Finance Act, 1995

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Amendment of section 26 (disposal of business or farm on retirement) of Capital Gains Tax Act, 1975.

71.—(1) Section 26 of the Capital Gains Tax Act, 1975 , is hereby amended—

(a) in subsection (1) (a), by the substitution of “£250,000” for “£200,000” (inserted by section 42 (a) of the Finance Act, 1991 ) in each place where it occurs,

(b) by the substitution of the following subsections for subsection (3) (as amended by section 84 (a) of the Finance Act, 1990 ) and subsection (3A) (inserted by section 84 (b) of the said Act):

“(3) Where a disposal of qualifying assets includes a disposal of shares or securities of the individual's family company, the amount of the consideration to be taken into account for the purposes of subsection (1) in respect of those shares or securities shall be the proportion of the consideration for such shares or securities which is equal to—

(a) in a case where the individual's family company is not a holding company, the proportion which the part of the value of the company's chargeable assets at the time of the disposal which is attributable to the value of the company's chargeable business assets bears to the whole of that value, and

(b) in a case where the individual's family company is a holding company, the proportion which the part of the value of the chargeable assets of the trading group (excluding shares or securities of one member of the group held by another member of the group) at the time of the disposal which is attributable to the value of the chargeable business assets of the trading group bears to the whole of that value:

Provided that nothing in this section shall affect liability on any gains calculated by reference to the balance of the consideration for the disposal of the shares or securities.

(3A) For the purposes of subsection (3) every asset shall be a chargeable asset except one on the disposal of which by the company or a member of the trading group, as the case may be, at the time of the disposal of the shares or securities, no gain accruing to the company or member of the trading group, as the case may be, would be a chargeable gain.”,

and

(c) in subsection (6) (a)—

(i) by the deletion of “a company shall be deemed to be a ‘100 per cent. subsidiary’ of another company if and so long as not less than 100 per cent. of its ordinary share capital is owned directly or indirectly by that other company” (inserted by section 84 (c) (i) of the Finance Act, 1990 ),

(ii) by the substitution of the following definition for the definition of “chargeable business asset” (as amended by section 84 (c) (ii) of the Finance Act, 1990 ):

“‘chargeable business asset’ means an asset (including goodwill but not including shares or securities or other assets held as investments) which is, or is an interest in, an asset used for the purposes of farming, or a trade, profession, office or employment, carried on by—

(i) the individual, or

(ii) the individual's family company, or

(iii) a company which is a member of a trading group of which the holding company is the individual's family company,

other than an asset on the disposal of which no gain accruing would be a chargeable gain;”,

(iii) by the substitution of “75 per cent. subsidiaries” for “100 per cent. subsidiaries” in the definition of “holding company” (inserted by section 84 (c) (iii) of the Finance Act, 1990 ),

(iv) by the substitution of the following definitions for the definitions of “trading company” and “trading group” (inserted by section 84 (c) (v) of the Finance Act, 1990 ):

“‘trading company’ means a company whose business consists wholly or mainly of the carrying on of one or more trades or professions;

‘trading group’ means a group of companies consisting of the holding company and its 75 per cent. subsidiaries, the business of whose members taken together consists wholly or mainly of the carrying on of one or more trades or professions;”,

and

(v) by the insertion of the following definition after the definition of “trading group” (inserted by subparagraph (iv)):

“‘75 per cent. subsidiary’ has the meaning assigned to it in section 156 of the Corporation Tax Act, 1976 .”.

(2) Subsection (1) shall apply and have effect as respects disposals made on or after the 6th day of April, 1995.