Part 14Income tax liability: miscellaneous rules
F1Chapter A1Remittance basis
F2Business investment relief
809VHMeaning of “potentially chargeable event”
(1)
For the purposes of section 809VG, a “potentially chargeable event” occurs if—
(a)
the target company is for the first time neither an eligible trading company nor an eligible stakeholder company F3nor an eligible hybrid company nor an eligible holding company,
(b)
the relevant person who made the investment (“P”) disposes of all or part of the holding,
(c)
the extraction of value rule is breached, or
(d)
the F45-year start-up rule is breached.
(2)
The extraction of value rule is breached if—
(a)
value (in money or money's worth) is received by or for the benefit of P or another relevant person,
F5(b)
the value is received from any person in circumstances that are directly or indirectly attributable to the investment, and
(c)
the value is received other than by virtue of a disposal that is itself a potentially chargeable event.
(3)
But the extraction of value rule is not breached merely because a relevant person receives value that—
(a)
is treated for income tax or corporation tax purposes as the receipt of income or would be so treated if that person were liable to such tax, and
(b)
is paid or provided to the person in the ordinary course of business and on arm's length terms.
F6(4)
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(5)
The F75-year start-up rule is breached if—
(a)
immediately after the end of the period of F85 years beginning with the day on which the investment was made, the target company is non-operational, or
(b)
at any time after the end of that period, the target company becomes non-operational.
(6)
The target company is “non-operational” at any time when—
(a)
it is an eligible trading company but is not trading,
(b)
it is an eligible stakeholder company but—
(i)
it holds no investments in eligible trading companies, or
(ii)
none of the eligible trading companies in which it holds investments is trading, F9...
F10(ba)
it is an eligible hybrid company but is not trading and—
(i)
it holds no investments in eligible trading companies, or
(ii)
none of the eligible trading companies in which it holds investments is trading, or
(c)
it is an eligible holding company but—
(i)
the group of which it is a member is not an eligible trading group, or
(ii)
none of its 51% subsidiaries in the eligible trading group of which it is a member is an eligible trading company that is trading.
(7)
In subsection (6), “trading” means carrying on one or more commercial trades (including the carrying on of any activities treated under section 809VE(4) as the carrying on of a commercial trade).
(8)
If consideration for a disposal of all or part of the holding is or is to be paid in instalments, the disposal is to be treated for the purposes of this section as if it were separate disposals, one for each instalment (and each giving rise to a separate potentially chargeable event).
(9)
An event listed in subsection (1) does not count as a potentially chargeable event if it is due to an insolvency step taken for genuine commercial reasons (but this does not prevent the extraction of any value in connection with the insolvency step from counting as a potentially chargeable event).
(10)
For the purposes of subsection (9), an insolvency step is taken if—
(a)
the target company enters into administration or receivership or is wound up or dissolved,
(b)
the target company is an eligible stakeholder company F11or an eligible hybrid company and any eligible trading company in which it holds an investment enters into administration or receivership or is wound up or dissolved,
(c)
the target company is an eligible holding company and any eligible trading company in the group that is a 51% subsidiary of it enters into administration or receivership or is wound up or dissolved, or
(d)
a similar step is taken in relation to a company mentioned in paragraph (a), (b) or (c) under the law of a country or territory outside the United Kingdom.