Finance Act 1994 (c. 9)

(The document as of February, 2008)

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his wife shall be entitled (in addition to any reduction to which she is entitled by virtue of an election under section 257BA) to an income tax reduction calculated by reference to an amount equal to the unused part of the amount by reference to which her husband's income tax reduction fell to be calculated in pursuance of section 257A and any election under section 257BA. "

(2) In subsection (3) of that section, for paragraph (b) and the words after that paragraph there shall be substituted--

" (b) the amount of the reduction to which she is entitled is determined in accordance with section 256(2)(b) or, by virtue of her having no income tax liability to which that reduction is applicable, is nil,

her husband shall be entitled (in addition to any other reduction to which he is entitled by virtue of section 257A) to an income tax reduction calculated by reference to an amount equal to the unused part of the amount by reference to which his wife's income tax reduction fell to be calculated in pursuance of that election. "

(3) After that subsection there shall be inserted the following subsection--

" (3A) In this section references, in relation to such an amount as is mentioned in subsection (1)(b) or (3)(b), to the unused part of an amount by reference to which any income tax reduction fell to be calculated are references to so much of it (including, where the amount so mentioned is nil, all of it) as has no practical effect on the determination of the amount so mentioned. "

(4) Subsection (6) of that section (calculation of amount left after deductions of a person's total income) shall cease to have effect.

4 (1) Where the year in question for the purposes of subsection (5) of section 257D of the Taxes Act 1988 (transitional relief in the case of a husband with excess allowances) is the year 1994-95, deductions by virtue of any of sections 257A to 262 of that Act shall be disregarded in determining the deductions which a wife is taken for the purposes of paragraph (c) of that subsection to have been entitled to make from her total income for the year immediately preceding the year in question.

(2) In section 257D(5)(d) of that Act, the words "section 257A and" shall be omitted.

5 In section 257F(c) of that Act, after "257A" there shall be inserted "or, as the case may be, an income tax reduction under that section".

6 (1) In subsection (1)(b) of section 259 of that Act (additional personal allowance not available to a person entitled to the married couple's allowance), for "to a deduction from his total income" there shall be substituted "to an income tax reduction".

(2) In subsection (3) of that section (entitlement confined to only one deduction), for "deduction" there shall be substituted "income tax reduction".

(3) In subsection (4A) of that section--

(a) for the words "a deduction", in the first and third places where they occur, there shall be substituted "an income tax reduction"; and

(b) for the words "a deduction", in the second place where they occur, there shall be substituted "a reduction".

7 (1) In subsection (1)(b) of section 260 of that Act (apportionment of relief under section 259), for the words from "the deduction" to "equal" there shall be substituted "the income tax reduction to which each of them is entitled under that section shall be calculated, subject to subsection (2) below, by reference".

(2) In subsection (2) of that section, for the words from "the deduction" to "equal" there shall be substituted "the income tax reduction to which he is entitled for that year under section 259 shall be calculated by reference".

8 (1) In subsection (2) of section 261A of that Act (additional personal allowance for a year in which spouses separate), for the words from "that he is entitled to deduct" onwards there shall be substituted "by reference to which the income tax reduction to which he is entitled under subsection (1) above is calculated shall be treated as reduced by the amount by reference to which the income tax reduction in which that relief consists is, or but for section 256(2)(b) would be, calculated (or to nil where the latter amount is equal to or exceeds the amount which is to be treated as reduced)."

(2) In subsection (4) of that section, for "deduction" there shall be substituted "income tax reduction".

(3) In subsection (5) of that section--

(a) in paragraph (a), for "relief to which those persons are entitled shall not exceed" there shall be substituted "income tax reductions to which those persons are entitled shall not exceed an amount equal to an income tax reduction calculated (in accordance with section 256(2)(a)) by reference to"; and

(b) in paragraph (c), for the words from "the deduction" to "equal" there shall be substituted "the income tax reduction to which each of them is entitled under section 259 or this section shall be calculated by reference".

9 (1) In subsection (2) of section 262 of that Act (widow's bereavement allowance)--

(a) for the words "a deduction from her total income", where they occur in paragraphs (a) and (b), there shall be substituted "an income tax reduction"; and

(b) for the words after paragraph (b) there shall be substituted--

" the income tax reduction mentioned in paragraph (b) above shall instead be made (without a claim being made and in accordance with section 257A) in relation to her late husband's liability to tax for that year as if there had been no such election. "

(2) For subsections (3) and (4) of that section (cases where allowance transferred back to deceased would be unused) there shall be substituted the following subsections--

" (3) If the amount of an income tax reduction falling to be made by virtue of subsection (2) above in relation to the liability of a widow's late husband--

(a) is less by virtue of section 256(2)(b) than the income tax reduction which, but for subsection (2) above, would have been made in her case by virtue of the election mentioned in that subsection, or

(b) by virtue of his having no income tax liability to which that reduction is applicable, is nil,

the widow shall be entitled (in addition to any reduction to which she is entitled by virtue of subsection (1) above and without making a further claim) to an income tax reduction calculated by reference to an amount equal to the unused part of the amount by reference to which the income tax reduction transferred to the late husband in pursuance of subsection (2) above would have fallen to be calculated.

(3A) In subsection (3) above the references, in relation to an amount to which paragraph (a) or (b) of that subsection applies, to the unused part of an amount by reference to which any income tax reduction would have fallen to be calculated are references to so much of it (including, where paragraph (b) of that subsection applies, all of it) as has no practical effect on the determination of the amount to which that paragraph applies. "

10 In section 265(3)(b) of that Act (blind person's allowance), the words from "section 257A" to "or under" shall be omitted.

11 In section 276 of that Act (effect of relief on charges on income), after subsection (1) there shall be inserted the following subsection--

" (1A) In subsection (1) above the references to relief under this Chapter do not include references to relief consisting in such an income tax reduction as is mentioned in section 256(2). "

12 In section 796(1) of that Act (limits on credit for foreign tax), after the words "foreign tax", in the second place where they occur, there shall be inserted "but allowing for the making of any other income tax reduction under the Income Tax Acts".

The Taxes Management Act 1970 (c. 9)

13 In section 37A of the Taxes Management Act 1970 (effect of assessment where allowances transferred)--

(a) after the word "person's", in the first place where it occurs, there shall be inserted "liability to income tax or";

(b) for the words from "any deduction made" to "spouse" there shall be substituted "any income tax reduction or deduction from total income made in the case of that person's spouse"; and

(c) for the words from "and where" onwards there shall be substituted "and the entitlement in that case of the first-mentioned person for the year in question to any income tax reduction or deduction from total income shall be treated as correspondingly reduced."

Section 81.

SCHEDULE 9 Mortgage interest relief etc.

The Taxes Act 1988

1 For paragraph (o) of section 74 of the Taxes Act 1988 (deduction of relevant loan interest in computing profits and gains) there shall be substituted the following paragraph--

" (o) any interest in so far as the payment of that interest is or would be, otherwise than by virtue of section 375(2), either--

(i) a payment of interest to which section 369 applies, or

(ii) a payment of interest to which that section would apply but for section 373(5); " .

2 In section 237(5)(b) of the Taxes Act 1988 (no deduction for interest from or against income consisting of bonus issues etc.), for "under section 353" there shall be substituted "in accordance with section 353(1B)".

3 Subsections (4) and (5) of section 353 of the Taxes Act 1988 (restriction of relief to basic rate tax) shall cease to have effect.

4 In section 355(4) of the Taxes Act 1988 (relief where eligibility is by virtue only of section 355(1)(b))--

(a) for the words from "where" to "but" there shall be substituted "falling within subsection (1)(b) above shall be given only against income from the letting of any land, caravan or house-boat (whether or not the land, caravan or house-boat in question), but"; and

(b) for the words "the first-mentioned land, caravan or house-boat" there shall be substituted "the land, caravan or house-boat in question".

5 In section 356(1) of the Taxes Act 1988 (job-related accommodation), for "Section 355(1)" there shall be substituted "Section 355(1)(a)".

6 In section 356A(3) of the Taxes Act 1988 ("the sharer's limit") after "is", in the second place where it occurs, there shall be inserted "or but for section 353(1C)(a) would be".

7 (1) In sections 356D(1) and 357(1) of the Taxes Act 1988, for "eligible for relief under section 353 by virtue of section 355(1)(a) or 356(1)" there shall, in each case, be substituted ", in a case falling or treated as falling within section 355(1)(a), 356 or 358, eligible for relief under section 353 by virtue of section 354".

(2) In sections 357A(7) and 357B(1)(c) and (6) of that Act, for "by virtue of section 355(1)(a) or 356(1)" there shall, in each case, be substituted "and is such that the conditions for the case to fall, or be treated as falling, within section 355(1)(a), 356 or 358 are satisfied".

(3) In section 357C(1)(e) of that Act, for "by virtue of section 355(1)(a) or 356(1)" there shall be substituted "and would have been such that the conditions for the case to fall, or be treated as falling, within section 355(1)(a), 356 or 358 were satisfied".

(4) In section 357C(2) of that Act, for "by virtue of section 355(1)(a) or 356(1)" there shall be substituted "and was such that the conditions for the case to fall, or be treated as falling, within section 355(1)(a), 356 or 358 were satisfied".

8 In section 358 of the Taxes Act 1988 (relief where borrower deceased), after subsection (4) there shall be inserted the following subsection--

" (4A) References in this Act to a case falling within this section shall not include references to a case falling within section 355(1)(b) where the interest paid by the personal representatives or trustees is eligible for relief under section 353 apart from the assumptions for which subsection (3) above provides. "

9 In section 368(1) of the Taxes Act 1988 (interest in respect of which relief given not allowable as deduction for any other purpose), for "for any other purpose of the Income Tax Acts" there shall be substituted "for any purpose of the Income Tax Acts except so far as it is so allowable in accordance with subsection (1B) of that section."

10 (1) In subsection (2) of section 370 of the Taxes Act 1988 (conditions for interest to be treated as relevant loan interest)--

(a) after "section 353(2)" there shall be inserted "and any other provision applying to interest falling to be treated as relevant loan interest"; and

(b) for "from section 74(o) and, where applicable," there shall be substituted "(where applicable) from".

(2) After subsection (6) of that section there shall be inserted the following subsection--

" (6A) In disregarding section 353(2) for the purposes of subsection (2)(c) above, section 353(1C) and (1D) shall apply for determining whether or not the condition in section 355(1) or 356(1) is fulfilled as (but for section 353(2)) they would apply for the purpose of determining whether or not the case falls, or is treated as falling, within section 355(1)(a) or 356. "

11 In section 375(3) of the Taxes Act 1988 (liability of borrower for excess where deduction should not have been made), for the words from "entitles" to "been allowed" there shall be substituted "shall be taken as regards the borrower as entitling him to any deduction or to retain any amount deducted and, accordingly, where any amount that has been deducted exceeds the amount which ought to have been deducted".

The Finance Act 1993 (c. 34)

12 Subsection (7) of section 57 of the Finance Act 1993 (transitional provision for bridging loans made before 6th April 1991) shall cease to have effect.

Section 83.

SCHEDULE 10 Medical insurance

Introductory

1 In this Schedule "the 1989 Act" means the [1989 c. 26.] Finance Act 1989.

Reduction of relief

2 (1) Section 54 of the 1989 Act (relief on premiums for medical insurance) shall be amended as follows.

(2) In subsection (3) (relief by deduction from income) for the words from "it shall be deducted" to the end of the subsection there shall be substituted " the individual shall be entitled to relief under this subsection in respect of the payment; and (except where subsections (4) to (6) below apply) relief under this subsection shall be given--

(a) in accordance with subsections (3A) to (3C) below, and

(b) only on a claim made for the purpose. "

(3) The following subsections shall be inserted after subsection (3)--

" (3A) Where an individual is entitled to relief under subsection (3) above in respect of one or more payments made in a given year of assessment, the amount of his liability for that year of assessment to income tax on his total income shall be the amount to which he would be liable apart from this section less whichever is the smaller of--

(a) the amount found under subsection (3B) below, and

(b) the amount which reduces his liability to nil.

(3B) The amount referred to in subsection (3A)(a) above is an amount found by--

(a) taking the amount of the payment referred to in subsection (3A) above or (as the case may be) the aggregate amount of the payments there referred to, and

(b) finding an amount equal to tax on the amount taken under paragraph (a) above at the basic rate for the year of assessment concerned.

(3C) In determining for the purposes of subsection (3A) above the amount of incomerson would be liable apart from this section, no account shall be taken of--

(a) any income tax reduction under Chapter I of Part VII of the Taxes Act 1988 or under section 347B of that Act;

(b) any income tax reduction under section 353(1A) of the Taxes Act 1988;

(c) any relief by way of a reduction of liability to tax which is given in accordance with any arrangements having effect by virtue of section 788 of the Taxes Act 1988 or by way of a credit under section 790(1) of that Act;

(d) any tax at the basic rate on so much of that person's income as is income the income tax on which he is entitled to charge against any other person or to deduct, retain or satisfy out of any payment. "

(4) This paragraph shall apply in relation to payments made on or after 6th April 1994.

3 (1) In sections 257D(8) and 265(3) of the Taxes Act 1988 (total income after deductions) paragraph (d) (deduction on account of payments to which section 54(5) of the 1989 Act applies to be disregarded) shall be omitted.

(2) This paragraph shall apply in relation to payments made on or after 6th April 1994.

Surviving spouse

4 (1) In section 54 of the 1989 Act the following subsection shall be inserted after subsection (2)--

" (2A) In a case where--

(a) a payment is made in respect of a premium under a contract at a time when the contract meets the requirement in subsection (2) above by virtue of paragraph (c) of that subsection, and

(b) a payment is made under the same contract at a time after one of the individuals has died and when the contract does not (apart from this subsection) meet the requirement in subsection (2) above by virtue only of the fact that the surviving spouse is not aged 60 or over at the time,

for the purposes of subsection (2) above in its application to the contract the surviving spouse shall be deemed to be aged 60 or over at the time mentioned in paragraph (b) above. "

(2) This paragraph shall apply where the first or only payment to be made in respect of a premium under the contract after the death occurs is made on or after 6th April 1994.

Small benefits and abolition of certification

5 (1) Section 55 of the 1989 Act (eligible contracts) shall be amended as follows.

(2) In subsection (2) (conditions for contract's being eligible) the following paragraphs shall be inserted after paragraph (b)--

" (ba) at the relevant time the contract satisfies the conditions set out in subsection (2A) below,

(bb) the contract is not one in the case of which subsection (2D) below applies, " .

(3) Also in subsection (2)--

(a) after paragraph (c) there shall be inserted "and", and

(b) paragraph (e) and the word "and" immediately preceding it shall be omitted.

(4) The following subsections shall be inserted after subsection (2)--

" (2A) The conditions referred to in subsection (2)(ba) above are that--

(a) the contract either provides indemnity in respect of all or any of the costs of all or any of the treatments, medical services and other matters for the time being specified in regulations made by the Treasury, or in addition to providing indemnity of that description provides cash benefits falling within rules for the time being so specified,

(b) the contract does not confer any right other than such a right as is mentioned in paragraph (a) above or is for the time being specified in regulations made by the Treasury,

(d) the contract satisfies such other requirements as are for the time being specified in regulations made by the Treasury.

(2B) In a case where--

(a) at the relevant time the contract confers a material right, or more than one such right, but

(b) the total cost to the insurer of providing benefits in pursuance of the material right or (as the case may be) in pursuance of all the material rights would not exceed the prescribed sum,

the contract shall not thereby be regarded as failing to satisfy at the relevant time the condition set out in subsection (2A)(b) above.

(2C) For the purposes of subsection (2B) above a material right is a right which--

(a) is not a right such as is mentioned in subsection (2A)(a) above or such as is for the time being specified in regulations made under subsection (2A)(b) above, and

(b) is not a right to a cash benefit.

(2D) This subsection applies in the case of a contract (the main contract) if--

(a) at least one other contract is entered into which is a contract (a collateral contract) under which a benefit is provided in consideration of the insured's entering into the main contract, and

(b) the cost to the insurer of fulfilling his obligations under the collateral contract (or, if there is more than one collateral contract, of fulfilling his obligations under all of them) exceeds the prescribed sum. "

(5) Subsections (3) to (6) shall be omitted.

(6) In subsection (9) (approved benefit) for "mentioned in section 56(3)(a) below" there shall be substituted the following paragraphs--

" (a) mentioned in subsection (2A)(a) above, or

(b) for the time being specified in regulations made under subsection (2A)(b) above. "

(7) The following subsections shall be inserted after subsection (9)--

" (10) For the purposes of this section a benefit is also an approved benefit if it is not a cash benefit and--

(a) it is a single benefit provided otherwise than as mentioned in subsection (9) above and the cost to the insurer of providing it does not exceed the prescribed sum, or

(b) it is one of a number of benefits provided otherwise than as mentioned in subsection (9) above and the total cost to the insurer of providing the benefits does not exceed the prescribed sum.

(11) In this section the reference to a premium, in relation to a contract of insurance, is to any amount payable under the contract to the insurer.

(12) For the purposes of this section the prescribed sum is £30.

(13) The Treasury may by order substitute for the sum for the time being specified in subsection (12) above such sum as may be specified in the order; and any such substitution shall have effect in relation to cases where the relevant time falls on or after such date as is specified in the order. "

(8) This paragraph shall apply where the time which is the relevant time for the purposes of section 55 falls on or after 1st July 1994.

6 The Board shall not certify a contract under section 56 of the 1989 Act in such a way that the certification is expressed to take effect on or after 1st July 1994.

Section 91.

SCHEDULE 11 Extension of roll-over relief on re-investment

1 Chapter IA of Part V of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 shall be amended as follows.

Disposals on which relief available

2 In section 164A--

(a) in subsection (1)(a), for the words following "("the re-investor")" there is substituted "on any disposal by him of any asset ("the asset disposed of"); and",

(b) in subsection (2), "Subject to section 164C" is omitted and for "initial holding" (in three places) there is substituted "asset disposed of",

(d) in subsection (9), for "initial holding" there is substituted "asset disposed of", and

(e) for subsection (12) there is substituted--

" (12) Without prejudice to section 52(4), where consideration is given for the acquisition of any assets some of which are shares to the acquisition of which a claim under this section relates and some of which are not, the consideration shall be apportioned in such manner as is just and reasonable " .

3 For section 164B there is substituted--

" 164B Roll-over relief on re-investment by trustees

(1) Subject to the following provisions of this section, section 164A shall apply, as it applies in such a case as is mentioned in subsection (1) of that section, where there is--

(a) a disposal by the trustees of a settlement of any asset comprised in any settled property to which this section applies, and

(b) such an acquisition by those trustees of eligible shares in a qualifying company as would for the purposes of that section be an acquisition of a qualifying investment at a time in the qualifying period.

(2) This section applies--

(a) to any settled property in which the interests of the beneficiaries are not interests in possession, if all the beneficiaries are individuals, and

(b) to any settled property in which the interests of the beneficiaries are interests in possession, if any of the beneficiaries are individuals,

and references in this section to individuals include any charity.

(3) If, at the time of the disposal of the asset mentioned in subsection (1)(a) above, the settled property comprising that asset is property to which this section applies by virtue of subsection (2)(b) above but not all the beneficiaries are individuals, then--

(a) only the relevant proportion of the gain which would accrue to the trustees on the disposal shall be taken into account for the purposes of section 164A(2)(a)(i), and

(b) no reduction under section 164A(2) shall be made in respect of the whole or any part of the balance of the gain.

(4) Section 164A shall not apply by virtue of this section in a case where, at the time of the disposal of the asset mentioned in subsection (1)(a) above, the settled property which comprises that asset is property to which this section applies by virtue of subsection (2)(a) above unless, immediately after the acquisition of shares mentioned in subsection (1)(b) above, the settled property comprising the shares is also property to which this section applies by virtue of subsection (2)(a) above.

(5) Section 164A shall not apply by virtue of this section in a case where, at the time of the disposal of the asset mentioned in subsection (1)(a) above, the settled property which comprises that asset is property to which this section applies by virtue of subsection (2)(b) above unless, immediately after the acquisition of shares mentioned in subsection (1)(b) above--

(a) the settled property comprising the shares is also property to which this section applies by virtue of subsection (2)(b) above, and

(b) if not all the beneficiaries are individuals, the relevant proportion is not less than the proportion which was the relevant proportion at the time of the disposal of the asset mentioned in subsection (1)(a) above.

(6) If, at any time, in the case of settled property to which this section applies by virtue of subsection (2)(b) above, both individuals and others have interests in possession, the relevant proportion at that time is the proportion which the amount specified in paragraph (a) below bears to the amount specified in paragraph (b) below, that is--

(a) the total amount of the income of the settled property, being income the interests in which are held by beneficiaries who are individuals, and

(b) the total amount of all the income of the settled property.

(7) Where, in the case of any settled property in which any beneficiary holds an interest in possession, one or more beneficiaries ("the relevant beneficiaries") hold interests not in possession, this section shall apply as if--

(a) the interests of the relevant beneficiaries were a single interest in possession, and

(b) that interest were held, where all the relevant beneficiaries are individuals, by an individual and, in any other case, by a person who is not an individual.

(8) In this section references to interests in possession do not include interests for a fixed term. "

4 Sections 164C to 164E are omitted.

5 In section 164H(1), "within the meaning of section 164C" is omitted.

6 In section 164L(10), for the words following "trustees or" there is substituted "any individual or charity by virtue of whose interest, at the time of the acquisition, section 164B applies to the settled property".

Acquisitions on which relief available

7 For section 164A(8) there is substituted--

" (8) For the purposes of this section, a person who acquires any eligible shares in a qualifying company shall be regarded as acquiring a qualifying investment unless, where the asset disposed of consisted of shares in or other securities of any company ("the initial holding"), the qualifying company--

(a) is the company in which the initial holding subsisted, or

(b) is a company that was, at the time of the disposal of the initial holding, or is, at the time of the acquisition of the qualifying investment, a member of the same group of companies as the company in which the initial holding subsisted. "

Retirement relief

8 Section 164A(11) is omitted and after section 164B there is inserted--

" 164BA Interaction with retirement relief

(1) The provisions of section 164A for making any reduction shall apply before any provisions for calculating the amount of, or giving effect to, any relief under section 163 or 164; and references in that section and this to a chargeable gain (except the second reference in subsection (4)(a) below) shall be construed accordingly.

(2) Subsection (3) below applies where--

(a) any claim for relief is made under section 164A in respect of any chargeable gain, and

(b) apart from this Chapter, the whole or any part of that gain would be relieved under section 163 or 164.

(3) For the purpose of giving relief under section 163 or 164, any reduction under section 164A shall be treated as having been made first against the unrelieved part of the chargeable gain; and only the amount (if any) which is equal to the unrelieved part of the chargeable gain after that reduction shall be treated as exceeding the amount available for relief.

(4) For the purposes of this section--

(a) the unrelieved part of a chargeable gain is so much of that gain as, apart from this Chapter, would constitute a chargeable gain after the application of the appropriate paragraph of Schedule 6,

(b) "amount available for relief" has the same meaning as in the appropriate paragraph of that Schedule, and

Clawback

9 (1) In section 164F--

(a) for subsection (1) there is substituted--

" (1) This section shall apply where a person has acquired any eligible shares in a qualifying company ("the acquired holding") for a consideration which is treated as reduced, under section 164A or this section, by any amount ("the held-over gain") " ,

(b) in subsection (3), for the words from "either" to the end of paragraph (b) there is substituted "charged on any disposal or under this section",

" (4) For the purposes of this section the whole or a part of any held-over gain on the acquisition of the acquired holding shall be treated--

(a) in accordance with subsection (4A) below as charged on any disposal in relation to which the whole or any part of the held-over gain falls to be taken into account in determining the chargeable gain or allowable loss accruing on the disposal, and

(b) as charged under this section so far as it falls to be disregarded in accordance with subsection (11) below.

(4A) In the case of any such disposal as is mentioned in subsection (4)(a) above, the amount of the held-over gain charged on that disposal--

(a) shall, except in the case of a part disposal, be the amount taken into account as so mentioned, and

(b) in the case of a part disposal, shall be calculated by multiplying the following, that is to say--

(i) so much of the amount of the held-over gain as has not already been charged on a previous disposal, and

(ii) the fraction used in accordance with section 42(2) for determining, subject to any deductions in pursuance of this Chapter, the amount allowable as a deduction in the computation of the gain accruing on the disposal in question " ,

(d) in subsection (5)--

(i) in paragraph (a) "or 164D" is omitted, and

(ii) in paragraph (c), for the words from "section 164D(4)" to the end there is substituted "subsections (4) and (4A) above",

(e) in subsection (10), "(within the meaning of section 164D)" is omitted, and

(f) after that subsection there is inserted--

" (10A) Where (apart from this subsection) a chargeable gain of any amount would by virtue of subsection (2) above accrue to the person who acquired the acquired holding but, within the period mentioned in subsection (10B) below, that person acquires a qualifying investment (within the meaning of section 164A), that person shall, on making a claim as respects the qualifying investment, be treated--

(a) as if the amount of the gain were reduced by whichever is the smallest of the following--

(i) the actual amount or value of the consideration for the acquisition of the qualifying investment,

(ii) in the case of a qualifying investment acquired otherwise than by a transaction at arm's length, the market value of that investment at the time of its acquisition,

(iii) the amount specified for the purposes of this subsection in the claim, and

(b) as if the amount or value of the consideration for the acquisition of the qualifying investment were reduced by the amount of the reduction made under paragraph (a) above;

but paragraph (b) above shall not affect the treatment for the purposes of this Act of the other party to the transaction involving the qualifying investment.

(10B) The period referred to in subsection (10A) above is the period (not including any period before the acquisition of the acquired holding) which begins 12 months before and ends 3 years after the time when the chargeable gain accrues or would but for that subsection accrue, together with any such further period after the disposal as the Board may by notice allow. "

(2) Section 164F as amended by sub-paragraph (1) above shall have effect as follows--

(a) the reference in subsection (1) to consideration treated as reduced under section 164A includes consideration treated as reduced under section 164D,

(b) the reference in subsection (3) to a gain having been charged on any disposal includes any gain having been carried forward from any disposal of shares, and

(c) the amounts referred to in subsection (4A)(a) and (b)(i) shall be treated as reduced by any amounts carried forward from any disposal of shares.

(3) References in sub-paragraph (2) above to an amount being carried forward from a disposal of shares are references to the reduction by that amount, in accordance with section 164D(3)(a), of the amount of the consideration for the disposal of those shares.

Anti-avoidance

10 In section 164L--

(a) after subsection (10) there is inserted--

" (10A) For the purposes of this Chapter, where--

(a) a person has acquired any eligible shares in a qualifying company ("the acquired holding") for a consideration which is treated as reduced under this Chapter by any amount ("the held-over gain"), and

(b) after that acquisition, he acquires eligible shares in a relevant company,

he shall not be regarded in relation to his acquisition of those shares in the relevant company as acquiring a qualifying investment for the purposes of section 164A.

(10B) For the purposes of subsection (10A) above a company is a relevant company if--

(a) where that person has disposed of any of the acquired holding, it is the company in which the acquired holding has subsisted or a company which was a member of the same group of companies as that company at any time since the acquisition of the acquired holding,

(b) it is a company in relation to the disposal of any shares in which there has been a claim under this Chapter such that, without that or an equivalent claim, there would have been no held-over gain in relation to the acquired holding, or

(c) it is a company which, at the time of the disposal or acquisition to which the claim relates, was a member of the same group of companies as a company falling within paragraph (b) above " , and

(b) in subsection (11), for the definition of "chargeable business assets" there is substituted--

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