4(1)The Taxes Act 1988 is amended as follows.
(2)In section 299 (disposal of shares)—
(a)in subsection (6D), as that section applies to shares issued after 31st December 1993 (enterprise investment scheme), and
(b)in subsection (4C), as that section applies to shares issued before 1st January 1994 (business expansion scheme),
for “(whether or not by virtue of section 135(3) of that Act)" substitute “ (including a case where that section applies by virtue of any enactment relating to chargeable gains) ”, and for the words from “shall be construed" to the end substitute “ have the same meaning as in section 127 of the 1992 Act (or, as the case may be, that section as applied by virtue of the enactment concerned) ”.
(3)In section 312(3) (interpretation of Chapter 3 of Part 7: references to disposal of shares), for “136(1)" substitute “ 136 ”.
(4)In section 473(6) (conversion etc of securities held as circulating capital), for “136(3)" substitute “ 135(5), 136(5) ”.
(5)In section 757 (disposal of material interests in non-qualifying offshore funds), for subsections (5) and (6) substitute—
“(5)Section 135 of the 1992 Act (exchange of securities for those in another company treated as not involving a disposal) does not apply for the purposes of this Chapter if the company that is company A for the purposes of that section is or was at a material time a non-qualifying offshore fund and the company that is company B for those purposes is not such a fund.
In a case where that section would apply apart from this subsection, the exchange in question (of shares, debentures or other interests in or of an entity that is or was at a material time a non-qualifying offshore fund) shall for the purposes of this Chapter constitute a disposal of interests in the offshore fund for a consideration equal to their market value at the time of the exchange.
(6)Section 136 of the 1992 Act (scheme of reconstruction involving issue of securities treated as exchange not involving disposal) does not apply for the purposes of this Chapter so as to require persons to be treated as exchanging shares, debentures or other interests in or of an entity that is or was at a material time a non-qualifying offshore fund for assets that do not constitute interests in such a fund.
In a case where that section would apply apart from this subsection, the deemed exchange in question (of shares, debentures or other interests in or of an entity that is or was at a material time a non-qualifying offshore fund) shall for the purposes of this Chapter constitute a disposal of interests in the offshore fund for a consideration equal to their market value at the time of the deemed exchange.”.
(6)In section 758(6) (offshore funds operating equalisation arrangements: events treated as disposal), for the words from “section 135" to the end substitute “ any provision of Chapter 2 of Part 4 of that Act ”.
(7)In section 842 (investment trusts), at the end of subsection (4) add “and “scheme of reconstruction” has the same meaning as in section 136 of that Act".