Finance Act 1998

Section 70.

SCHEDULE 12 E+W+S+N.I. EIS and VCTs: meaning of qualifying trade

New exclusions for the enterprise investment scheme E+W+S+N.I.

1 (1) In subsection (2) of section 297 of the Taxes Act 1988 (activities excluded from qualifying trade), the following paragraphs shall be inserted after paragraph (f)— E+W+S+N.I.

“(fa) property development;

(fb) farming or market gardening;

(fc) holding, managing or occupying woodlands, any other forestry activities or timber production;

(fd) operating or managing hotels or comparable establishments or managing property used as an hotel or comparable establishment;

(fe) operating or managing nursing homes or residential care homes, or managing property used as a nursing home or residential care home;”.

(2) In paragraph (g) of that subsection (providing support for the carrying on of excluded activities), for “(f)" there shall be substituted “ (fe) ”.

(3) After subsection (3) of that section there shall be inserted the following subsection—

“(3A) For the purposes of this Chapter the activities of a person shall not be taken to fall within paragraph (fd) or (fe) of subsection (2) above except where that person has an estate or interest in, or is in occupation of, the hotels or comparable establishments or, as the case may be, the nursing homes or residential care homes.”

Definition of excluded activities for the enterprise investment scheme E+W+S+N.I.

2 (1) In subsection (5) of section 298 of the Taxes Act 1988 (interpretation of section 297), after the definition of “film" there shall be inserted the following definition— E+W+S+N.I.

““nursing home” means any establishment which exists wholly or mainly for the provision of nursing care for persons suffering from sickness, injury or infirmity or for women who are pregnant or have given birth to children;”.

(2) In that subsection, before the word “and" at the end of the definition of “pleasure craft" there shall be inserted the following definitions—

(a) by a company which has, or at any time has had, an interest in the land, and

(b) with the sole or main object of realising a gain from the disposal of an interest in the land when it is developed;

“residential care home” means any establishment which exists wholly or mainly for the provision of residential accommodation, together with board and personal care, for persons in need of personal care by reason of old age, mental or physical disabilities, past or present dependence on alcohol or drugs or any past illnesses or past or present mental disorders;”.

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

“(5A) References in this section, in relation to an hotel, to a comparable establishment are references to a guest house, hostel or other establishment the main purpose of maintaining which is the provision of facilities for overnight accommodation (whether with or without catering services).

(5B) Subject to subsection (5C) below, the reference in subsection (5) above to an interest in land is a reference to—

(a) any estate, interest or right in or over land, including any right affecting the use or disposition of land; or

(b) any right to obtain such an estate, interest or right from another which is conditional on the other’s ability to grant the estate, interest or right.

(5C) References in this section to an interest in land do not include references to—

(a) the interest of a creditor (other than a creditor in respect of a rentcharge) whose debt is secured by way of mortgage, an agreement for a mortgage or a charge of any kind over land; or

(b) in the case of land in Scotland, the interest of a creditor in a charge or security of any kind over land.”

New exclusions for VCTs E+W+S+N.I.

3 (1) In sub-paragraph (2) of paragraph 4 of Schedule 28B to the Taxes Act 1988 (activities excluded from qualifying trade), the following paragraphs shall be inserted after paragraph (e)— E+W+S+N.I.

“(ea) property development;

(eb) farming or market gardening;

(ec) holding, managing or occupying woodlands, any other forestry activities or timber production;

(ed) operating or managing hotels or comparable establishments, or managing property used as an hotel or comparable establishment;

(ee) operating or managing nursing homes or residential care homes, or managing property used as a nursing home or residential care home;”.

(2) In paragraph (f) of that sub-paragraph (providing support for the carrying on of excluded activities), for “(e)" there shall be substituted “ (ee) ”.

(3) After sub-paragraph (3) of that paragraph there shall be inserted the following sub-paragraph—

“(3A) For the purposes of this Schedule the activities of a person shall not be taken to fall within paragraph (ed) or (ee) of sub-paragraph (2) above except where that person has an estate or interest in, or is in occupation of, the hotels or comparable establishments or, as the case may be, the nursing homes or residential care homes.”

Definition of excluded activities for VCTs E+W+S+N.I.

4 (1) In sub-paragraph (1) of paragraph 5 of that Schedule (interpretation of paragraph 4), after the definition of “film" there shall be inserted the following definition— E+W+S+N.I.

““nursing home” means any establishment which exists wholly or mainly for the provision of nursing care for persons suffering from sickness, injury or infirmity or for women who are pregnant or have given birth to children;”.

(2) In that sub-paragraph, after the definition of “pleasure craft" there shall be inserted the following definition—

(a) by a company which has, or at any time has had, an interest in the land, and

(b) with the sole or main object of realising a gain from the disposal of an interest in the land when it is developed;”.

(3) In that sub-paragraph, before the word “and" at the end of the definition of “research and development" there shall be inserted the following definition—

““residential care home” means any establishment which exists wholly or mainly for the provision of residential accommodation, together with board and personal care, for persons in need of personal care by reason of old age, mental or physical disabilities, past or present dependence on alcohol or drugs or any past illnesses or past or present mental disorders;”.

(4) In sub-paragraph (5) of that paragraph (definitions for the purposes of that paragraph), after the definition of “director" there shall be inserted the following definition—

(a) any estate, interest or right in or over land, including any right affecting the use or disposition of land; or

(b) any right to obtain such an estate, interest or right from another which is conditional on the other’s ability to grant the estate, interest or right.”

(5) After that sub-paragraph there shall be inserted the following sub-paragraphs—

“(6) References in paragraph 4 above, in relation to an hotel, to a comparable establishment are references to a guest house, hostel or other establishment the main purpose of maintaining which is the provision of facilities for overnight accommodation (whether with or without catering services).

(7) References in this paragraph to an interest in land do not include references to—

(a) the interest of a creditor (other than a creditor in respect of a rentcharge) whose debt is secured by way of mortgage, an agreement for a mortgage or a charge of any kind over land; or

(b) in the case of land in Scotland, the interest of a creditor in a charge or security of any kind over land.”

Commencement E+W+S+N.I.

5 (1) Paragraphs 1 and 2 above have effect in relation to shares issued on or after 17th March 1998. E+W+S+N.I.

(2) Subject to sub-paragraph (3) below, paragraphs 3 and 4 above have effect for the purpose of determining whether any shares or securities are, as at any time on or after 17th March 1998, to be regarded as comprised in the qualifying holdings of any company (“the trust company").

(3) Paragraphs 3 and 4 above shall not have effect for the purpose of making such a determination in relation to any shares or securities acquired by the trust company by means of the investment of—

(a) money raised by the issue before 17th March 1998 of shares in or securities of the trust company, or

(b) money derived from the investment by that company of any such money.