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Finance Act, 1999

Amendment of Chapter 1 (general) of Part 20 (companies' chargeable gains) of Principal Act.

56.—(1) Part 20 of the Principal Act is hereby amended in Chapter 1—

(a) in section 616(1)—

(i) by the substitution for “of this Part” of “of this Chapter”, and

(ii) by the substitution for paragraphs (a) to (c) of the following paragraphs:

“(a) subject to section 621(1), a reference to a company or companies shall apply only to a company or companies, as limited by subsection (2), being a company or, as the case may be, companies—

(i) where the reference is in this section, which, by virtue of the law of a Member State of the European Communities, is or are resident for the purposes of tax in such a Member State, and for this purpose ‘tax’, in relation to a Member State of the European Communities other than the State, means any tax imposed in the Member State which corresponds to corporation tax in the State, and

(ii) where the reference is in the following sections of this Chapter, which is or are resident in the State,

and references to a member or members of a group of companies shall be construed accordingly;

(b) a company is an effective 75 per cent subsidiary of another company (in this paragraph referred to as ‘the parent’) at any time if at that time—

(i) the company is a 75 per cent subsidiary (within the meaning of section 9) of the parent,

(ii) the parent is beneficially entitled to not less than 75 per cent of any profits available for distribution to equity holders of the company, and

(iii) the parent would be beneficially entitled to not less than 75 per cent of the assets of the company available for distribution to its equity holders on a winding up,

and sections 413 to 419 shall apply for the purposes of this paragraph as they apply for the purposes of Chapter 5 of Part 12;

(bb) a principal company and all its effective 75 per cent subsidiaries shall form a group, and where a principal company is a member of a group as being itself an effective 75 per cent subsidiary that group shall comprise all its effective 75 per cent subsidiaries;

(c) ‘principal company’ means a company of which another company is an effective 75 per cent subsidiary;”,

(b) in section 616—

(i) by the substitution in subsection (3) for “a 75 per cent subsidiary” (in both places where it occurs) of “an effective 75 per cent subsidiary”, and

(ii) by the substitution in subsection (4) for “75 per cent subsidiary” of “effective 75 per cent subsidiary”,

(c) in section 621(4) by the substitution for “75 per cent subsidiary” of “effective 75 per cent subsidiary”,

(d) by the insertion after section 623 of the following section:

“Transitional provisions in respect of section 623.

623A.—(1) In this section ‘the new definition’ means section 616 as amended by section 56 of the Finance Act, 1999, and ‘the old definition’ means that section as it had effect on the 10th day of February, 1999.

(2) Where—

(a) on the 11th day of February, 1999, a company ceases, for the purposes of section 616 and the provisions of this Part subsequent to that section, to be a member of a group by reason only of the substitution for the old definition of the new definition, and

(b) in consequence of ceasing to be such a member the company would, apart from this section, be treated by virtue of section 623(4) as selling an asset at any time,

the company shall not be treated as selling the asset at that time unless the conditions in subsection (3) become satisfied, assuming for that purpose that the old definition applies.

(3) The conditions referred to in subsection (2) are—

(a) that for the purposes of section 623, the company ceases at any time (in this subsection referred to as the ‘relevant time’) to be a member of the group referred to in subsection (2)(a),

(b) that, at the relevant time, the company (or an associated company also ceasing to be a member of that group at that time) owns, otherwise than as trading stock, the asset, or property on the acquisition of which a chargeable gain in relation to the asset has been deferred on a replacement of business assets, and

(c) that the time of acquisition of the asset referred to in section 623(2) fell within the period of 10 years ending with the relevant time.”,

(e) by the insertion after section 625 of the following section:

“Transitional provisions in respect of section 625.

625A.—(1) In this section—

‘the subsidiary’ and ‘the chargeable company’ have the same meanings, respectively, assigned to them by 625(1);

‘the new definition’ means section 616 as amended by section 56 of the Finance Act, 1999, and ‘the old definition’ means that section as it had effect on the 10th day of February, 1999.

(2) Where—

(a) on the 11th day of February, 1999, the subsidiary company ceases, for the purposes of section 616 and the provisions of this Part subsequent to that section, to be a member of a group by reason only of the substitution for the old definition of the new definition, and

(b) in consequence of ceasing to be such a member the chargeable company would, apart from this section, be treated by virtue of section 625(2) as selling shares in the subsidiary at any time,

the chargeable company shall not be treated as selling the shares at that time unless the conditions in subsection (3) become satisfied assuming for that purpose that the old definition applies.

(3) The conditions referred to in subsection (2) are—

(a) that for the purposes of section 625 the subsidiary ceases at any time (in this subsection referred to as ‘the relevant time’) to be a member of the group referred to in subsection (2)(a), and

(b) that the time of the earlier occasion referred to in section 625(1)(a) fell within the period of 10 years ending with the relevant time.”,

and

(f) by the insertion after section 626 of the following section:

“Restriction on set-off of pre-entry losses.

626A.—For the purposes of Part 20, Schedule 18A (which makes provision in relation to losses accruing to a company before the time when it becomes a member of a group of companies and losses accruing on assets held by any company at such a time) shall apply.”.

(2) This section shall apply—

(a) as respects paragraph (a) of subsection (1), in so far as it relates to section 616(1)(a) of the Principal Act, as respects accounting periods ending on or after the 1st day of July, 1998, and

(b) in any other case as on and from the 11th day of February, 1999.