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Finance Act 1962

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This is the original version (as it was originally enacted).

14Disposals of land effected indirectly

(1)Subject to the provisions of this section, where a person disposes of shares in a company, and immediately before the disposal either—

(a)the company is or has control of a land-owning company, and is one which is under the control of not more than five persons and in which he has a substantial interest; or

(b)the company, or a company of which it has control, has a substantial interest in a land-owning company under the control of not more than five persons, and the company is one of which he has control, or of which he and persons connected with him have control;

then he shall be chargeable to tax under Case VII by reference to his disposal of the shares, whenever he acquired them, and notwithstanding that he acquired them as legatee.

(2)Where, but for this section, a person would not be chargeable to tax under Case VII by reference to a disposal of shares in a company, then—

(a)he shall not be chargeable unless chargeable gains would have accrued to the company, being a land-owning company, or to a land-owning company referred to in paragraph (a) or (b), as the case may be, of subsection (1) above, on the company disposing of its land at market value at the time of his disposal and any such land-owning company disposing likewise of the land of that company; and

(b)he shall not, if a gain accrues to him on that disposal, be chargeable by reference to it to tax on an amount greater than the amount of the chargeable gains which would have so accrued, or such part of that amount as is attributable to the shares disposed of by him, but if a loss accrues to him on the disposal, it shall not be allowable under Case VII.

(3)For the purposes of this section, "chargeable gains" means gains chargeable to tax under Case VII, but in calculating the chargeable gains that would have accrued to a company on the disposal of its land there shall be made the like deductions as would have been made in charging that tax for the losses that would have so accrued and, so far as they could not be deducted from chargeable gains previously accruing to the company, for losses previously accruing to it:

Provided that in the application of this section to a disposal of shares acquired as legatee on a death a company shall be treated as not chargeable to tax under Case VII by reference to any acquisition of land made before the death.

(4)Where in the case of a company any amount deductible under subsection (3) above in respect of losses cannot be deducted under that subsection because no gains or insufficient gains would have accrued to the company, the amount of the chargeable gains attributable to shares in the principal company shall be reduced by the amount that cannot be deducted or, if the company is not the principal company, by such part of that amount as is attributable to any shares held by the principal company. In this subsection " principal company ", in relation to any disposal of shares in a company, means that company.

(5)The part attributable to any shares in a company of the amount of any chargeable gains, or of any amount deductible in respect of losses, shall be the sum which that amount would add to or take from the distributions made in respect of those shares in a winding-up of the company if the amount represented assets of the company or, in the case of an amount deductible in respect of losses, a liability of the company, and if apart from that amount the assets of the company were enough, and no more than enough, to ensure the satisfaction of its liabilities (including the return of share capital); and the part of any such amount which is directly or indirectly attributable under this subsection to shares held by a company shall (so far as is necessary for the determination of any question as to the tax chargeable) be apportioned by the like method between the shares in that company to arrive at the part attributable to any of those shares.

(6)In this section " land-owning company " means a company not carrying on a trade of dealing in or developing land, but entitled to land, being chargeable assets, to a value equal to or exceeding one-fifth of the net value of all its assets (that is to say, their value less the value of the debts and liabilities of the company); and for this purpose the value of the said land shall be taken to be the value of the company's interest free of any liability charged thereon, and to include the value of interests which the company has unconditionally contracted to acquire, but not that of interests which the company has unconditionally contracted to dispose of. For the purposes of this subsection " value " in relation to a company's land means market value, and the net value of a company's assets is the net value they would have on a sale in the open market of the company's business as a going concern.

(7)For the purposes of this section a person shall be deemed to have a substantial interest in a company if one-tenth or more in market value of the issued shares in the company is held by him or is held partly by him and partly by persons connected with him; and the persons to be treated as connected with one another are those specified in paragraph 20 of the Ninth Schedule to this Act.

(8)In this section " share ", in relation to a company not limited by shares (whether or not it has a share capital), shall include the interest of a member of the company as such, whatever the form of that interest, and this section shall apply in relation to any disposal of rights attached to or forming part of a share as if the rights included in the, disposal and those not included were separate shares.

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