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Amendment of Second Schedule to Principal Act.
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83.—(1) Part I of the Second Schedule to the Principal Act is hereby amended by the substitution for paragraph 9 of the following paragraph:
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“9. (1) In this paragraph—
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‘company’ means a company which—
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(a) is a private trading company within the meaning assigned by section 16 (2); and
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(b) for the relevant period, is such a company—
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(i) controlled by the disponer; and
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(ii) where the disponer is a director thereof;
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‘company controlled by the disponer’ means a company that is under the control of any one or more of the following, that is to say—
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(a) the disponer,
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(b) nominees of the disponer,
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(c) the trustees of a settlement made by the disponer;
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‘control’, in relation to a company, shall be construed in accordance with section 16 (4) (b);
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‘nominee’ has the same meaning as it has in section 16;
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‘relevant period’ means—
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(a) the period of five years ending on the date of the disposition; or
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(b) where, at the date of the disposition,
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(i) an interest in possession in—
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(I) the property referred to in subparagraph (2) (a), or
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(II) the shares referred to in subparagraph (2) (b),
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as the case may be, is limited to the disponer under the disposition, and
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(ii) such property is not, or such shares are not, property consisting of the appropriate part of property, within the meaning of section 5 (5), on which is charged or secured an annuity or other annual right limited to cease on the death of the disponer,
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the period of five years ending on the coming to an end of that interest,
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subject, in relation to work, to the exclusion of reasonable periods of annual or sick leave from that period of five years.
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(2) For the purpose of computing the tax payable on a gift or inheritance, the donee or successor shall be deemed to bear to the disponer the relationship of a child in any case where the donee or successor is a child of a brother, or a child of a sister, of the disponer and either—
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(a) the donee or successor has worked substantially on a full-time basis for the disponer for the relevant period in carrying on, or in assisting in carrying on, the trade, business or profession of the disponer, and the gift or inheritance consists of property which was used in connection with that business, trade or profession; or
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(b) the donee or successor has worked substantially on a full-time basis for a company for the relevant period in carrying on, or in assisting in carrying on, the trade, business or profession of the company, and the gift or inheritance consists of shares in that company.
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(3) Without prejudice to the generality of subparagraph (2), a donee or successor shall not be deemed to be working substantially on a full-time basis for a disponer or a company unless—
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(a) where the gift or inheritance consists of property which was used in connection with the business, trade or profession of the disponer, the donee or successor works—
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(i) more than 24 hours a week for the disponer, at a place where that business, trade or profession, is carried on; or
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(ii) more than 15 hours a week for the disponer, at a place where that business, trade or profession is carried on, and such business, trade or profession is carried on exclusively by the disponer, any spouse of the disponer, and the donee or successor;
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or
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(b) where the gift or inheritance consists of shares in the company, the donee or successor works—
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(i) more than 24 hours a week for the company, at a place where the business, trade or profession of the company is carried on; or
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(ii) more than 15 hours a week for the company, at a place where the business, trade or profession of the company is carried on, and such business, trade or profession is carried on exclusively by the disponer, any spouse of the disponer, and the donee or successor.
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(4) The provisions of this paragraph shall not apply to a gift or inheritance taken by a donee or successor under a discretionary trust.”.
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(2) This section shall have effect as respects gifts and inheritances taken on or after the 1st day of May, 1989.
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