Capital Gains Tax Act 1979 (repealed 6.3.1992)

Part VIIU.K. Other Provisions

InsuranceU.K.

140 Policies of insurance. U.K.

(1)The rights of the insurer under any policy of insurance shall not constitute an asset on the disposal of which a gain may accrue, whether the risks insured relate to property or not; and the rights of the insured under any policy of insurance of the risk of any kind of damage to, or the loss or depreciation of, assets shall constitute an asset on the disposal of which a gain may accrue only to the extent that those rights relate to assets on the disposal of which a gain may accrue or might have accrued.

(2)Notwithstanding subsection (1) above, sums received under a policy of insurance of the risk of any kind of damage to, or the loss or depreciation of, assets are for the purposes of this Act, and in particular for the purposes of section 20 above (disposal of assets by owner where any capital sum is derived from assets), sums derived from the assets.

(3)In this section “policy of insurance” does not include a policy of assurance on human life.

141 Disallowance of insurance premiums as expenses.U.K.

Without prejudice to the provisions of section 33 above (exclusion of expenditure by reference to tax on income), there shall be excluded from the sums allowable as a deduction in the computation under Part II of Chapter II above of the gain accruing to a person on the disposal of an asset any premiums or other payments made under a policy of insurance of the risk of any kind of damage or injury to, or loss or depreciation of, the asset.

142 Underwriters.U.K.

(1)An underwriting member of Lloyd’s or of an approved association of underwriters shall, subject to the following provisions of this section, be treated for the purposes of this Act as absolutely entitled as against the trustees to the investments of his premiums trust fund, his special reserve fund (if any) and any other trust fund required or authorised by the rules of Lloyd’s or the association in question, or required by the underwriting agent through whom his business or any part of it is carried on, to be kept in connection with the business.

(2)The trustees of any premiums trust fund shall, subject to [F1subsections (2A) and (3)] below, be assessed and charged to capital gains tax as if subsection (1) above had not been passed.

[F2(2A)Tax assessed by virtue of subsection (2) above for a year of assessment shall be assessed at a rate equivalent to the basic rate of income tax for the year; and if an assessment to tax at a higher rate is subsequently made on an underwriting member in respect of the same gains, an appropriate credit shall be given for the tax assessed on the trustees.]

(3)The assessment to be made on the trustees of a fund by virtue of subsection (2) above for any year of assessment shall not take account of losses accruing in any previous year of assessment, and if for that or any other reason the tax paid on behalf of an underwriting member for any year of assessment by virtue of assessments so made exceeds the capital gains tax for which he is liable, the excess shall, on a claim by him, be repaid.

(4)For the purposes of subsections (2) and (3) above the underwriting agent may be treated as a trustee of the premiums trust fund.

[F3142A Disposal of assets in premiums trust fund etc.U.K.

(1)Subject to subsection (4) below, for the year 1972-73 and subsequent years of assessment the chargeable gains or allowable losses accruing on the disposal of assets forming part of a premiums trust fund shall be taken to be those allocated to the corresponding underwriting year.

(2)The amount of the gains or losses so allocated at the end of any accounting period shall be such proportion of the difference mentioned in subsection (3) below as is allocated to the underwriting year under the rules or practice of Lloyd’s.

(3)That difference is the difference between the valuations at the beginning and at the end of the accounting period of the assets forming part of the fund, the value at the beginning of the period of assets acquired during the period being taken as the cost of acquisition and the value at the end of the period of assets disposed of during the period being taken as the consideration for the disposal.

(4)Subsections (1) to (3) above do not apply to the computation of chargeable gains or allowable losses on the disposal of gilt-edged securities as defined in Schedule 2 to this Act or of qualifying corporate bonds as defined in section 64 of the Finance Act 1984.

[F4(4A)Subsection (4B) below applies where the following state of affairs exists at the beginning of an accounting period or the end of an accounting period—

(a)securities have been transferred by the trustees of a premiums trust fund in pursuance of an arrangement mentioned in section 129(1) or (2) of the Taxes Act 1988 (stock lending),

(b)the transfer was made to enable another person to fulfil a contract or to make a transfer,

(c)securities have not been transferred in return, and

(d)the transfer made by the trustees constitutes a disposal which by virtue of section 149B(9) below is to be disregarded as there mentioned.

(4B)The securities transferred by the trustees shall be treated for the purposes of subsection (3) above as if they formed part of the premiums trust fund at the beginning concerned or the end concerned (as the case may be).]

(5)The Board may, by regulations made by statutory instrument which shall be subject to annulment in pursuance of a resolution of the House of Commons, provide—

(a)for the assessment and collection of tax charged in accordance with this section;

(b)for modifying the provisions of this section in relation to syndicates continuing for more than two years after the end of an underwriting year;

(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F5

(d)for giving credit for foreign tax.]

[F6(6)Regulations under subsection (5) above may make provision with respect to any year or years of assessment; and the year (or any of the years) may be the one in which the regulations are made or any year falling before or after that year.

(7)But the regulations may not make provision with respect to any year of assessment which precedes the next but one preceding the year of assessment in which the regulations are made.]

143 Life assurance and deferred annuities.U.K.

(1)This section has effect as respects any policy of assurance or contract for a deferred annuity on the life of any person.

(2)No chargeable gain shall accrue on the disposal of, or of an interest in, the rights under any such policy of assurance or contract except where the person making the disposal is not the original beneficial owner and acquired the rights or interest for a consideration in money or money’s worth.

(3)Subject to subsection (2) above, the occasion of—

(a)the payment of the sum or sums assured by a policy of assurance, or

(b)the transfer of investments or other assets to the owner of a policy of assurance in accordance with the policy,

and the occasion of the surrender of a policy of assurance, shall be the occasion of a disposal of the rights under the policy of assurance.

(4)Subject to subsection (2) above, the occasion of the payment of the first instalment of a deferred annuity, and the occasion of the surrender of the rights under a contract for a deferred annuity, shall be the occasion of a disposal of the rights under the contract for a deferred annuity and the amount of the consideration for the disposal of a contract for a deferred annuity shall be the market value at that time of the right to that and further instalments of the annuity.

Superannuation funds, annuities and annual paymentsU.K.

144 Superannuation funds, annuities and annual payments.U.K.

No chargeable gain shall accrue to any person on the disposal of a right to, or to any part of—

(a)any allowance, annuity or capital sum payable out of any superannuation fund, or under any superannuation scheme, established solely or mainly for persons employed in a profession, trade, undertaking or employment, and their dependants,

(b)an annuity granted otherwise than under a contract for a deferred annuity by a company as part of its business of granting annuities on human life, whether or not including instalments of capital, or an annuity granted or deemed to be granted under the M1Government Annuities Act 1929, or

(c)annual payments which are due under a covenant made by any person and which are not secured on any property.

[F7 Profit sharing and share option schemes]U.K.

144A Approved profit sharing and share option schemes.U.K.

(1)Notwithstanding anything in a profit sharing scheme approved under Schedule 9 of the Taxes Act 1988 or in paragraph 2(2) of that Schedule or in the trust instrument relating to that scheme, for the purposes of capital gains tax a person who is a participant in relation to that scheme shall be treated as absolutely entitled to his shares as against the trustees of the scheme.

(2)For the purposes of capital gains tax—

(a)no deduction shall be made from the consideration for the disposal of any shares by reason only that an amount determined under section 186 or 187 of or Schedule 9 or 10 to the Taxes Act 1988 is chargeable to income tax under section 186(3) or (4) of that Act;

(b)any charge to income tax by virtue of section 186(3) of that Act shall be disregarded in determining whether a distribution is a capital distribution within the meaning of section 72(5)(b) above;

(c)nothing in any provision of section 186 or 187 of or Schedule 9 or 10 to that Act with respect to—

(i)the order in which any of a participant’s shares are to be treated as disposed of for the purposes of those provisions as they have effect in relation to profit sharing schemes, or

(ii)the shares in relation to which an event is to be treated as occurring for any such purpose,

shall affect the rules applicable to the computation of a gain accruing on a part disposal of a holding of shares or other securities which were acquired at different times; and

(d)a gain accruing on an appropriation of shares to which section 186(11) applies shall not be a chargeable gain.

(3)In subsection (2) above “participant” and “the trust instrument” have the meanings given by section 187 of the Taxes Act 1988.

(4)Where a right to acquire shares in a body corporate is released in consideration of the grant of a right to acquire shares in another body corporate in accordance with a provision included in a scheme pursuant to paragraph 15 of Schedule 9 to the Taxes Act 1988, the transaction shall not be treated for the purposes of this Act as involving any disposal of the first-mentioned right but for those purposes the other right shall be treated as the same asset acquired as the first-mentioned right was acquired.

This subsection does not apply in relation to a savings-related share option scheme, within the meaning of section 187 of that Act, unless the first-mentioned right was acquired as mentioned in section 185(1) of that Act.

Other exemptions and reliefsU.K.

145 Charities. U.K.

(1)[F8Subject to section 505(3) of the Taxes Act 1988 and] subsection (2) below a gain shall not be a chargeable gain if it accrues to a charity and is applicable and applied for charitable purposes.

(2)If property held on charitable trusts ceases to be subject to charitable trusts—

(a)the trustees shall be treated as if they had disposed of, and immediately re-acquired, the property for a consideration equal to its market value, any gain on the disposal being treated as not accruing to a charity, and

(b)if and so far as any of that property represents, directly or indirectly, the consideration for the disposal of assets by the trustees, any gain accruing on that disposal shall be treated as not having accrued to a charity,

and an assessment to capital gains tax chargeable by virtue of paragraph (b) above may be made at any time not more than three years after the end of the year of assessment in which the property ceases to be subject to charitable trusts.

146 Gifts to charities etc. U.K.

(1)Subsection (2) below shall apply where a disposal of an asset is made otherwise than under a bargain at arm’s length—

(a)to a charity, or

(b)to any of the bodies mentioned in [F9Schedule 3 to the Capital Transfer Tax Act 1984] (gifts for national purposes, etc.).

(2)[F10Section 29A(1)] above (consideration deemed to be equal to market value) and section 147(3) below shall not apply; but if the disposal is by way of gift (including a gift in settlement) or for a consideration not exceeding the sums allowable as a deduction under section 32 above, then—

(a)the disposal and acquisition shall be treated for the purposes of this Act as being made for such consideration as to secure that neither a gain nor a loss accrues on the disposal, and

(b)where, after the disposal, the asset is disposed of by the person who acquired it under the disposal, its acquisition by the person making the earlier disposal shall be treated for the purposes of this Act as the acquisition of the person making the later disposal.

(3)Where, otherwise than on the termination of a life interest (within the meaning of section 55 above) by the death of the person entitled thereto, any assets or parts of any assets forming part of settled property are, under section 54 [F11or 55] above, deemed to be disposed of and re-acquired by the trustee, and—

(a)the person becoming entitled as mentioned in section 54(1) above is a charity, or a body mentioned in [F9Schedule 3 to the Capital Transfer Tax Act 1984] (gifts for national purposes, etc.), [F12or]

[F13(b)any of the assets which, or parts of which, are deemed to be disposed of and re-acquired under section 55(1) above are held for the purposes of a charity, or a body mentioned in the said paragraph 12,]

then, if no consideration is received by any person for or in connection with any transaction by virtue of which the charity or other body becomes so entitled [F11or the assets are so held], the disposal and re-acquisition of the assets to which the charity or other body becomes so entitled [F11or of the assets or parts of the assets which are held as mentioned in paragraph (b) above] shall, notwithstanding sections 54 [F11and 55] above, be treated for the purposes of this Act as made for such consideration as to secure that neither a gain nor a loss accrues on the disposal.

[F14146A(1)Subsection (2) below shall apply where—

(a)a disposal of an estate or interest in land in the United Kingdom is made to a registered housing association otherwise than under a bargain at arm’s length, and

(b)a claim for relief under this section is made by the transferor and the association.

(2)Section 29A(1) above (consideration deemed to be equal to market value) shall not apply; but if the disposal is by way of gift or for a consideration not exceeding the sums allowable as a deduction under section 32 above, then—

(a)the disposal and acquisition shall be treated for the purposes of this Act as being made for such consideration as to secure that neither a gain nor a loss accrues on the disposal, and

(b)where, after the disposal, the estate or interest is disposed of by the association, its acquisition by the person making the earlier disposal shall be treated for the purposes of this Act as the acquisition of the association.

(3)In this section “registered housing association” means a registered 156 housing association within the meaning of the Housing Associations Act 1985 or Part VII of the Housing (Northern Ireland) Order 1981.]

147 Works of art etc. U.K.

(1)A gain accruing on the disposal of an asset by way of gift shall not be a chargeable gain if the asset is property falling within [F15subsection (2) of section 26 of the Capital Transfer Tax Act 1984] (gifts for public benefit) and the Treasury give a direction in relation to it under [F15subsection (1) of that section].

(2)A gain shall not be a chargeable gain if it accrues on the disposal of an asset with respect to which a capital transfer tax undertaking or an undertaking under the following provisions of this section has been given and—

(a)the disposal is by way of sale by private treaty to a body mentioned in [F15Schedule 3 to the Capital Transfer Tax Act 1984] (museums, etc), or is to such a body otherwise than by sale, or

(b)the disposal is to the Board in pursuance of [F15section 230 of the Capital Transfer Tax Act 1984] or in accordance with directions given by the Treasury under section 50 or 51 of the M2Finance Act 1946 (acceptance of property in satisfaction of tax).

(3)Subsection (4) below shall have effect in respect of the disposal of any asset which is property which has been or could be designated under [F15section 31 of the Capital Transfer Tax Act 1984], being—

(a)a disposal by way of gift, including a gift in settlement, or

(b)a disposal of settled property by the trustee on an occasion when, under section 54(1) [F16or 55(1)] above, the trustee is deemed to dispose of and immediately re-acquire settled property (other than any disposal on which by virtue of section 56 above no chargeable gain or allowable loss accrues to the trustee),

if the requisite undertaking described in [F15the said section 31] (maintenance, preservation and access) is given by such person as the Treasury think appropriate in the circumstances of the case.

(4)The person making a disposal to which subsection (3) above applies and the person acquiring the asset on the disposal shall be treated for all the purposes of this Act as if the asset was acquired from the one making the disposal for a consideration of such an amount as would secure that on the disposal neither a gain nor a loss would accrue to the one making the disposal.

(5)If—

(a)there is a sale of the asset and capital transfer tax is chargeable under [F15section 32 of the Capital Transfer Tax Act 1984] (or would be chargeable if a capital transfer tax undertaking as well as an undertaking under this section had been given), or

(b)the Treasury are satisfied that at any time during the period for which any such undertaking was given it has not been observed in a material respect,

the person selling that asset or, as the case may be, the owner of the asset shall be treated for the purposes of this Act as having sold the asset for a consideration equal to its market value, and, in the case of a failure to comply with the undertaking, having immediately re-acquired it for a consideration equal to its market value.

(6)The period for which an undertaking under this section is given shall be until the person beneficially entitled to the asset dies or it is disposed of, whether by sale or gift or otherwise; and if the asset subject to the undertaking is disposed of—

(a)otherwise than on sale, and

(b)without a further undertaking being given under this section,

subsection (5) above shall apply as if the asset had been sold to an individual.

References in this subsection to a disposal shall be construed without regard to any provision of this Act under which an asset is deemed to be disposed of.

(7)Where under subsection (5) above a person is treated as having sold for a consideration equal to its market value any asset within [F15section 31(1)(c), (d) or (e) of the Capital Transfer Tax Act 1984], he shall also be treated as having sold and immediately re-acquired for a consideration equal to its market value any asset associated with it; but the Treasury may direct that the preceding provisions of this subsection shall not have effect in any case in which it appears to them that the entity consisting of the asset and any assets associated with it has not been materially affected.

For the purposes of this subsection two or more assets are associated with each other if one of them is a building falling within [F15the said section 31(1)(c)] and the other or others such land or objects as, in relation to that building, fall within [F15the said section 31(1)(d) or (e)].

(8)If in pursuance of subsection (5) above a person is treated as having on any occasion sold an asset and capital transfer tax becomes chargeable on the same occasion, then, in determining the value of the asset for the purposes of that tax, an allowance shall be made for the capital gains tax chargeable on any chargeable gain accruing on that occasion.

(9)In this section “capital transfer tax undertaking” means an undertaking under [F17Chapter II of Part II or section 78 of, or Schedule 5 to, the Capital Transfer Tax Act 1984], sections 76 to 81 of the Finance Act 1976 or section 31 or 34 of the M3Finance Act 1975.

[F18147A Gifts on which inheritance tax is chargeable etc. U.K.

(1)If—

(a)an individual or the trustees of a settlement (in this section referred to as “the transferor”) make a disposal within subsection (2) below of an asset,

(b)the asset is acquired by an individual or the trustees of a settlement (in this section referred to as “the transferee”), and

(c)a claim for relief under this section is made by the transferor and the transferee or, where the trustees of a settlement are the transferee, by the transferor alone,

then, subject to subsection (6) and section 147B below, subsection (3) below shall apply in relation to the disposal.

(2)A disposal is within this subsection if it is made otherwise than under a bargain at arm’s length and—

(a)is a chargeable transfer within the meaning of the Inheritance Tax Act 1984 (or would be but for section 19 of that Act) and is not a potentially exempt transfer (within the meaning of that Act),

(b)is an exempt transfer by virtue of—

(i)section 24 of that Act (transfers to political parties),

(ii)section 26 of that Act (transfers for public benefit),

(iii)section 27 of that Act (transfers to maintenance funds for historic buildings etc.), or

(iv)section 30 of that Act (transfers of designated property),

(c)is a disposition to which section 57A of that Act applies and by which the property disposed of becomes held on trusts of the kind referred to in subsection (1)(b) of that section (maintenance funds for historic buildings etc.),

(d)by virtue of subsection (4) of section 71 of that Act (accumulation and maintenance trusts) does not constitute an occasion on which inheritance tax is chargeable under that section,

(e)by virtue of section 78(1) of that Act (transfers of works of art etc.) does not constitute an occasion on which tax is chargeable under Chapter III of Part III of that Act, or

(f)is a disposal of an asset comprised in a settlement where, as a result of the asset or part of it becoming comprised in another settlement, there is no charge, or a reduced charge, to inheritance tax by virtue of paragraph 9, 16 or 17 of Schedule 4 to that Act (transfers to maintenance funds for historic buildings etc.).

(3)Where this subsection applies in relation to a disposal—

(a)the amount of any chargeable gain which, apart from this section, would accrue to the transferor on the disposal, and

(b)the amount of the consideration for which, apart from this section, the transferee would be regarded for the purposes of capital gains tax as having acquired the asset in question,

shall each be reduced by an amount equal to the held-over gain on the disposal.

(4)Subject to subsection (5) below, the reference in subsection (3) above to the held-over gain on a disposal is a reference to the chargeable gain which would have accrued on that disposal apart from this section.

(5)In any case where—

(a)there is actual consideration (as opposed to the consideration equal to the market value which is deemed to be given by virtue of any provision of this Act) for a disposal in respect of which a claim for relief is made under this section, and

(b)that actual consideration exceeds the sums allowable as a deduction under section 32 above,

the held-over gain on the disposal shall be reduced by the excess referred to in paragraph (b) above or, if part of the gain on the disposal is relieved under Schedule 20 to the Finance Act 1985 (retirement relief), by so much, if any, of that excess as exceeds the part so relieved.

(6)Subsection (3) above does not apply in relation to a disposal of assets within section 67(1) above on which a gain is deemed to accrue by virtue of paragraph 10(1)(b) of Schedule 13 to the Finance Act 1984.

(7)In the case of a disposal within subsection (2)(a) above there shall be allowed as a deduction in computing the chargeable gain accruing to the transferee on the disposal of the asset in question an amount equal to whichever is the lesser of—

(a)the inheritance tax attributable to the value of the asset, and

(b)the amount of the chargeable gain as computed apart from this subsection.

(8)Where an amount of inheritance tax is varied after it has been taken into account under subsection (7) above, all necessary adjustments shall be made, whether by the making of an assessment to capital gains tax or by the discharge or repayment of such tax.

(9)Where subsection (3) above applies in relation to a disposal which is deemed to occur by virtue of section 54(1) or 55(1) above, subsection (5) above shall not apply.

(10)Where a disposal is partly within subsection (2) above, or is a disposal within paragraph (1) of that subsection on which there is a reduced charge such as is mentioned in that paragraph, the preceding provisions of this section shall have effect in relation to an appropriate part of the disposal.]

[F19147B Section 147A relief: gifts to non-residents. U.K.

(1)Section 147A(3) above shall not apply where the transferee is neither resident nor ordinarily resident in the United Kingdom.

(2)Section 147A(3) above shall not apply where the transferee is an individual who—

(a)though resident or ordinarily resident in the United Kingdom, is regarded for the purposes of any double taxation arrangements having effect by virtue of section 788 of the Taxes Act 1988 as resident in a territory outside the United Kingdom, and

(b)by virtue of the arrangements would not be liable in the United Kingdom to tax on a gain arising on a disposal of the asset occurring immediately after its acquisition.]

[F20148 Maintenance funds for historic buildings. U.K.

(1)This section applies where a person disposes of an asset to trustees in circumstances such that the disposal is a transfer of value which by virtue of [F21section 95 of the Finance Act 1982] (capital transfer tax: maintenance funds for historic buildings) is an exempt transfer.

[F22(1A)This section applies also where a trustee is deemed by virtue of section 54(1) above to dispose of an asset comprised in a settlement and, as a result of the asset or part of it becoming comprised in another settlement, there is by virtue of [F21paragraph 1(1) or (5) or 3(1) of Schedule 16 to the Finance Act 1982 no charge to capital transfer tax in respect of the asset deemed to be disposed of or a reduced charge to that tax by virtue of pargraph 1(2) or (8) or 3(4) of that Schedule]; but—

(a)if part only of the asset becomes comprised in the other settlement this subsection applies only to the deemed disposal of that part; and

(b)if the trustees of the other settlement give any consideration for the asset or part that becomes comprised in it this subsection applies only if the consideration does not exceed the sums that would be allowable as a deduction in computing the gain accruing on the deemed disposal.]

[F23(1B)This section applies also where a trustee disposes (or is deemed to dispose) of an asset comprised in a settlemdnt if on the disposal the asset becomes settled property in respect of which a direction has effect under sectin 93 of the Finance Act 1982.]

(2)The person making the disposal and the person acquiring the asset on the disposal shall be treated for all the purposes of this Act as if the asset was acquired from the one making the disposal for a consideration of such an amount as would secure that on the disposal neither a gain nor a loss would accrue to the one making the disposal.]

149 Employee trusts. U.K.

(1)Where—

(a)a close company disposes of an asset to trustees in circumstances such that the disposal is a disposition which by virtue of [F24section 13 of the Capital Transfer Tax Act 1984] (employee trusts) is not a transfer of value for the purposes of capital transfer tax, or

(b)an individual disposes of an asset to trustees in circumstances such that the disposal is an exempt transfer by virtue of [F24section 28 of the Capital Transfer Tax Act 1984] (employee trusts: capital transfer tax),

this Act shall have effect in relation to the disposal in accordance with subsections (2) and (3) below.

(2)[F25Section 29A(1)] above (consideration deemed to be equal to market value) shall not apply to the disposal; and if the disposal is by way of gift or is for a consideration not exceeding the sums allowable as a deduction under section 32 above—

(a)the disposal, and the acquisition by the trustees, shall be treated for the purposes of this Act as being made for such consideration as to secure that neither a gain nor a loss accrues on the disposal, and

(b)where the trustees dispose of the asset, its acquisition by the company or individual shall be treated as its acquisition by the trustees.

(3)Where the disposal is by a close company, section 75(1) above (assets disposed of for less than market value) shall apply to the disposal as if for the reference to market value there were substituted a reference to market value or the sums allowable as a deduction under section 32 above, whichever is the less.

(4)Subject to subsection (5) below, this Act shall also have effect in accordance with subsection (2) above in relation to any disposal made by a company other than a close company if—

(a)the disposal is made to trustees otherwise than under a bargain made at arm’s length, and

(b)the property disposed of is to be held by them on trusts of the description specified in [F24section 86(1) of the Capital Transfer Tax Act 1984 (that is to say, those in relation to which the said section 13 of that Act has effect)] and the persons for whose benefit the trusts permit the property to be applied include all or most of either—

(i)the persons employed by or holding office with the company, or

(ii)the persons employed by or holding office with the company or any one or more subsidiaries of the company.

(5)Subsection (4) above does not apply if the trusts permit any of the property to be applied at any time (whether during any such period as is referred to in [F24the said section 86(1)] or later) for the benefit of—

(a)a person who is a participator in the company (“the donor company”), or

(b)any other person who is a participator in any other company that has made a disposal of property to be held on the same trusts as the property disposed of by the donor company, being a disposal in relation to which this Act has had effect in accordance with subsection (2) above, or

(c)any other person who has been a participator in the donor company or any such company as is mentioned in paragraph (b) above at any time after, or during the ten years before, the disposal made by that company, or

(d)any person who is connected with a person within paragraph (a), (b) or (c) above.

(6)The participators in a company who are referred to in subsection (5) above do not include any participator who—

(a)is not beneficially entitled to, or to rights entitling him to acquire, 5 per cent. or more of, or of any class of the shares comprised in, its issued share capital, and

(b)on a winding-up of the company would not be entitled to 5 per cent. or more of its assets;

and in determining whether the trusts permit property to be applied as mentioned in that subsection, no account shall be taken—

(i)of any power to make a payment which is the income of any person for any of the purposes of income tax, or would be the income for any of those purposes of a person not resident in the United Kingdom if he were so resident, or

(ii)if the trusts are those of a profit sharing scheme approved under the M4Finance Act 1978, of any power to appropriate shares in pursuance of the scheme.

(7)In subsection (4) above “subsidiary” has [F26the same meaning as in][F26the meaning given by section 736 of] the [F27Companies Act 1985] and in subsections (5) and (6) above “participator” has the meaning given in section [F28417(1)] of [F28the Taxes Act 1988], except that it does not include a loan creditor.

(8)In this section “close company” includes a company which, if resident in the United Kingdom, would be a close company as defined in section 155(1) below.

[F29149A Building societies and life policies. U.K.

(1)If in the course of or as part of an amalgamation of two or more building societies or a transfer of engagements from one building society to another, there is a disposal of an asset by one society to another, both shall be treated for the purposes of corporation tax on chargeable gains as if the asset were acquired from the one making the disposal for a consideration of such amount as would secure that on the disposal neither a gain nor a loss would accrue to the one making the disposal.

In this subsection “building society” means a building society within the meaning of the Building Societies Act 1986.

(2)Where any investments or other assets are or have been, in accordance with a policy issued in the course of life assurance business carried on by an insurance company, transferred to the policy holder on or after 6th April 1967, the policy holder’s acquisition of the assets and the disposal of them to him shall be deemed to be, for the purposes of this Act, for a consideration equal to the market value of the assets.

In this subsection “life assurance business” and “insurance company” have the same meaning as in Chapter I of Part XII of the Taxes Act 1988.]

[F30149B Miscellaneous exemptions. U.K.

(1)The following gains shall not be chargeable gains—

(a)gains accruing on the disposal of stock—

(i)transferred to accounts in the books of the Bank of England in the name of the Treasury or the National Debt Commissioners in pursuance of any Act of Parliament; or

(ii)belonging to the Crown, in whatever name it may stand in the books of the Bank of England;

(b)any gain accruing to a person from his acquisition and disposal of assets held by him as part of a fund mentioned in section 613(4) of the Taxes Act 1988 (Parliamentary pension funds) or of which income is exempt from income tax under section 614(1) of that Act (social security supplementary schemes);

(c)any gain accruing to a person from his acquisition and disposal of assets held by him as part of a fund mentioned in section [F31614(2)] or paragraph (b), (c), (d), (f) or (g) of section 615(2) of the Taxes Act 1988 (India etc. pension funds) or as part of a fund to which subsection (3) of that section applies (pension funds for overseas employees);

(d)any gain accruing to a person from his acquisition and disposal of assets held by him as part of any fund maintained for the purpose mentioned in subsection (5)(b) of section 620 or subsection (5) of section 621 of the Taxes Act 1988 under a scheme for the time being approved under that subsection;

(e)any gain accruing on the disposal by the trustees of any settled property held on trusts in accordance with directions which are valid and effective under section 9 of the Superannuation and Trust Funds (Validation) Act 1927 (trust funds for the reduction of the National Debt);

(f)any gain accruing to a consular officer or employee, within the meaning of section 322 of the Taxes Act 1988, of any foreign state to which that section applies on the disposal of assets which at the time of the disposal were situated outside the United Kingdom;

(g)any gain accruing to a person from his disposal of investments if, or to such extent as the Board are satisfied that, those investments were held by him or on his behalf for the purposes of a scheme which at the time of the disposal is an exempt approved scheme;

(h)any gain accruing to a person on his disposal of investments held by him for the purposes of an approved personal pension scheme;

(j)any gain accruing to a unit holder on his disposal of units in an authorised unit trust which is also an approved personal pension scheme or is one to which section 592(10) of the Taxes Act 1988 applies.

In this subsection “exempt approved scheme” and “approved personal pension scheme” have the same meanings as in Part XIV of the Taxes Act 1988.

(2)Where a claim is made in that behalf, a gain which accrues to a person on the disposal of investments shall not be a chargeable gain for the purposes of capital gains tax if, or to such extent as the Board are satisfied that, those investments were held by him or on his behalf for the purpose of a fund to which section 608 of the Taxes Act 1988 applies.

A claim under this subsection shall not be allowed unless the Board are satisfied that the terms on which benefits are payable from the fund have not been altered since 5th April 1980.

[F32(3)A local authority, a local authority association and a health service body shall be exempt from capital gains tax.

(3A)In subsection (3) above—

(a)“local authority association” has the meaning given by section 519 of the Taxes Act 1988, and

(b)“health service body” has the meaning given by section 519A of that Act.]

[F33(4)Any bonus to which section 326 (certified contractual savings schemes) or 326A (tax-exempt special savings accounts) of the Taxes Act 1988 applies shall be disregarded for all purposes of the enactments relating to capital gains tax.]

(5)A signatory to the Operating Agreement made pursuant to the Convention on the International Maritime Satellite Organisation which came into force on 16th July 1979, other than a signatory designated for the purposes of the Agreement by the United Kingdom in accordance with the Convention, shall be exempt from capital gains tax in respect of any payment received by that signatory from the Organisation in accordance with the Agreement.

(6)The following shall, on a claim made in that behalf to the Board, be exempt from tax in respect of all chargeable gains—

(a)the Trustees of the British Museum and the Trustees of the British Museum (Natural History); and

(b)an Association within the meaning of section 508 of the Taxes Act 1988 (scientific research organisations).

(7)The Historic Buildings and Monuments Commission for England, the Trustees of the National Heritage Memorial Fund, the United Kingdom Atomic Energy Authority and the National Radiological Protection Board shall be exempt from tax in respect of chargeable gains; and for the purposes of this subsection gains accruing from investments or deposits held for the purposes of any pension scheme provided and maintained by the United Kingdom Atomic Energy Authority shall be treated as if those gains and investments and deposits belonged to the Authority.

(8)There shall be exempt from tax any chargeable gains accruing to the issue department of the Reserve Bank of India constituted under an Act of the Indian legislature called the Reserve Bank of India Act 1934, or to the issue department of the State Bank of Pakistan constituted under certain orders made under section 9 of the Indian Independence Act 1947.

(9)Any disposal and acquisition made in pursuance of an arrangement mentioned in subsection (1) or (2) [F34or (2A)] of section 129 of the Taxes Act 1988 (stock lending) shall, subject to regulations under subsection (4) of that section, be disregarded for the purposes of capital gains tax.]

[F35(10)In subsections (1)(g) and (h) and (2) above “investments”, includes futures contracts and options contracts; and paragraph 7(3)(d) of Schedule 22 to the Taxes Act 1988 shall be construed accordingly.

(11)For the purposes of subsection (10) above a contract is not prevented from being a futures contract or an options contract by the fact that any party is or may be entitled to receive or liable to make, or entitled to receive and liable to make, only a payment of a sum (as opposed to a transfer of assets other than money) in full settlement of all obligations.]

[F36149C Business expansion schemes. U.K.

(1)In this section “relief” means relief under Chapter III of Part VII of the Taxes Act 1988, Schedule 5 to the Finance Act 1983 (“the 1983 Act”) or Chapter II of Part IV of the Finance Act 1981 (“the 1981 Act”) and “eligible shares” has the meaning given by section 289(4) of the Taxes Act 1988.

(2)A gain or loss which accrues to an individual on the disposal of any shares issued after 18th March 1986 in respect of which relief has been given [F37to him] and not withdrawn shall not be a chargeable gain or allowable loss for the purposes of capital gains tax.

(3)The sums allowable as deductions from the consideration in the computation for the purposes of capital gains tax of the gain or loss accruing to an individual on the disposal of shares issued before 19th March 1986 in respect of which any relief has been given and not withdrawn shall be determined without regard to that relief, except that where those sums exceed the consideration they shall be reduced by an amount equal to—

(a)the amount of that relief; or

(b)the excess,

whichever is the less, but the foregoing provisions of this subsection shall not apply to a disposal falling within section 44(1) above.

(4)Sections 88 and 89 of the Finance Act 1982 (identification of securities disposed of) shall not apply to shares in respect of which any relief has been given and not withdrawn; and any question—

(a)as to which of any such shares issued to a person at different times a disposal relates; or

(b)whether a disposal relates to such shares or to other shares;

shall for the purposes of capital gains tax be determined as for the purposes of section 299 of the Taxes Act 1988, or section 57 of the Finance Act 1981 if the relief has only been given under that Act.

(5)Where an individual holds shares which form part of the ordinary share capital of a company and the relief has been given (and not withdrawn) in respect of some but not others, then, if there is within the meaning of section 77 above a reorganisation affecting those shares, section 78 shall apply separately to the shares in respect of which the relief has been given (and not withdrawn) and to the other shares (so that shares of each kind are treated as a separate holding of original shares and identified with a separate new holding).

(6)Where section 44 above has applied to any eligible shares disposed of by an individual to his or her spouse (“the transferee”), subsection (2) above shall apply in relation to the subsequent disposal of the shares by the transferee to a third party.

(7)Where section 85 or 86 above would, but for this subsection, apply in relation to eligible shares [F38issued after 18th March 1986] in respect of which an individual has been given relief, that section shall apply only if the relief is withdrawn.

(8)Sections 78 to 81 above shall not apply in relation to any shares in respect of which relief (other than relief under the 1981 Act) has been given and which form part of a company’s ordinary share capital if—

(a)there is, by virtue of any such allotment for payment as is mentioned in section 77(2)(a) above, a reorganisation occurring after 18th March 1986 affecting those shares; and

(b)immediately following the reorganisation, the relief has not been withdrawn in respect of those shares or relief has been given in respect of the allotted shares and not withdrawn.

(9)Where relief is reduced by virtue of subsection (2) of section 305 of the Taxes Act 1988—

(a)the sums allowable as deductions from the consideration in the computation, for the purposes of capital gains tax, of the gain or loss accruing to an individual on the disposal, after 18th March 1986, of any of the allotted shares or debentures shall be taken to include the amount of the reduction apportioned between the allotted shares or (as the case may be) debentures in such a way as appears to the inspector, or on appeal to the Commissioners concerned, to be just and reasonable; and

(b)the sums so allowable on the disposal (in circumstances in which subsections (2) to (7) above do not apply) of any of the shares referred to in section 305(2)(a) shall be taken to be reduced by the amount mentioned in paragraph (a) above, similarly apportioned between those shares.

(10)There shall 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 the relief being given or withdrawn.]

[F39149D Personal equity plans. U.K.

(1)The Treasury may make regulations providing that an individual who invests under a plan shall be entitled to relief from capital gains tax in respect of the investments.

(2)Subsections (2) to (5) of section 333 of the Taxes Act 1988 (personal equity plans) shall apply in relation to regulations under subsection (1) above as they apply in relation to regulations under subsection (1) of that section but with the substitution for any reference to income tax of a reference to capital gains tax.

[F40(2A)Regulations under this section may include provision securing that losses are disregarded for the purposes of capital gains tax where they accrue on the disposal of investments on or after 18th January 1988.]

(3)Regulations under this section shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of the House of Commons.]