Finance Act, 1974

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Amendment of section 20 of the Finance (Miscellaneous Provisions) Act, 1968.

63.—(1) Section 20 of the Finance (Miscellaneous Provisions) Act, 1968 , is hereby amended by—

(a) the substitution in subsection (1) of “development or the securing of the development of land and after the development” for “construction or the securing of the construction of a building and after the construction”,

(b) the substitution of the following paragraph for paragraph (b) of subsection (2):

“(b) at the time of the sale the company has (directly or indirectly) an interest in the development and the value of that interest and any interest which the company so has at that time in any other development (not being a development completed more than six years before that time nor a development in relation to which the condition specified in paragraph (c) is not satisfied) carried out or secured by the company amounts to one-fifth or more of the net assets of the company;”,

(c) the substitution of “development” for “building” in each place where it occurs in subsections (4), (9), (10) and (13) (c),

(d) the substitution of the following subsection for subsection (11):

“(11) Where a development has been commenced or carried out by a company on land in which a company connected with that company has an interest and after the development has commenced and not later than six years after its completion a person acquires control of the first company, then, as respects sales to that person of shares in the company having the interest in the land (whether effected before or after that person acquires control of the first company), the foregoing subsections shall apply as they apply to such a company as is therein mentioned but with the substitution for references to an interest in the development of references to an interest in the land.”, and

(e) the substitution of the following subsection for subsection (12):

“(12) For the purposes of the foregoing subsections an uncompleted development shall be taken to include so much of any materials belonging to the company as are required for the development and a development whether completed or not shall be taken to include the land related to the development.”,

and the said subsections (1), (4), (9), (10) and (13) (c), as so amended are set out in the Table to this section.

(2) Section 20 of the Finance (Miscellaneous Provisions) Act, 1968 , as amended by subsection (1), shall not apply or have effect in any case where the shares of the relevant company were sold before the 3rd day of April, 1974.

TABLE

(1) Where the activities of a company consist of or include the development or the securing of the development of land and after the development has begun and not later than six years after its completion shares in the company are sold to a person who has, or in consequence of the sale will have, control of the company, and apart from this section the consideration for the sale would not be a receipt of an income nature in the hands of the seller, the consideration shall, if the conditions specified in subsection (2) are satisfied, be deemed to be income of the seller up to the amount specified in subsection (5), and shall be chargeable under Case IV of Schedule D accordingly.

(4) Where before the sale of shares mentioned in subsection (1) the company—

(a) has disposed of its interest in the development, or of an interest which derives therefrom, to the person who is the purchaser of the shares, or to a company connected with the purchaser, or

(b) has disposed of any interest in the development to or in favour of any person, and the purchaser of the shares, or a company connected with the purchaser, acquires the interest, either before the sale or after the sale in pursuance of arrangements made not later than the sale,

subsection (1) shall apply as if the interest disposed of were still vested in the first-mentioned company at the time of the sale of the shares, and as if any assets of the company representing the consideration for the disposal of the interest were not assets of the company.

(9) Where, in consequence of a sale of shares, any amount would have, under subsection (1), been deemed to be income of the seller but for the circumstance that the condition specified in subsection (2) (c) was not satisfied, and on the sixth anniversary of the sale any interest in a development such as is mentioned in subsection (2) (b) is still held by the company, then, income of the like amount shall be deemed to have been received by the company on the said anniversary and shall be chargeable under Case IV of Schedule D accordingly.

(10) If after the sale of the shares any receipts accrue to the company from the disposal, in the course of a trade of dealing in or developing land, of an interest in a development, being an interest which the company had at the time of the sale of the shares and with respect to which the profit which would have arisen on the disposal thereof was taken into account in arriving at the amount of income chargeable to tax by reference to the sale under the foregoing provisions of this section, the receipts shall be disregarded for income tax purposes if and to the extent that is just so to do having regard to any tax charged under the said provisions.

(13) (c) there shall be disregarded any development provided for use, and brought into use, for the purposes of a bona fide trade carried on by the company, other than a trade of—

(i) dealing in or developing land, or

(ii) the provision of services for occupiers of land an interest in which is held by the company.