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Income Tax Act 2007 (c. 3)

(The document as of February, 2008)

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(i) is the beneficial owner of more than 30% of the ordinary share capital of the company, or

(ii) is able, directly or through the medium of other companies or by any other indirect means, to control more than 30% of that share capital, or

(c) at least half the business could, in accordance with section 344(2) of ICTA (persons to whom company's trade may be treated as belonging), be regarded as belonging to A for the purposes of section 343 of that Act (company reconstructions without a change of ownership).

(4) In any other case, a person has a controlling interest in a business if the person is entitled to at least half the assets used for, or of the income arising from, the business.

(5) For the purposes of this section--

(a) any rights or powers of a person who is an associate of another are to be attributed to that other person, and

(b) "business" includes any trade, profession or vocation.



Supplementary

311 Power to amend Chapter

The Treasury may by order amend this Chapter--

(a) to make such modifications of sections 290, 291, 298 and 300, sections 303 to 310 and section 313(3) as they consider appropriate, and

(b) to substitute different sums for the sums of money for the time being specified in sections 287(2) and 297.

312 Winding up of the relevant company

None of the requirements of this Chapter is to be regarded, at a time when the relevant company is being wound up, as being, on that account, a requirement that is not met in relation to that company if--

(a) the requirements of this Chapter would be met in relation to that company apart from the winding up, and

(b) the winding up is for genuine commercial reasons, and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.

313 Interpretation of Chapter

(1) In this Chapter --

  • "the investing company" has the meaning given by section 286(1),

  • "the relevant company" has the meaning given by section 286(1), and

  • "the relevant holding" has the meaning given by section 286(1).

(2) References in this Chapter to the issue of any securities, in relation to any security consisting in a liability in respect of an unsecured loan, have effect as references to the making of the loan.

(3) References in sections 303 to 309 to a trade are to be read without regard to the definition of "trade" in section 989 (see also section 300(4)).

(4) For the purposes of sections 296 and 310(3) and (4), the question whether a person controls a company is to be determined in accordance with section 416(2) to (6) of ICTA with the modification given by subsection (6).

(5) For the purposes of this Chapter, section 993 (meaning of "connected persons") applies as if references to "control" in that section were to be read in accordance with section 416 of ICTA with the modification given by subsection (6).

(6) The modification is that, in determining whether a person controls a company, the following are to be ignored--

(a) any person's possession of, or entitlement to acquire, fixed-rate preference shares in the company that do not carry voting rights, and

(b) any person's possession of, or entitlement to acquire, rights as a loan creditor of the company.

(7) In subsection (6) "fixed-rate preference shares" means shares which--

(a) were issued wholly for new consideration,

(b) do not carry any right either to conversion into shares or securities of any other description or to the acquisition of any additional shares or securities, and

(c) do not carry any right to dividends other than dividends which--

(i) are of a fixed amount or at a fixed rate per cent of the nominal value of the shares, and

(ii) together with any sum paid on redemption, represent no more than a reasonable commercial return on the consideration for which the shares were issued,

and in paragraph (a) "new consideration" has the meaning given by section 254 of ICTA.



Chapter 5 Powers: winding up and mergers of VCTs

Winding up

314 Power to treat VCT-in-liquidation as VCT

(1) Regulations may make provision for tax enactments specified by the regulations to have effect as if--

(a) a VCT-in-liquidation that is not a VCT were, or were during any prescribed period of its winding up, a VCT,

(b) VCT approval withdrawn from a company--

(i) at any time during the period when it is a VCT-in-liquidation, or

(ii) at any time during a prescribed part of that period,

were withdrawn at a prescribed time (and not at the time when it is actually withdrawn).

(2) In this section "prescribed" means specified by, or determined under, regulations.

315 Power to treat conditions for VCT approval as met with respect to VCT-in-liquidation

(1) Regulations may make provision for conditions mentioned in section 274(2) (conditions for approval as a VCT) to be treated for the purposes of section 274(1) as met, or as conditions that will be met, with respect to a VCT-in-liquidation.

(2) Provision under subsection (1) may be made so as to apply in relation to a VCT-in-liquidation--

(a) throughout its winding up, or

(b) during prescribed periods of its winding up.

(3) Regulations may, for purposes of tax enactments specified by the regulations, make provision for VCT approval to be treated as having been withdrawn, with effect from a time specified by or determined under the regulations, from a VCT-in-liquidation from which the Commissioners for Her Majesty's Revenue and Customs would have power to withdraw such approval but for provision made under subsection (1).

316 Power to make provision about distributions by VCT-in-liquidation

(1) Regulations may make provision for tax enactments specified by the regulations--

(a) to apply in relation to distributions from a VCT-in-liquidation (including, in particular, distributions in the course of dissolving it or winding it up),

(b) not to apply in relation to such distributions,

(c) to apply in relation to such distributions with modifications specified by the regulations.

(2) Provision under subsection (1) may be made so as to apply in relation to distributions from a VCT-in-liquidation made--

(a) at any time during its winding up, or

(b) during periods of its winding up specified by, or determined under, regulations.

317 Power to facilitate disposal to VCT by VCT-in-liquidation

(1) Regulations may make provision authorised by subsection (2) for cases where shares in or securities of a company are acquired by a VCT from a VCT-in-liquidation.

(2) The provision that may be made under subsection (1) for such a case is--

(a) provision for conditions mentioned in section 274(2) (conditions for approval as a VCT) to be treated for the purposes of section 274(1) as met, or as conditions that will be met, with respect to the VCT in relation to periods ending after the acquisition,

(b) provision for the shares or securities acquired to be treated, at times after the acquisition when they are held by the VCT, as meeting the requirements of Chapter 4 (provisions for determining whether shares or securities form part of qualifying holdings), and

(c) provision for shares in the VCT issued in connection with the acquisition of the shares or securities from the VCT-in-liquidation and either--

(i) issued to a person who is a member of the VCT-in-liquidation, or

(ii) issued to the VCT-in-liquidation and distributed by it in the course of its winding up or dissolution to a person who is one of its members,

to be treated, for the purposes of Schedule 5C to TCGA 1992 (VCTs: deferred charge on re-investment), as representing shares in the VCT-in-liquidation held by that person.

(3) Provision under subsection (1) may be made so as to apply in relation to shares or securities acquired from a VCT-in-liquidation--

(a) at any time during its winding up, or

(b) during periods of its winding up specified by, or determined under, regulations.

(4) In this section "securities" means any securities and includes any liability that is a security in relation to a company because of section 285(2) (securities).

318 Power in respect of periods before and after winding up

(1) Any power under sections 314 to 317 to make provision in relation to a VCT-in-liquidation includes power to make corresponding or similar provision in relation to--

(a) a company for whose winding up an application has been made to a court and which is not a VCT-in-liquidation but would be if, at the time that the application was made, the court had ordered the company's winding up to commence at that time, or

(b) a company that has been a VCT-in-liquidation but no longer is a VCT-in-liquidation because it has been wound up.

(2) For the purposes of making provision in reliance on subsection (1), references in sections 314 to 317 (however expressed) to a VCT-in-liquidation's winding up, or the commencement or ending of its winding up, may be taken to be references to, or to the commencement or ending of, the extension period for a company to which subsection (1) applies.

(3) In this section--

  • "the extension period"--

    (a)

    in relation to a company to which subsection (1)(a) applies, means the period beginning with the making of the application and ending with the earlier of its final determination and the company becoming a company that is being wound up, and

    (b)

    in relation to a company to which subsection (1)(b) applies, means the period between the end of the company's winding up and the company's dissolution, and

  • "prescribed" means specified by, or determined under, regulations.

319 Sections 314 to 318: supplementary

(1) Provision made by regulations under sections 314 to 318 applies in cases, and subject to conditions, specified by regulations.

(2) Such provision may (but need not) be made so as to have effect in a particular case only for such period as may be specified by, or determined under, regulations.

(3) References in sections 314 to 318 to things done by a VCT-in-liquidation include things done by a liquidator of a VCT-in-liquidation.

320 Meaning of "VCT-in-liquidation"

(1) In this Chapter "VCT-in-liquidation" means a company--

(a) that is being wound up (whether or not under the law of a part of the United Kingdom and whether under the law of one, or more than one, territory),

(b) that was a VCT immediately before the commencement of its winding up, and

(c) whose winding up is for genuine commercial reasons and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.

(2) Regulations may, for purposes of this Chapter, make provision as to when a company's winding up is to be treated as commencing or ending in a case where it is wound up otherwise than under the law of a part of the United Kingdom or otherwise than under the law of a single territory.



Mergers

321 Power to facilitate mergers of VCTs

(1) Regulations may make provision authorised by section 322 for cases where--

(a) there is a merger of two or more companies each of which is a VCT immediately before the merger begins to be effected, and

(b) the merger is for genuine commercial reasons and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.

(2) Provision made by regulations under subsection (1) applies--

(a) in cases, and

(b) subject to conditions (including conditions requiring approvals to be obtained),

specified by the regulations.

322 Provision that may be made by regulations under section 321

(1) The provision that may be made under section 321(1) for a case where there is a merger of two or more companies ("the merging companies") is as follows.

(2) Provision for the successor company, or any of the merging companies, to be treated (whether at times before, during or after the merger) as a VCT for purposes of tax enactments specified by regulations.

(3) Provision for section 266 (loss of relief on disposal of VCT shares within 5 years of their issue) not to apply in the case of disposals of shares in a merging company made in the course of effecting the merger.

(4) Provision for such disposals not to be chargeable events for the purposes of Schedule 5C to TCGA 1992 (VCTs: deferred charge on re-investment).

(5) Provision for conditions mentioned in section 274(2) (conditions for approval as a VCT) to be treated (whether at times before, during or after the merger) for purposes of section 274(1) as met, or as conditions that will be met, with respect to the successor company or any of the merging companies.

(6) Provision for shares in or securities of a company that are acquired (whether at times before, during or after the merger) by the successor company from a merging company to be treated, at times after the acquisition when they are held by the successor company, as meeting requirements of Chapter 4 (provisions for determining whether shares or securities held by a VCT form part of its qualifying holdings).

(7) Provision for tax enactments specified by regulations to apply, with or without adaptations, in relation to the merger or transactions taking place (whether before, during or after the merger) in connection with the merger.

(8) Provision authorising disclosure for tax purposes connected with the merger--

(a) by Her Majesty's Revenue and Customs,

(b) to any of the merging companies or the successor company,

(c) of any information provided to Her Majesty's Revenue and Customs by or on behalf of any of the merging companies or the successor company.

323 Meaning of "merger" and "successor company"

(1) For the purposes of this Chapter there is a merger of two or more companies ("the merging companies") if--

(a) shares in one of the merging companies ("company A") are issued to members of the other merging company or companies, and

(b) the shares issued to members of the other merging company or, in the case of each of the other merging companies, the shares issued to members of that other company, are issued--

(i) in exchange for their shares in that other company, or

(ii) by way of consideration for a transfer to company A of the whole or part of the business of that other company.

(2) For the purposes of this Chapter there is also a merger of two or more companies ("the merging companies") if--

(a) shares in a company ("company B") that is not one of the merging companies are issued to members of the merging companies, and

(b) in the case of each of the merging companies, the shares issued to members of that company are issued--

(i) in exchange for their shares in that company, or

(ii) by way of consideration for a transfer to company B of the whole or part of the business of that company.

(3) In this Chapter "the successor company"--

(a) in relation to a merger such as is described in subsection (1), means the company that performs the role of company A, and

(b) in relation to a merger such as is described in subsection (2), means the company that performs the role of company B.



Supplementary

324 Regulations under Chapter

(1) Regulations under this Chapter may--

(a) contain such administrative provisions (including provision for advance clearance and provision for the withdrawal of clearances) as appear to the Treasury to be necessary or appropriate,

(b) authorise the Commissioners for Her Majesty's Revenue and Customs to give notice to any person requiring that person to provide such information, specified in the notice, as they may reasonably require in order to determine whether any conditions imposed by regulations under this Chapter are met,

(c) make different provision for different cases,

(d) contain incidental, supplemental, consequential and transitional provision and savings, and

(e) include provision having retrospective effect.

(2) Without prejudice to any specific provision of this Chapter, a power conferred by any provision of this Chapter to make regulations includes power to provide for Her Majesty's Revenue and Customs to exercise a discretion in dealing with any matter.

325 Interpretation of Chapter

In this Chapter--

  • "regulations" means regulations made by the Treasury, and

  • "tax enactments" means provisions of or made under--

    (a)

    the Tax Acts,

    (b)

    TCGA 1992 or any other enactment relating to capital gains tax, or

    (c)

    TMA 1970.



Chapter 6 Supplementary and general

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Acquisitions for restructuring purposes

326 Restructuring to which section 327 applies

(1) Section 327 applies if--

(a) arrangements are made for a company ("the new company") to acquire all the shares ("old shares") in another company ("the old company"),

(b) the acquisition provided for by the arrangements falls within subsection (2), and

(c) the Commissioners for Her Majesty's Revenue and Customs have, before any exchange of shares takes place under the arrangements, given an approval notification.

(2) An acquisition of shares falls within this subsection if--

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

(b) new shares are issued in consideration of old shares only at times when there are no issued shares in the new company other than subscriber shares and new shares previously issued in consideration of old shares,

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

(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.

(3) For the purposes of subsection (1)(c) an approval notification is one which, on the application of either the old company or the new company, is given to the applicant company and states that the Commissioners for Her Majesty's Revenue and Customs are satisfied that the exchange of shares under the arrangements--

(a) will be effected for genuine commercial reasons, and

(b) will not form part of any such scheme or arrangements as are mentioned in section 137(1) of TCGA 1992 (schemes with avoidance purposes).

(4) Nothing in section 327 treats any of the requirements of Chapter 4 as being met in relation to any new shares unless the matching old shares were first issued to the company holding them and have been held by that company from the time when they were issued until they are acquired by the new company.

(5) If, at any time after the arrangements first came into existence and before the new company acquired all the old shares, the arrangements--

(a) cease to be arrangements for the acquisition of all the old shares by the new company, or

(b) cease to be arrangements for an acquisition falling within subsection (2),

section 327 does not treat any requirement of Chapter 4 as being met, and subsection (8) of that section does not apply, in the case of any new shares at any time after the arrangements have so ceased.

327 Certain requirements of Chapter 4 to be treated as met

(1) If this section applies, subsections (2) to (8) have effect to determine the extent to which, and the times for which, the requirements of the following provisions of Chapter 4 are met in relation to the new shares--

  • section 287 (the maximum qualifying investment requirement),

  • section 289 (the proportion of eligible shares requirement),

  • section 290 (the trading requirement),

  • section 291 (the carrying on of a qualifying activity requirement),

  • section 293 (the use of the money raised requirement),

  • section 294 (the relevant company to carry on the relevant qualifying activity requirement),

  • section 296 (the control and independence requirement), and

  • section 297 (the gross assets requirement).

(2) If the requirements of sections 290 and 291 were met in relation to the old company and any old shares immediately before the beginning of the period for giving effect to the arrangements, then (so far as it would not otherwise be the case) those requirements are treated as being met in relation to the new company and the matching new shares at all times which--

(a) fall in that period, and

(b) do not fall after a time when (apart from the arrangements) those requirements would have ceased by virtue of--

(i) section 291(4) or (5), or

(ii) any cessation of a trade by any company,

to be met in relation to the old company and the matching old shares.

(3) For the purposes of section 291, the period of two years mentioned in subsection (4) of that section is treated, in the case of any new shares, as expiring at the same time as it would have expired (or by virtue of this subsection would have been treated as expiring) in the case of the matching old shares.

(4) Subject to subsection (5), if--

(a) there is an exchange under the arrangements of any new shares for any old shares, and

(b) those old shares are shares in relation to which the requirements of sections 293, 294 and 297 were (or were treated as being) met to any extent immediately before the exchange,

those requirements are to be treated, at all times after that time, as met to the same extent in relation to the matching new shares.

(5) If there is a time following any exchange under the arrangements of any new shares for any old shares when (apart from the arrangements) the requirement of section 293 would have ceased under--

(a) subsection (1) of that section, or

(b) this subsection,

to be met in relation to those old shares, that requirement ceases at that time to be met in relation to the matching new shares.

(6) For the purposes of section 287, any new shares acquired under the arrangements are to be treated as representing an investment which--

(a) raised the same amount of money as was raised (or, by virtue of this subsection, is treated as having been raised) by the issue of the matching old shares, and

(b) raised that amount by an issue of shares in the new company made at the time when the issue of the matching old shares took place (or, as the case may be, is treated as having taken place).

(7) In determining whether the requirements of section 296 are met in relation to the old company or the new company at a time in the period for giving effect to the arrangements, ignore both--

(a) the arrangements themselves, and

(b) any exchange of new shares for old shares that has already taken place under the arrangements.

(8) For the purposes of section 289, the value of the new shares, both--

(a) immediately after the time of their acquisition, and

(b) immediately after the time of any subsequent relevant event occurring by virtue of the arrangements,

is to be taken to be the same as the value, when last valued in accordance with that section, of the old shares for which they are exchanged.

328 Supplementary

(1) Subject to subsection (2), references in sections 326 and 327 and this section, except in the expression "subscriber shares", to shares in a company include references to any securities of that company.

(2) For the purposes of subsection (1) a relevant security of the old company is not to be treated as a security of the old company if--

(a) the arrangements do not provide for the acquisition of the security by the new company, or

(b) such treatment prevents section 326(1)(b) from being met in connection with the arrangements.

(3) In subsection (2) "relevant security" means an instrument which is a security for the purposes of Chapter 4 merely because of section 285(2).

(4) References in section 327 to the period for giving effect to the arrangements are references to the period which--

(a) begins with the time when the arrangements first came into existence, and

(b) ends with the time when the new company completes its acquisition under the arrangements of all the old shares.

(5) For the purposes of sections 326 and 327 and this section--

(a) old shares and new shares are of a corresponding description if, were they shares in the same company, they would be of the same description, and

(b) old shares and new shares are matching shares in relation to each other if the old shares are the shares for which the new shares are exchanged under the arrangements.



Conversion of shares etc and company reorganisations

329 Conversion of convertible shares and securities

(1) This section applies if--

(a) shares have been issued to a company ("the investing company") by the exercise by it of any right of conversion attached to other shares or securities held by it ("the convertibles"),

(b) the shares so issued are in the same company as the convertibles to which the right was attached,

(c) the convertibles to which the right was attached were first issued to the investing company and were held by it from the time they were issued until converted, and

(d) the right was attached to the convertibles when they were first so issued and was not varied before it was exercised.

(2) If this section applies, subsections (3) and (4) have effect to determine the extent to which, and the times for which, the requirements of the following provisions of Chapter 4 are met in relation to the shares issued to the investing company by the exercise by it of the right of conversion--

  • section 287 (the maximum qualifying investment requirement),

  • section 289 (the proportion of eligible shares requirement),

  • section 291 (the carrying on of a qualifying activity requirement),

  • section 293 (the use of the money raised requirement),

  • section 294 (the relevant company to carry on the relevant qualifying activity requirement), and

  • section 297 (the gross assets requirement).

(3) Subsections (3) to (6) of section 327 apply in relation to the exchange of convertibles for shares by virtue of the exercise of the right of conversion as if--

(a) that exchange were an exchange, under any arrangements to which that section applies, of new shares for old shares, and

(b) the references in those subsections and section 328(5)(b) to the arrangements were references to the provision conferring the right of conversion.

(4) For the purposes of section 289 the value of the new shares immediately after the time of their acquisition by the investing company is to be taken as the same as the value, when last valued in accordance with that section, of the convertibles for which they are exchanged.

330 Power to facilitate company reorganisations etc involving exchange of shares

(1) The Treasury may by regulations make provision for cases where--

(a) a holding of shares or securities that meets the requirements of Chapter 4 is exchanged for other shares or securities,

(b) the exchange is made for genuine commercial reasons and does not form part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax, and

(c) the new shares or securities do not meet some or all of the requirements of Chapter 4,

providing that the new shares or securities are to be treated as meeting those requirements.

(2) The references in subsection (1) to an exchange of shares or securities include any form of company reorganisation or other arrangement which involves a holder of shares in or securities of a company receiving other shares or securities--

(a) whether the original shares or securities are transferred, cancelled or retained, and

(b) whether the new shares or securities are in or of the same or another company.

(3) The regulations must specify--

(a) the cases in which, and conditions subject to which, they apply,

(b) which requirements of Chapter 4 are to be treated as met, and

(c) the period for which those requirements are to be treated as met.

(4) The regulations may contain such administrative provisions (including provision for advance clearances) as appear to the Treasury to be necessary or appropriate.

(5) The regulations may authorise the Commissioners for Her Majesty's Revenue and Customs to give notice to any person requiring that person to provide such information, specified in the notice, as they may reasonably require in order to determine whether any conditions imposed by the regulations are met.

(6) Regulations under this section --

(a) may make different provision for different cases,

(b) may contain incidental, supplemental, consequential and transitional provision and savings, and

(c) may include provision having retrospective effect.



Supplementary

331 Meaning of a company being "in administration" or "in receivership"

(1) References in this Part to a company being "in administration" or "in receivership" are to be read as follows.

(2) A company is "in administration" if--

(a) it is in administration within the meaning of Schedule B1 to the Insolvency Act 1986 (c. 45) or Schedule B1 to the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), or

(b) there is in force in relation to it under the law of a country or territory outside the United Kingdom any appointment corresponding to an appointment of an administrator under either of those Schedules.

(3) A company is "in receivership" if there is in force in relation to it--

(a) an order for the appointment of an administrative receiver, a receiver and manager or a receiver under Chapter 1 or 2 of Part 3 of the Insolvency Act 1986 or Part 4 of the Insolvency (Northern Ireland) Order 1989, or

(b) any corresponding order under the law of a country or territory outside the United Kingdom.

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