Part III Income tax and corporation tax

Distributions, tax credits etc: avoidance

25 Repeal of s.95(5) of the Taxes Act 1988: consequential amendments.

1

In section 246A(9) of the Taxes Act 1988 (which provides that “fixed-rate preference shares” shall be construed in accordance with section 95(5)) for “section 95(5)” there shall be substituted “ paragraph 13(6) of Schedule 28B ”.

2

In Schedule 28B to the Taxes Act 1988 (venture capital trusts) paragraph 13 (general interpretation) shall be amended in accordance with subsections (3) and (4) below.

3

In sub-paragraph (5), paragraph (b) (which provides that “fixed-rate preference shares” has the same meaning as in section 95), and the word “and” immediately preceding that paragraph, shall be omitted.

4

After sub-paragraph (5) there shall be inserted—

6

In this paragraph “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) above “new consideration” has the meaning given by section 254.

5

In Schedule 7 to the M1Finance Act 1997 (special treatment for certain distributions) paragraph 5 (fixed-rate preference shares) shall be amended in accordance with subsections (6) and (7) below.

6

In sub-paragraph (2) (which defines “fixed-rate preference shares” by reference to section 95 of the Taxes Act 1988)—

a

in paragraph (a) for “section 95 of” there shall be substituted “ paragraph 13 of Schedule 28B to ”; and

b

in paragraph (b) for “section 95(5)(c)(i) of that Act” there shall be substituted “ paragraph 13(6)(c)(i) of that Schedule ”.

7

After sub-paragraph (2) there shall be inserted—

3

For the purposes of sub-paragraph (2) above, any reference in paragraph 13(6) of Schedule 28B to shares shall be taken as a reference to shares within the meaning of this Schedule.

8

This section has effect on and after 2nd July 1997.