PART V continued
(1) The Taxation of Chargeable Gains Act 1992 shall be amended as follows.
(2) In paragraph (a) of subsection (3) of section 132 (meaning of conversion of securities)—
(a) after “includes” there shall be inserted “any of the following, whether effected by a transaction or occurring in consequence of the operation of the terms of any security or of any debenture which is not a security, that is to say”;
(b) after sub-paragraph (i) there shall be inserted the following sub-paragraphs—
“(ia) a conversion of a security which is not a qualifying corporate bond into a security of the same company which is such a bond, and
(ib) a conversion of a qualifying corporate bond into a security which is a security of the same company but is not such a bond, and”.
(3) After that subsection there shall be inserted the following subsections—
“(4) In subsection (3)(a)(ia) above the reference to the conversion of a security of a company into a qualifying corporate bond includes a reference to—
(a) any such conversion of a debenture of that company that is deemed to be a security for the purposes of section 251 as produces a security of that company which is a qualifying corporate bond; and
(b) any such conversion of a security of that company, or of a debenture that is deemed to be a security for those purposes, as produces a debenture of that company which, when deemed to be a security for those purposes, is such a bond.
(5) In subsection (3)(a)(ib) above the reference to the conversion of a qualifying corporate bond into a security of the same company which is not such a bond includes a reference to any conversion of a qualifying corporate bond which produces a debenture which—
(a) is not a security; and
(b) when deemed to be a security for the purposes of section 251, is not such a bond.”
(4) In section 116(2) (qualifying corporate bonds), after the word “section”, in the first place where it occurs, there shall be inserted “references to a transaction include references to any conversion of securities (whether or not effected by a transaction) within the meaning of section 132 and”.
(5) In section 251(6) (deemed securities), after paragraph (d) there shall be inserted—
“and any debenture which results from a conversion of securities within the meaning of section 132, or is issued in pursuance of rights attached to such a debenture, shall be deemed for the purposes of this section to be a security (as defined in that section).”
(6) This section has effect for the purposes of the application of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 in relation to any disposal on or after 26th November 1996 and shall so have effect, where a conversion took place at a time before that date, as if it had come into force before that time.
(1) After section 138 of the Taxation of Chargeable Gains Act 1992 there shall be inserted the following section—
(1) For the purposes of this section an earn-out right is so much of any right conferred on any person (“the seller”) as—
(a) constitutes the whole or any part of the consideration for the transfer by him of shares in or debentures of a company (“the old securities”);
(b) consists in a right to be issued with shares in or debentures of another company (“the new company”);
(c) is such that the value or quantity of the shares or debentures to be issued in pursuance of the right (“the new securities”) is unascertainable at the time when the right is conferred; and
(d) is not capable of being discharged in accordance with its terms otherwise than by the issue of the new securities.
(2) Where—
(a) there is an earn-out right,
(b) the exchange of the old securities for the earn-out right is an exchange to which section 135 would apply, in a manner unaffected by section 137, if the earn-out right were an ascertainable amount of shares in or debentures of the new company, and
(c) the seller elects under this section for the earn-out right to be treated as a security of the new company,
this Act shall have effect, in the case of the seller and every other person who from time to time has the earn-out right, in accordance with the assumptions specified in subsection (3) below.
(3) Those assumptions are—
(a) that the earn-out right is a security within the definition in section 132;
(b) that the security consisting in the earn-out right is a security of the new company and is incapable of being a qualifying corporate bond for the purposes of this Act;
(c) that references in this Act (including those in this section) to a debenture include references to a right that is assumed to be a security in accordance with paragraph (a) above; and
(d) that the issue of shares or debentures in pursuance of such a right constitutes the conversion of the right, in so far as it is discharged by the issue, into the shares or debentures that are issued.
(4) For the purposes of this section where—
(a) any right which is assumed, in accordance with this section, to be a security of a company (“the old right”) is extinguished,
(b) the whole of the consideration for the extinguishment of the old right consists in another right (“the new right”) to be issued with shares in or debentures of that company,
(c) the new right is such that the value or quantity of the shares or debentures to be issued in pursuance of the right (“the replacement securities”) is unascertainable at the time when the old right is extinguished,
(d) the new right is not capable of being discharged in accordance with its terms otherwise than by the issue of the replacement securities, and
(e) the person on whom the new right is conferred elects under this section for it to be treated as a security of that company,
the assumptions specified in subsection (3) above shall have effect in relation to the new right, in the case of that person and every other person who from time to time has the new right, as they had effect in relation to the old right.
(5) An election under this section in respect of any right must be made, by a notice given to an officer of the Board—
(a) in the case of an election by a company within the charge to corporation tax, within the period of two years from the end of the accounting period in which the right is conferred; and
(b) in any other case, on or before the first anniversary of the 31st January next following the year of assessment in which that right is conferred.
(6) An election under this section shall be irrevocable.
(7) Subject to subsections (8) to (10) below, where any right to be issued with shares in or debentures of a company is conferred on any person, the value or quantity of the shares or debentures to be issued in pursuance of that right shall be taken for the purposes of this section to be unascertainable at a particular time if, and only if—
(a) it is made referable to matters relating to any business or assets of one or more relevant companies; and
(b) those matters are uncertain at that time on account of future business or future assets being included in the business or assets to which they relate.
(8) Where a right to be issued with shares or debentures is conferred wholly or partly in consideration for the transfer of other shares or debentures or the extinguishment of any right, the value and quantity of the shares or debentures to be issued shall not be taken for the purposes of this section to be unascertainable in any case where, if—
(a) the transfer or extinguishment were a disposal, and
(b) a gain on that disposal fell to be computed in accordance with this Act,
the shares or debentures to be issued would, in pursuance of section 48, be themselves regarded as, or as included in, the consideration for the disposal.
(9) Where any right to be issued with shares in or debentures of a company comprises an option to choose between shares in that company and debentures of that company, the existence of that option shall not, by itself, be taken for the purposes of this section either—
(a) to make unascertainable the value or quantity of the shares or debentures to be issued; or
(b) to prevent the requirements of subsection (1)(b) and (d) or (4)(b) and (d) above from being satisfied in relation to that right.
(10) For the purposes of this section the value or quantity of shares or debentures shall not be taken to be unascertainable by reason only that it has not been fixed if it will be fixed by reference to the other and the other is ascertainable.
(11) In subsection (7) above “relevant company”, in relation to any right to be issued with shares in or debentures of a company, means—
(a) that company or any company which is in the same group of companies as that company; or
(b) the company for whose shares or debentures that right was or was part of the consideration, or any company in the same group of companies as that company;
and in this subsection the reference to a group of companies shall be construed in accordance with section 170(2) to (14).”
(2) Subject to subsections (3) to (8) below—
(a) the section 138A inserted by subsection (1) above shall be deemed always to have been a section of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992; and
(b) the enactments applying to chargeable periods beginning before 6th April 1992 shall be deemed always to have included a corresponding section.
(3) Subject to subsections (4) to (6) below, an election under section 138A of the Taxation of Chargeable Gains Act 1992 in respect of a right conferred on any person before 26th November 1996 may be made at any time before the end of the period for the making of such an election in respect of a right conferred on that person on that date.
(4) An election in respect of a right conferred on any person shall not be made by virtue of subsection (3) above at any time after the final determination of his liability to corporation tax or capital gains tax for the chargeable period in which the right was in fact conferred on him.
(5) A notice given to an officer of the Board before the day on which this Act is passed shall not have effect as an election under section 138A of the Taxation of Chargeable Gains Act 1992, or the corresponding provision applying to chargeable periods beginning before 6th April 1992, except in accordance with subsection (6) below.
(6) Where—
(a) any person has given a notification to an officer of the Board before the day on which this Act is passed, and
(b) that notification was given either—
(i) in anticipation of the right to make an election under section 138A of the Taxation of Chargeable Gains Act 1992, or
(ii) for the purposes of an extra-statutory concession available to be used by that person for purposes similar to those of that section,
that notification shall, unless the Board otherwise direct, be treated as if it were a valid and irrevocable election made by that person for the purposes of that section or, as the case may be, the corresponding provision.
(7) Where any notification given as mentioned in subsection (6)(b)(ii) above is treated as an election for the purposes of section 138A of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 or any corresponding provision, that section or, as the case may be, the corresponding provision shall be taken to have no effect by virtue of that election in relation to any disposal before 26th November 1996 of any asset which—
(a) was issued to any person in pursuance of an earn-out right;
(b) was issued to any person in pursuance of any such right as is mentioned in subsection (4) of that section; or
(c) falls for the purposes of that Act to be treated as the same as an asset issued at any time to any person in pursuance of such a right as is mentioned in paragraph (a) or (b) above but is not an asset first held by that person before that time.
(8) Subsection (7) above shall not prevent section 138A of the Taxation of Chargeable Gains Act 1992 from being taken, for the purposes of applying that Act to any disposal on or after 26th November 1996, to have had effect in relation to—
(a) any disposal before that date on which, by virtue of any of the enactments specified in section 35(3)(d) of that Act, neither a gain nor a loss accrued,
(b) any deemed disposal before that date by reference to which a gain or loss falls to be calculated in accordance with section 116(10)(a) of that Act, or
(c) any transaction before that date that would have fallen to be treated as a disposal but for section 127 of that Act.
(1) After section 801 of the Taxes Act 1988 there shall be inserted the following section—
(1) This section applies where—
(a) a company resident in the United Kingdom (“the United Kingdom company”) makes a claim for an allowance by way of credit in accordance with this Part;
(b) the claim relates to underlying tax on a dividend paid to that company by a company resident outside the United Kingdom (“the overseas company”);
(c) that underlying tax is or includes an amount in respect of tax (“the high rate tax”) payable by—
(i) the overseas company, or
(ii) such a third, fourth or successive company as is mentioned in section 801,
at a rate in excess of the relievable rate; and
(d) the whole or any part of the amount in respect of the high rate tax which is or is included in the underlying tax would not be, or be included in, that underlying tax but for the existence of, or for there having been, an avoidance scheme.
(2) Where this section applies, the amount of the credit to which the United Kingdom company is entitled on the claim shall be determined as if the high rate tax had been tax at the relievable rate, instead of at a rate in excess of that rate.
(3) For the purposes of this section tax shall be taken to be payable at a rate in excess of the relievable rate if, and to the extent that, the amount of that tax exceeds the amount that would represent tax on the relevant profits at the relievable rate.
(4) In subsection (3) above “the relevant profits”, in relation to any tax, means the profits of the overseas company or, as the case may be, of the third, fourth or successive company which, for the purposes of this Part, are taken to bear that tax.
(5) In this section “the relievable rate” means the rate of corporation tax in force when the dividend mentioned in subsection (1)(b) above was paid.
(6) In this section “an avoidance scheme” means any scheme or arrangement which—
(a) falls within subsection (7) below; and
(b) is a scheme or arrangement the purpose, or one of the main purposes, of which is to have an amount of underlying tax taken into account on a claim for an allowance by way of credit in accordance with this Part.
(7) A scheme or arrangement falls within this subsection if the parties to it include both—
(a) the United Kingdom company, a company related to that company or a person connected with the United Kingdom company; and
(b) a person who was not under the control of the United Kingdom company at any time before the doing of anything as part of, or in pursuance of, the scheme or arrangement.
(8) In this section “arrangement” means an arrangement of any kind, whether in writing or not.
(9) Section 839 (meaning of “connected persons”) applies for the purposes of this section.
(10) Subsection (5) of section 801 (meaning of “related company”) shall apply for the purposes of this section as it applies for the purposes of that section.
(11) For the purposes of this section a person who is a party to a scheme or arrangement shall be taken to have been under the control of the United Kingdom company at all the following times, namely—
(a) any time when that company would have been taken (in accordance with section 416) to have had control of that person for the purposes of Part XI;
(b) any time when that company would have been so taken if that section applied (with the necessary modifications) in the case of partnerships and unincorporated associations as it applies in the case of companies; and
(c) any time when that person acted in relation to that scheme or arrangement, or any proposal for it, either directly or indirectly under the direction of that company.”
(2) This section has effect in relation to dividends paid to a company resident in the United Kingdom at any time on or after 26th November 1996.
(1) Section 807A of the Taxes Act 1988 (disposals and acquisitions of company loan relationships with or without interest) shall be amended as follows.
(2) At the beginning of subsection (2) there shall be inserted “Subject to subsection (2A) below,”.
(3) After that subsection there shall be inserted the following subsection—
“(2A) Tax attributable to interest accruing to a company under a loan relationship does not fall within subsection (2) above if—
(a) at the time when the interest accrues, that company has ceased to be a party to that relationship by reason of having made the initial transfer under or in accordance with any repo or stock-lending arrangements relating to that relationship; and
(b) that time falls during the period for which those arrangements have effect.”
(4) In subsection (3)(b), after “related transaction” there shall be inserted “other than the initial transfer under or in accordance with any repo or stock-lending arrangements relating to that relationship”.
(5) After subsection (6) there shall be inserted the following subsection—
“(6A) In this section “repo or stock-lending arrangements” has the same meaning as in paragraph 15 of Schedule 9 to the [1996 c. 8.] Finance Act 1996 (repo transactions and stock-lending); and, in relation to any such arrangements—
(a) a reference to the initial transfer is a reference to the transfer mentioned in sub-paragraph (3)(a) of that paragraph; and
(b) a reference to the period for which the arrangements have effect is a reference to the period from the making of the initial transfer until whichever is the earlier of the following—
(i) the discharge of the obligations arising by virtue of the entitlement or requirement mentioned in sub-paragraph (3)(b) of that paragraph; and
(ii) the time when it becomes apparent that the discharge mentioned in sub-paragraph (i) above will not take place.”
(6) Subsections (2) and (3) above have effect in relation to interest accruing on or after 1st April 1996.
(7) Subsection (4) above has effect in relation to transactions made on or after 26th November 1996.
(1) Section 824 of the [1994 c. 9.] Taxes Act 1988 (repayment supplements), where it has effect as amended by paragraph 41 of Schedule 19 to the Finance Act 1994, shall be amended in accordance with subsections (2) to (4) below.
(2) For paragraphs (a) and (b) of subsection (3) there shall be substituted the following paragraphs—
“(a) if the repayment is—
(i) the repayment of an amount paid in accordance with the requirements of section 59A of the Management Act on account of income tax for a year of assessment, or
(ii) the repayment of income tax for such a year which is not income tax deducted at source,
the relevant time is the date of the payment that is being repaid;
(b) if the repayment is of income tax deducted at source for a year of assessment, the relevant time is the 31st January next following that year; and”.
(3) In paragraph (c) of that subsection, for the words from “the relevant time” to the end of that paragraph there shall be substituted “the relevant time is the date on which the penalty or surcharge was paid”.
(4) For subsection (4) there shall be substituted the following subsections—
“(4) For the purposes of subsection (3) above, where a repayment in respect of income tax for a year of assessment is made to any person, that repayment—
(a) shall be attributed first to so much of any payment made by him under section 59B of the Management Act as is a payment in respect of income tax for that year;
(b) in so far as it exceeds the amount (if any) to which it is attributable under paragraph (a) above, shall be attributed in two equal parts to each of the payments made by him under section 59A of the Management Act on account of income tax for that year;
(c) in so far as it exceeds the amounts (if any) to which it is attributable under paragraphs (a) and (b) above, shall be attributed to income tax deducted at source for that year; and
(d) in so far as it is attributable to a payment made in instalments shall be attributed to a later instalment before being attributed to an earlier one.
(4A) In this section any reference to income tax deducted at source for a year of assessment is a reference to—
(a) income tax deducted or treated as deducted from any income, or treated as paid on any income, in respect of that year, and
(b) amounts which, in respect of that year, are tax credits to which section 231 applies,
but does not include a reference to amounts which, in that year, are deducted at source under section 203 in respect of previous years.”
(5) In subsection (2) of section 283 of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (repayment supplements), for the words from “the relevant time” to the end of that subsection there shall be substituted “the relevant time is the date on which the tax was paid”.
(6) This section has effect as respects the year 1997-98 and subsequent years of assessment and shall be deemed to have had effect as respects the year 1996-97.