(1)In section 246A(9) of the Taxes Act 1988 (which provides that “fixed-rate preference shares” shall be construed in accordance with section 95(5)) for “section 95(5)” there shall be substituted “paragraph 13(6) of Schedule 28B”.
(2)In Schedule 28B to the Taxes Act 1988 (venture capital trusts) paragraph 13 (general interpretation) shall be amended in accordance with subsections (3) and (4) below.
(3)In sub-paragraph (5), paragraph (b) (which provides that “fixed-rate preference shares” has the same meaning as in section 95), and the word “and” immediately preceding that paragraph, shall be omitted.
(4)After sub-paragraph (5) there shall be inserted—
“(6)In this paragraph “fixed-rate preference shares” means shares which—
(a)were issued wholly for new consideration;
(b)do not carry any right either to conversion into shares or securities of any other description or to the acquisition of any additional shares or securities; and
(c)do not carry any right to dividends other than dividends which—
(i)are of a fixed amount or at a fixed rate per cent. of the nominal value of the shares, and
(ii)together with any sum paid on redemption, represent no more than a reasonable commercial return on the consideration for which the shares were issued;
and in paragraph (a) above “new consideration” has the meaning given by section 254.”
(5)In Schedule 7 to the [1997 c. 16.] Finance Act 1997 (special treatment for certain distributions) paragraph 5 (fixed-rate preference shares) shall be amended in accordance with subsections (6) and (7) below.
(6)In sub-paragraph (2) (which defines “fixed-rate preference shares” by reference to section 95 of the Taxes Act 1988)—
(a)in paragraph (a) for “section 95 of” there shall be substituted “paragraph 13 of Schedule 28B to”; and
(b)in paragraph (b) for “section 95(5)(c)(i) of that Act” there shall be substituted “paragraph 13(6)(c)(i) of that Schedule”.
(7)After sub-paragraph (2) there shall be inserted—
“(3)For the purposes of sub-paragraph (2) above, any reference in paragraph 13(6) of Schedule 28B to shares shall be taken as a reference to shares within the meaning of this Schedule.”
(8)This section has effect on and after 2nd July 1997.