company or those companies (as the case may be) or any other company engaged in business of a kind carried on by that company or those companies.

(4) In relation to an employee's disposal, a person who has been exercising any office or employment shall be treated as having retired on ill-health grounds if, on production of such evidence as the Board may reasonably require, the Board are satisfied--

(a) that he has ceased to exercise and, by reason of ill-health, is incapable of exercising that office or employment; and

(b) that he is likely to remain permanently so incapable.

4 (1) In this Schedule--

(a) "material disposal of business assets" has the same meaning as in section 163;

(b) "employee's disposal" means a disposal falling within subsection (1) of section 164;

(c) "trustees' disposal" means a disposal falling within subsection (3) of section 164 and, in relation to such a disposal, "the qualifying beneficiary" has the meaning assigned to it by paragraph (b) of that subsection;

(d) "associated disposal" has the meaning assigned to it by section 164(7);

and "qualifying disposal" means any of the disposals referred to in paragraphs (a) to (d) above.

(2) Any reference in this Schedule to the qualifying period is a reference to the period of at least one year which--

(a) in relation to a material disposal of business assets, is referred to in subsection (3), subsection (4)(a) or subsection (5) (as the case may require) of section 163;

(b) in relation to an employee's disposal, is referred to in section 164(2)(a);

(c) in relation to a trustees' disposal, is referred to in subsection (4) or subsection (5) (as the case may require) of section 164;

and, in relation to an associated disposal, any reference in this Schedule to the qualifying period is a reference to that period which is the qualifying period in relation to the material disposal of business assets with which the associated disposal is associated in accordance with section 164(7).

(3) In relation to a qualifying disposal, any reference in this Schedule to the amount available for relief is a reference to the amount determined in accordance with paragraphs 13 to 16 below.

Part II The operation of the relief

Disposals on which relief may be given

5 (1) Relief in accordance with this Schedule shall not be given in respect of any disposal unless the qualifying period relating to that disposal ends on or after 6th April 1985.

(2) Except in the case of a disposal which is made by an individual who has attained the age of 55, relief in accordance with this Schedule shall be given only on the making of a claim not later than 2 years after the end of the year of assessment in which the disposal occurred.

(3) In the case of a trustees' disposal, relief in accordance with this Schedule shall be given only on a claim made jointly by the trustees and the beneficiary concerned.

(4) Where a claim for relief in accordance with this Schedule is dependent upon an individual having retired on ill-health grounds below the age of 55, the claim shall be made to the Board.

Gains qualifying for relief

6 Subject to paragraphs 9 and 10 below, in the case of any qualifying disposal other than one of shares or securities of a company, the gains accruing to the individual or, in the case of a trustees' disposal, the trustees on the disposal of chargeable business assets comprised in the qualifying disposal shall be aggregated, and only so much of that aggregate as exceeds the amount available for relief shall be chargeable gains (but not so as to affect liability in respect of gains accruing on the disposal of assets other than chargeable business assets).

7 (1) Subject to paragraphs 9 to 11 below, in the case of a qualifying disposal of shares or securities of a trading company which is not a holding company,--

(a) the gains which on the disposal accrue to the individual or, as the case may be, the trustees shall be aggregated, and

(b) of the appropriate proportion of the aggregated gains, only so much as exceeds the amount available for relief shall constitute chargeable gains (but not so as to affect liability in respect of gains representing the balance of the aggregated gains).

(2) For the purposes of sub-paragraph (1)(b) above, "the appropriate proportion" is that which that part of the value of the company's chargeable assets immediately before the end of the qualifying period which is attributable to the value of the company's chargeable business assets bears to the whole of that value, but, in the case of a company which has no chargeable assets, "the appropriate proportion" is the whole.

(3) For the purposes of this paragraph, every asset is a chargeable asset except one, on the disposal of which by the company immediately before the end of the qualifying period, no gain accruing to the company would be a chargeable gain.

8 (1) Subject to paragraphs 9 to 11 below, in the case of a qualifying disposal of shares or securities of a holding company--

(a) the gains which on the disposal accrue to the individual or, as the case may be, the trustees shall be aggregated, and

(2) For the purposes of sub-paragraph (1)(b) above, "the appropriate proportion" is that which that part of the value of the trading group's chargeable assets immediately before the end of the qualifying period which is attributable to the value of the trading group's chargeable business assets bears to the whole of that value; but, in the case of a trading group which has no chargeable assets, "the appropriate proportion" is the whole.

(3) For the purposes of sub-paragraph (2) above--

(a) any reference to the trading group's chargeable assets or chargeable business assets is a reference to the chargeable assets or, as the case may be, chargeable business assets of every member of the trading group; and

(b) subject to paragraph (c) below, every asset is a chargeable asset except one, on the disposal of which by the member of the group concerned immediately before the end of the qualifying period no gain accruing to that member would be a chargeable gain; and

(c) a holding by one member of the trading group of the ordinary share capital of another member of the group is not a chargeable asset.

(4) Where the whole of the ordinary share capital of a 51 per cent. subsidiary of the holding company is not owned directly or indirectly by that company, then, for the purposes of sub-paragraph (2) above, the value of the chargeable assets and chargeable business assets of that subsidiary shall be taken to be reduced by multiplying it by a fraction of which the denominator is the whole of the ordinary share capital of the subsidiary and the numerator is the amount of that share capital owned, directly or indirectly, by the holding company.

(5) Expressions used in sub-paragraph (4) above have the same meaning as in section 838 of the Taxes Act (subsidiaries).

9 (1) If, in the case of a trustees' disposal, there is, in addition to the qualifying beneficiary, at least one other beneficiary who, at the end of the qualifying period, has an interest in possession in the whole of the settled property or, as the case may be, in a part of it which consists of or includes the shares, securities or asset which is the subject matter of the disposal, only the relevant proportion of the gain which accrues to the trustees on the disposal shall be brought into account under paragraph 6, paragraph 7 or paragraph 8 above (as the case may require) and the balance of the gain shall, accordingly, be a chargeable gain.

(2) For the purposes of sub-paragraph (1) above, the relevant proportion is that which, at the end of the qualifying period, the qualifying beneficiary's interest in the income of the part of the settled property comprising the shares, securities or asset in question bears to the interests in that income of all the beneficiaries (including the qualifying beneficiary) who then have interests in possession in that part.

(3) The reference in sub-paragraph (2) above to the qualifying beneficiary's interest is a reference to the interest by virtue of which he is the qualifying beneficiary and not to any other interest he may hold.

10 (1) If, in the case of an associated disposal--

(a) the asset in question was in use for the purposes of a business as mentioned in section 164(7)(c) for only part of the period in which it was in the ownership of the individual making the disposal, or

(b) for any part of the period in which the asset in question was in use for the purposes of a business as mentioned in section 164(7)(c), the individual making the disposal was not concerned in the carrying on of that business (whether personally, as a member of a partnership or as a full-time working director of any such company as is referred to in section 163(3)(b)), or

(c) for the whole or any part of the period in which the asset in question was in use for the purposes of a business as mentioned in section 164(7)(c), its availability for that use was dependent upon the payment of rent,

only such part of the gain which accrues on the disposal as appears to the Board to be just and reasonable shall be brought into account under paragraph 6, paragraph 7 or paragraph 8 above (as the case may require) and the balance of the gain shall, accordingly, be a chargeable gain.

(2) In determining how much of a gain it is just and reasonable to bring into account as mentioned in sub-paragraph (1) above, the Board shall have regard to the length of the period the asset was in use as mentioned in that sub-paragraph and the extent to which any rent paid was less than the amount which would have been payable in the open market for the use of the asset.

(3) In sub-paragraphs (1) and (2) above "rent" includes any form of consideration given for the use of the asset.

11 (1) This paragraph applies where--

(a) there is a material disposal of business assets or a trustees' disposal which (in either case) consists of a disposal which the individual or trustees is or are treated as making by virtue of section 122 in consideration of a capital distribution; and

(b) the capital distribution consists wholly of chargeable business assets of the company or partly of such assets and partly of money or money's worth.

(2) Where the capital distribution consists wholly of chargeable business assets, no relief shall be given under this Schedule in respect of the gains accruing on the disposal.

(3) Where the capital distribution consists only partly of chargeable business assets, the gains accruing on the disposal (aggregated as mentioned in paragraph 7(1)(a) or paragraph 8(1)(a) above) shall be reduced for the purposes of this Schedule by multiplying them by the fraction--

---

where--

A is the part of the capital distribution which does not consist of chargeable business assets; and
B is the entire capital distribution;

and it shall be to that reduced amount of aggregated gains that, in accordance with sub-paragraph (1)(b) of paragraph 7 or, as the case may be, paragraph 8 above, the appropriate proportion determined under sub-paragraph (2) of that paragraph shall be applied.

(4) Any question whether or to what extent a capital distribution consists of chargeable business assets shall be determined by reference to the status of the assets immediately before the end of the qualifying period.

12 (1) Subject to paragraphs 9 to 11 above, in arriving at the aggregate gains under any of paragraphs 6, 7(1) and 8(1) above--

(a) the respective amounts of the gains shall be computed in accordance with the provisions of this Act fixing the amount of chargeable gains, and

(b) any allowable loss which accrues on the qualifying disposal concerned shall be deducted,

and the provisions of this Schedule shall not affect the computation of the amount of any allowable loss.

(2) Subject to the following provisions of this paragraph, in paragraphs 6 to 11 above, "chargeable business asset" means an asset (including goodwill but not including shares or securities or other assets held as investments) which is, or is an interest in, an asset used for the purposes of a trade, profession, vocation, office or employment carried on by--

(a) the individual concerned; or

(b) that individual's family company; or

(d) a partnership of which the individual concerned is a member.

(3) An asset is not a chargeable business asset if, on the disposal of it, no gain which might accrue would be a chargeable gain.

(4) In relation to a trustees' disposal, references in sub-paragraph (2) above to the individual shall be construed as references to the beneficiary concerned.

(5) Sub-paragraph (6) below applies if--

(a) a qualifying disposal falling within paragraph 7 or paragraph 8 above is a disposal which the individual or trustees concerned is or are treated as making by virtue of section 122 in consideration of a capital distribution; and

(b) not later than 2 years after the end of the year of assessment in which the individual or the trustees received the capital distribution, the individual or trustees by notice to the inspector elects or elect that that sub-paragraph should apply.

(6) If, in a case where this sub-paragraph applies in relation to a qualifying disposal, any part of the assets of the company concerned consists, as at the end of the qualifying period, of the proceeds of the sale of an asset sold not more than 6 months before the end of that period, then, sub-paragraph (2) above and paragraph 7 or, as the case may be, paragraph 8 above shall have effect as if, at that time--

(a) the asset remained the property of the company and was in use for the purposes for which it was used before its sale; and

(b) the proceeds of sale of the asset did not form part of the assets of the company.

The amount available for relief: the basic rule

13 (1) Subject to the following provisions of this Part of this Schedule, on a qualifying disposal by an individual the amount available for relief by virtue of sections 163 and 164 is an amount equal to the aggregate of--

(a) so much of the gains qualifying for relief as do not exceed the appropriate percentage of £150,000; and

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