Finance Act 1960

26 Sale of shares in investment company to associated dealing company

(1) Where a person who has control of an investment company sells shares in the company to a dealing company of which he has control, and—

(a) the shares were acquired by the seller after the beginning of the year 1960-61, or the rights attached to the shares were altered after the beginning of that year, or

(b) at the time of the sale he had shares so acquired similar in number and rights to the shares sold by him,

the provisions of subsections (2) and (3) of this section shall have effect.

(2) If apart from this section the consideration for the sale of the shares would not be a receipt of an income nature in the hands of the seller, it shall be deemed to be income of his (and, if the seller is a company to which section two hundred and forty-five of the Act of 1952 (surtax on undistributed income of certain companies) applies, to be investment income) up to the amount specified in the next following subsection, or, if the seller so elects, up to the full amount of the said consideration reduced by the amount of the consideration (if any) paid for the shares or for the alteration of the rights, and shall be chargeable under Case VI of Schedule D accordingly.

(3) The said amount is the amount of the profit which would have been made by the investment company if, at the time of the sale of the shares, it had sold to the dealing company, for the consideration paid for the shares, such proportion of all its assets as is properly apportionable to the shares, having regard to the number and nature of the shares sold and the rights attaching thereto, as compared with the number and nature of all shares in the investment company and the rights or different rights attaching thereto.

(4) Where a person sells shares in an investment company to a dealing company, and he and one or more other persons together have control of both companies, then if each of the other persons sells or has sold shares in the investment company to the dealing company and paragraph (a) or (b) of subsection (1) of this section applies in relation to all of the sales, the provisions of subsections (2) and (3) of this section shall have effect in relation to each of the sales.

(5) References in subsection (1) or (4) of this section to the sale of shares to such a dealing company as is therein mentioned include references to the sale of the shares to a person not being such a dealing company in any case where the shares are subsequently acquired by such a dealing company in pursuance of arrangements for their eventual acquisition by it made not later than the sale to the said person, and in any such case the shares shall be deemed for the purposes of this section to have been sold to the said person for the consideration paid for them by the dealing company.