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Finance Act 2014

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2After section 255 insert—

Investments in social enterprises

255AHold-over relief for gains re-invested in social enterprises

Schedule 8B to this Act (which provides relief in respect of gains re-invested in social enterprises) has effect.

255BGains and losses on investments in social enterprises

(1)For the purpose of determining the gain or loss on any disposal of an asset by an individual where—

(a)an amount of SI relief is attributable to the asset, and

(b)apart from this subsection there would be a loss,

treat the consideration given by the individual for the acquisition of the asset as reduced by the amount of the SI relief.

(2)If—

(a)an individual disposes of an asset,

(b)an amount of SI relief is attributable to the asset,

(c)the disposal takes place after the end of the 3 years beginning with the day when the individual acquired the asset, and

(d)apart from this subsection, there would be a gain on the disposal,

the gain is not a chargeable gain, subject to section 255C.

(3)Despite section 16(2), subsection (2) above does not apply to a disposal on which a loss accrues.

(4)Any question as to—

(a)which of any assets acquired by an individual at different times a disposal relates to, being assets to which SI relief is attributable, or

(b)whether a disposal relates to assets to which SI relief is attributable or to other assets,

is to be determined for the purposes of capital gains tax as provided by section 257TA of ITA 2007.

(5)Chapter 1 of this Part has effect subject to subsection (4).

(6)Sections 104, 105 and 106A do not apply to assets to which SI relief is attributable.

(7)There are to be made all such adjustments of capital gains tax, whether by way of assessment or by way of discharge or repayment of tax, as may be required in consequence of SI relief being given or withdrawn.

(8)In this section and sections 255C to 255E “SI relief” means relief under Part 5B of ITA 2007 (income tax relief for investments in social enterprises).

(9)That Part applies for the purposes of this section and sections 255C to 255E to determine whether SI relief is attributable to any asset and, if so, the amount of SI relief so attributable.

255CApplication of section 255B(2) where maximum SI relief not obtained

(1)Subsection (2) applies if—

(a)an individual’s liability to income tax has been reduced (or treated by virtue of section 257T of ITA 2007 (spouses or civil partners) as reduced) for any tax year under section 257JA of ITA 2007 (SI relief) in respect of the acquisition of an asset,

(b)the amount of the reduction (“D”) is less than the amount given by—

I × R

where—

  • I is the amount on which the individual has SI relief in the case of the asset, and

  • R is the SI rate for the tax year for which the SI relief was obtained, and

(c)D is not within paragraph (b) solely by virtue of section 29(2) and (3) of ITA 2007.

(2)If the individual disposes of the asset and there is a gain on the disposal, section 255B(2) has effect in relation to the gain as if it were reduced by multiplying it by—

(3)In this section “SI rate” has the meaning given by section 257JA(5) of ITA 2007.

255DApplication of section 255B(2) where SI relief has been reduced

(1)Subsection (2) applies if before a disposal of an asset—

(a)value is received in circumstances where SI relief attributable to the asset is reduced by an amount under section 257Q(1)(a) of ITA 2007, or

(b)there is a repayment, redemption, repurchase or payment in circumstances where SI relief attributable to the asset is reduced by an amount under section 257QJ(2)(a) of ITA 2007, or

(c)paragraphs (a) and (b) both apply.

(2)If section 255B(2) applies on the disposal but section 255C does not, section 255B(2) applies only to so much of the gain as remains after deducting so much of it as is found by multiplying it by the fraction—

where—

  • A is equal to the amount by which the SI relief given in respect of the asset is reduced as mentioned in subsection (1) above, and

  • B is equal to the amount of the SI relief given in respect of the asset.

(3)If sections 255B(2) and 255C apply on the disposal, section 255B(2) applies only to so much of the gain as is found by—

(a)taking the part of the gain found under section 255C, and

(b)deducting from that part so much of it as is found by multiplying it by the fraction mentioned in subsection (2).

(4)If the SI relief given in respect of the asset is reduced as mentioned in subsection (1) by more than one amount, the amount referred to as A in subsection (2) is to be taken to be equal to the aggregate of those amounts.

(5)The amount referred to in subsection (2) as B is to be found without regard to any reduction mentioned in subsection (1).

255EReorganisations involving shares to which SI relief is attributable

(1)Subsection (2) applies if an individual holds shares which form part of the ordinary share capital of a company and include shares of more than one of the following kinds—

(a)shares to which SI relief is attributable and to which subsection (3) applies,

(b)shares to which SI relief is attributable and to which subsection (3) does not apply, and

(c)shares to which SI relief is not attributable and to which subsection (3) does not apply.

(2)If there is a reorganisation within the meaning of section 126 affecting the shares listed in subsection (1), section 127 applies separately to those shares so that shares of each kind are treated as a separate holding of original shares and identified with a separate new holding.

(3)This subsection applies to any shares if—

(a)expenditure on the shares has been set under Schedule 8B to this Act against the whole or part of any gain, and

(b)in relation to the shares there has been no chargeable event for the purposes of that Schedule.

(4)If—

(a)an individual holds shares (“the existing holding”) which form part of the ordinary share capital of a company,

(b)there is, by virtue of any such allotment for payment as is mentioned in section 126(2)(a), a reorganisation affecting the existing holding, and

(c)immediately following the reorganisation, SI relief is attributable to the existing holding or the allotted shares,

sections 127 to 130 do not apply in relation to the existing holding.

(5)Subject to subsection (6), sections 135 and 136 do not apply in respect of shares to which SI relief is attributable.

(6)Subsection (5) does not have effect to disapply section 135 or 136 in a case where the original shares are shares to which SI relief is attributable if—

(a)the new holding consists of new ordinary shares which meet conditions A and B of section 257L of ITA 2007,

(b)the new shares are issued after the end of three years beginning with the day on which the original shares were acquired,

(c)before issuing the new shares, the company had issued shares which met conditions A and B of section 257L of ITA 2007, and

(d)the company issued a compliance certificate in relation to those earlier shares for the purposes of section 257PA(1) of ITA 2007 and in accordance with sections 257PB and 257PC of ITA 2007.

(7)In subsection (6) “new holding” is to be construed in accordance with sections 126, 127, 135 and 136.

(8)In this section—

  • “ordinary share capital” has the meaning given in section 989 of ITA 2007;

  • “ordinary shares”, in relation to a company, means shares forming part of its ordinary share capital.

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