SCHEDULES
SCHEDULE 3Qualifying scheme
Part 1Introductory
1
For the purposes of section 24 a scheme is a qualifying scheme if it falls within any of the following Parts of this Schedule.
Part 2Schemes involving hybrid entities
2
A scheme falls within this Part if a party to a transaction forming part of the scheme is a hybrid entity.
3
1
An entity is a hybrid entity if—
a
under the tax law of any territory, the entity is regarded as being a person, and
b
the entity's profits or gains are, for the purposes of a relevant tax imposed under the law of any territory, treated as the profits or gains of a person or persons other than that person.
2
The requirement in sub-paragraph (1)(b) is not to be regarded as satisfied in relation to an entity by reason only of its profits or gains being subject to a rule similar to that in section 747(3) of ICTA (imputation of chargeable profits of controlled foreign company) and having effect under the tax law of any territory outside the United Kingdom.
3
For the purposes of this paragraph, the following are relevant taxes—
a
income tax;
b
corporation tax;
c
any tax of a similar character to income tax or corporation tax that is imposed by the law of a territory other than the United Kingdom.
Part 3Schemes involving hybrid effect
Schemes involving hybrid effect
4
A scheme falls within this Part if it satisfies the requirements of paragraph 5, 6, 7 or 8.
Instruments of alterable character
5
1
A scheme satisfies the requirements of this paragraph if one of the parties to the scheme is party to an instrument falling within sub-paragraph (2).
2
An instrument falls within this sub-paragraph if, under the law of a particular territory, a relevant characteristic of the instrument may be altered on the election of any party to the instrument.
3
For the purposes of this paragraph a characteristic of an instrument is a relevant characteristic if, under the law of a particular territory, altering it has the effect of determining whether, for the tax purposes of that territory—
a
the instrument is taken into account as giving rise to income,
b
the instrument is taken into account as giving rise to capital, or
c
the instrument does not fall to be taken into account as giving rise either to income or to capital.
4
An instrument is taken into account as giving rise to capital if any gain on the disposal of the instrument would, or would if the person making the disposal were resident in the United Kingdom, be a chargeable gain.
Securities subject to conversion
7
1
A scheme satisfies the requirements of this paragraph if it includes—
a
the issuing by a company of securities subject to conversion, or
b
the amendment of rights attaching to securities issued by a company such that the securities become securities subject to conversion.
2
For the purposes of sub-paragraph (1) a company's securities are securities subject to conversion if—
a
the rights attached to the securities include provision by virtue of which a holder of such securities is entitled, on the occurrence of an event, to acquire by conversion or exchange shares in the company or another company, and
b
the occurrence of the event is within the reasonable expectation of the company at the relevant time.
3
For the purposes of sub-paragraph (2) the relevant time is—
a
the time when the securities are issued, or
b
if at the time when the securities are issued the occurrence of the event is not within the company's reasonable expectation and the rights attaching to the securities are later amended as described in sub-paragraph (1)(b), the time when the rights attaching to the securities are so amended.
4
In this paragraph “security” has the same meaning as in Part 6 of ICTA.
Debt instruments treated as equity
8
1
A scheme satisfies the requirements of this paragraph if it includes a debt instrument issued by a company that is treated as equity in the company under generally accepted accounting practice.
2
For the purposes of this paragraph, a debt instrument is an instrument issued by a company that represents a loan relationship of the company or, if the company were a company resident in the United Kingdom, would represent a loan relationship of the company.
Part 4Schemes involving hybrid effect and connected persons
Schemes involving hybrid effect and connected persons
9
A scheme falls within this Part if it satisfies the requirements of paragraph 10 or 11.
Scheme including transfer of rights under a security
11
1
A scheme satisfies the requirements of this paragraph if it includes a transaction or a series of transactions under which a person (“the transferor”)—
a
transfers rights to receive a payment under a relevant security to one or more other persons, or
b
otherwise secures that one or more other persons are similarly benefited,
and sub-paragraphs (3) and (4) are satisfied.
2
A person is similarly benefited for these purposes if he receives a payment which would, but for the transaction or series of transactions, have arisen to the transferor.
3
This sub-paragraph is satisfied if—
a
the transferor, and
b
at least one of the persons to whom a transfer of rights is made or a similar benefit is secured,
are connected with each other.
4
This sub-paragraph is satisfied if following the transfer of rights or the securing of the similar benefit—
a
two or more persons either hold rights to receive a payment under the security or enjoy a similar benefit, and
b
the rights held and benefits enjoyed by such of those persons as are connected have, taken together, a value equal to or greater than the value of any other rights to receive a payment under the security and of any other similar benefits, taken together.
5
In sub-paragraph (4)(b) references to the value of rights to receive a payment under a relevant security are references to the market value of those rights; and references to the value of similar benefits are to be construed accordingly.
6
In this paragraph a relevant security is—
a
a security (within the meaning of Part 6 of ICTA), or
b
any agreement under which a person receives an annuity or other annual payment (whether it is payable annually or at shorter or longer intervals) for a term which is not contingent on the duration of a human life or lives.
Interpretation
12
Section 839 of ICTA has effect for the purposes of this Part.