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Finance Act 1966

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39Cancellation of tax advantages from certain transactions in securities

(1)For the purposes of the definition of tax advantage in section 43 (4) (g) of the Finance Act 1960 it shall be assumed that a person who might have received from a company any dividend or other distribution (as defined for the purposes of the Corporation Tax Acts) would have borne the income tax chargeable under Schedule F which the company would have had to account for under section 47(3) of the Finance Act 1965 in respect of the distribution, and an assessment under section 28(3) of the Finance Act 1960 to counteract a tax advantage consisting of the avoidance or reduction of an assessment to income tax which would be payable by a company under the said section 47(3) in respect of a distribution may be made under Case VI of Schedule D on a person other than the company, and may be so made in addition to any assessment to counteract a tax advantage in respect of surtax.

(2)An assessment so made on a person other than the company may be of an amount arrived at without regard to any set off to which the company would have been entitled under Schedule 12 to the Finance Act 1965.

(3)After paragraph (2)(d) in the said section 28 there shall be added the following paragraph—

(e)in connection with the transfer directly or indirectly of assets of a company to which paragraph (d) above applies to another such company, or in connection with any transaction in securities in which two or more companies to which paragraph (d) above applies are concerned, the person in question receives non-taxable consideration which is or represents the value of assets available for distribution by such a company, and which consists of any share capital or any security (as defined by paragraph 7(1) of Schedule 11 to the Finance Act 1965) issued by such a company.

(4)So far as the paragraph (e) added to the said section 28(2) by subsection (3) above relates to share capital other than redeemable share capital, it shall not apply unless and except to the extent that the share capital is repaid (in a winding-up or otherwise), and where the said section 28 applies to a person by virtue of the said paragraph (e) on the repayment of any share capital any assessment to tax under subsection (3) of the said section 28 shall be an assessment to tax for the year in which the share capital is repaid.

(5)Any notice or notification under subsection (3) or (4) of the said section 28, or under section 29(b) of the Finance Act 1960, concerning the application of the said section 28 to a person who has died may be given or issued to his personal representatives, and the provisions of the said section 28 relating to the making of a statutory declaration, to rights of appeal and to the giving of information shall be construed accordingly.

(6)In this section—

  • " assets available for distribution " means assets which are, or apart from anything done by the company in question would have been, available for distribution by way of dividend, or trading stock of the company,

  • " non-taxable ", in relation to a person receiving consideration, means that the recipient does not pay or bear tax on it as income (apart from the provisions of section 28 of the Finance Act 1960),

  • " share " includes stock and any other interest of a member in a company, and the references in subsection (4) above to the repayment of share capital include references to any distribution made in respect of any shares in a winding up or dissolution of the company.

(7)The amendments made by this section in sections 28 and 29 of the Finance Act 1960, and in the definition of tax advantage as it applies for the purposes of that section, shall not apply to a person in respect of any transaction or transactions in securities if they were carried out before 3rd May 1966, and if any change in the nature of any activities carried on by any person, being a change necessary in order that the tax advantage should be obtainable in consequence of the transaction or transactions, was also effected before that day, but nothing in this section shall be taken to prejudice the operation of the said section 28, without this section, in any such case.

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