Finance Act 2006

118Funds awaiting re-investmentU.K.

(1)This section applies where a company to which this Part applies—

(a)disposes of an asset used wholly and exclusively for the purposes of tax-exempt business, and

(b)holds the proceeds in cash.

(2)Profits or losses arising from a loan relationship entered into in connection with the proceeds—

(a)shall be disregarded for the purposes of section 120, and

(b)shall be treated for all tax purposes as arising from a loan relationship entered into in connection with business of C (residual).

(3)For the purposes of section 108—

(a)the proceeds shall, during the period of 24 months beginning with the date of the disposal, be treated for the purposes of Condition 2 as assets held in connection with the tax-exempt business, but

(b)any income derived from the proceeds is income from non-tax-exempt business.

(4)For the purposes of this section proceeds are held in cash if—

(a)held on deposit (whether or not in sterling),

(b)invested in stocks or bonds of any of the descriptions included in Part 1 of Schedule 11 to FA 1942 (gilts), or

(c)held or invested in such other form as the Commissioners for Her Majesty's Revenue and Customs may specify for the purposes of this section in regulations.

(5)In the case of the disposal of an asset which for one or more periods of [F1(in aggregate)] at least a year has been used partly for the purposes of the business of C (tax-exempt) and partly for the purposes of C (residual), this section shall apply to such part of the proceeds as may reasonably be attributed to the tax-exempt business (having regard to the extent to which, and the length of the periods during which, the asset was used for the different purposes).