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Amendment of Chapter 6 of Part 19 of Principal Act (transfers of business assets)
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30. (1) Section 597AA of the Principal Act is amended—
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(a) in subsection (2)(b)—
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(i) in subparagraph (ii), by substituting “land,” for “land, or”,
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(ii) in subparagraph (iii), by substituting “chargeable gains,” for “chargeable gains.”, and
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(iii) by inserting the following subparagraphs after subparagraph (iii)—
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“(iv) subject to subsection (8), goodwill which is disposed of directly or indirectly to a company, where, immediately following the disposal, the individual is connected with the company, or
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(v) subject to subsection (8), shares or securities in a company which are disposed of directly or indirectly to another company, where, immediately following the disposal, the individual is connected with the first-mentioned company.”,
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and
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(b) by inserting the following subsections after subsection (5):
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“(6) Subject to section 600 and subsection (8), this section shall not apply to such portion of the chargeable gain or gains accruing in respect of a disposal or disposals by a relevant individual of chargeable business assets which form part of a transfer to which section 600 applies as bears the same proportion to the total of such gains as the value of the consideration received by the relevant individual out of the assets of the company in respect of the transfer bears to the value of the consideration received by the relevant individual other than by way of shares or securities in respect of such transfer.
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(7) Where a relevant individual enters into arrangements, the main purpose, or one of the main purposes, of which is to secure that the relevant individual is not connected with a company for the purpose of either or both of subparagraphs (iv) or (v) of subsection (2)(b), this section shall not apply.
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(8) Subsections (2)(b)(iv), (2)(b)(v) and (6) shall not apply in relation to a disposal of assets where it would be reasonable to consider that the disposal is made for bona fide commercial reasons and does not form part of any arrangement or scheme the main purpose or one of the main purposes of which is the avoidance of liability to tax.”.
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(2) Section 598 of the Principal Act is amended—
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(a) in subsection (1), in the definition of “chargeable business asset”, by substituting the following for “other than an asset on the disposal of which no gain accruing would be a chargeable gain;”:
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“other than—
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(I) an asset on the disposal of which no gain accruing would be a chargeable gain,
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(II) subject to subsection (1)(f), goodwill which is disposed of directly or indirectly to a company, where, immediately following the disposal the individual is connected with the company, or
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(III) subject to subsection (1)(f), shares or securities in a company which are disposed of directly or indirectly to another company where, immediately following the disposal, the individual is connected with the first-mentioned company;”,
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(b) in subsection (1), by inserting the following paragraph after paragraph (e)—
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“(f) Goodwill, shares or securities referred to in clauses (II) and (III) of the definition of ‘chargeable business asset’ shall be treated as chargeable business assets where it would be reasonable to consider that a disposal of such assets is made for bona fide commercial reasons and does not form part of any arrangement or scheme the main purpose or one of the main purposes of which is the avoidance of liability to tax.”,
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and
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(c) by inserting the following subsections after subsection (7A):
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“(7B) Where an individual enters into arrangements, the main purpose, or one of the main purposes, of which is to secure that the individual is not connected with a company for the purpose of either or both of clauses (II) or (III) in the definition of ‘chargeable business asset’, the individual will be deemed to be connected with that company for the purpose of either or both of clauses (II) or (III) as the case may be.
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(7C) Subject to section 600 and subsection (7D), this section shall not apply to such portion of the chargeable gain or gains accruing in respect of a disposal or disposals by an individual of qualifying assets which form part of a transfer to which section 600 applies as bears the same proportion to the total of such gains as the value of the consideration received by the individual out of the assets of the company in respect of the transfer bears to the value of the consideration received by the individual other than by way of shares or securities in respect of such transfer.
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(7D) Subsection (7C) shall not apply in relation to a disposal of assets where it would be reasonable to consider that the disposal is made for bona fide commercial reasons and does not form part of any arrangement or scheme the main purpose or one of the main purposes of which is the avoidance of liability to tax.”.
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(3) Section 599 of the Principal Act is amended—
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(a) in subsection (5) by substituting “Subject to subsection (7), the consideration” for “The consideration”, and
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(b) by inserting the following subsection after subsection (6):
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“(7) Where there is—
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(a) a disposal of shares or securities of a family company by an individual referred to in subparagraph (iia) or (iii) of subsection (1)(b) to his or her child, and
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(b) a disposal of shares or securities of the family company by the individual to a company controlled by that child,
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the consideration for the disposals referred to in paragraphs (a) and (b) shall be aggregated for the purpose of section 598(3).”.
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(4) This section shall come into operation on 2 November 2017.
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