Finance Act 2015

44Deferred entrepreneurs’ relief on invested gains

(1)In Part 5 of TCGA 1992 (transfer of business assets) after Chapter 3 (entrepreneurs’ relief) insert—

“Chapter 4Entrepreneurs’ relief where held-over gains become chargeable

169TOverview of Chapter

This Chapter makes provision about claiming entrepreneurs’ relief in certain cases where, in relation to held-over gains that originally arose on a business disposal, there is a chargeable event for the purposes of Schedule 5B or 8B (relief for gains invested under the enterprise investment scheme or in social enterprises).

169UEligibility conditions for deferred entrepreneurs’ relief

(1)Section 169V applies if, ignoring the operation of section 169V(2)(b), each of the following conditions is met.

(2)The first condition is that a chargeable gain (“the first eventual gain”) accrues as a result of the operation of—

• paragraph 4 of Schedule 5B (enterprise investment scheme), or

• paragraph 5 of Schedule 8B (investments in social enterprises).

(3)If the first condition is met, the paragraph and Schedule mentioned in subsection (2) that apply in the case are referred to in this section, and section 169V, as “the relevant paragraph” and “the applicable Schedule”.

(4)The second condition is—

(a)that the first eventual gain accrues in a case in which the original gain would, but for the operation of the applicable Schedule, have accrued on a relevant business disposal, or

(b)where the first eventual gain accrues in a case in which the original gain would, but for the operation of the applicable Schedule, have accrued as a result of the operation of either of the paragraphs mentioned in subsection (2), that the underlying disposal is a relevant business disposal.

(5)The third condition is that a claim for entrepreneurs’ relief in respect of the first eventual gain is made, on or before the first anniversary of the 31 January following the tax year in which the first eventual gain accrues, by the individual who made the disposal mentioned in subsection (4)(a) or (b).

(6)The fourth condition is that the first eventual gain is the first gain to accrue in the case as a result of the operation of the relevant paragraph.

(7)In subsection (4) “the underlying disposal” means the disposal (not being a disposal within paragraph 3 of Schedule 5B or paragraph 6 of Schedule 8B) by virtue of which Schedule 5B or 8B has effect.

(8)For the purposes of subsection (4), whether the disposal on which the original gain would have accrued is a relevant business disposal, or whether the underlying disposal is a relevant business disposal, is to be decided according to the law applicable to disposals made at the time the disposal was made.

(9)In this section—

• “the original gain”, in relation to a particular case, has the same meaning as in the applicable Schedule,

• “relevant business asset” has the meaning given by section 169L, and

• “relevant business disposal” means—

  (a)

  a disposal—

  (i)

  within section 169H(2)(a) or (c) (qualifying business disposals), and

  (ii)

  consisting of the disposal of (or of interests in) shares in or securities of a company, or

  (b)

  a disposal of relevant business assets which is comprised in a disposal—

  (i)

  within section 169H(2)(a) or (c), and

  (ii)

  not consisting of the disposal of (or of interests in) shares in or securities of a company.

169VOperation of deferred entrepreneurs’ relief

(1)Where this section applies, the following rules have effect.

(2)The gain mentioned in section 169U(2) (“the first eventual gain”)—

(a)is treated for ER purposes as the amount resulting from a calculation under section 169N(1) carried out—

(i)in respect of a qualifying business disposal made when the first eventual gain accrues, and

(ii)because of the claim mentioned in section 169U(5), and

(b)except for ER purposes, is not to be taken into account under this Act as a chargeable gain.

(3)If the first eventual gain is a part only of the original gain in the case concerned, each part of the original gain that subsequently accrues as a chargeable gain as a result of the operation of the relevant paragraph—

(a)is treated for ER purposes as the amount resulting from a calculation under section 169N(1) carried out—

(i)in respect of a qualifying business disposal made when that chargeable gain so accrues, and

(ii)because of the claim mentioned in section 169U(5), and

(b)except for ER purposes, is not to be taken into account under this Act as a chargeable gain.

(4)If the disposal mentioned in paragraph (a) or (b) of section 169U(4) is a disposal within section 169H(2)(c) (qualifying business disposal: disposal associated with a relevant material disposal)—

(a)a disposal mentioned in subsection (2) or (3) of this section is treated for the purposes of section 169P(1) as a disposal associated with a relevant material disposal, but

(b)section 169P applies in relation to that disposal as if the disposal referred to in section 169P(4) were the disposal mentioned in section 169U(4)(a) or (b).

(5)In this section “ER purposes” means the purposes of—

(a)section 169N(2) to (4B), (7) and (8), and

(b)section 169P.”

(2)The amendment made by subsection (1) has effect in relation to cases where the disposal mentioned in the new section 169U(4)(a) or (b) is made on or after 3 December 2014.