Office of Public Sector Information
PART III continued CHAPTER I continued
(3B) References in this section to enabling a person to obtain an amount of money shall be construed—
(a) as references to enabling an amount to be obtained by that person by any means at all, including, in particular—
(i) by using any asset or other property as security for a loan or advance, or
(ii) by using any rights comprised in or attached to any asset or other property to obtain any asset for which trading arrangements exist;
and
(b) as including references to cases where a person is enabled to obtain an amount as a member of a class or description of persons, as well as where he is so enabled in his own right.
(3C) For the purposes of this section an amount is similar to the expense incurred in the provision of any asset if it is, or is an amount of money equivalent to—
(a) the amount of the expense so incurred; or
(b) a greater amount; or
(c) an amount that is less than that amount but not substantially so.”
(4) In subsections (4) and (5) (meaning of “asset”), for the words “subsection (2) above”, in each place where they occur, there shall be substituted “this section”.
(5) After subsection (5) there shall be inserted the following subsection—
“(6) In this section—
“EEA State” means a State which is a Contracting Party to the Agreement on the European Economic Area signed at Oporto on 2nd May 1992 as adjusted by the Protocol signed at Brussels on 17th March 1993;
“family or household” has the same meaning as it has, by virtue of section 168(4), in Chapter II of this Part;
“fiscal warehousing regime” means—
a warehousing regime or fiscal warehousing regime (within the meaning of sections 18 to 18F of the [1994 c. 23.] Value Added Tax Act 1994); or
any corresponding arrangements in an EEA State other than the United Kingdom;
“money” includes money expressed in a currency other than sterling or in the European currency unit (as for the time being defined in Council Regulation No. 3180/78/EEC or any Community instrument replacing it); and
“money debt” means any obligation which falls to be, or may be, settled—
by the payment of money, or
by the transfer of a right to settlement under an obligation which is itself a money debt.”
(6) The preceding provisions of this section have effect in relation to any asset provided on or after 6th April 1998 and shall be deemed, in accordance with subsection (7) below, to have come into force on that date.
(7) This section shall not be taken to have changed—
(a) the amounts which were deductible by any person under section 203 of the Taxes Act 1988 at any time on or before the day on which this Act is passed; or
(b) the amounts which should have been accounted for to the Board under section 203J(3) of that Act at any time on or before the fifth of the month following that in which this Act is passed;
but, the amounts which (but for this subsection) would have been deductible, or would have been amounts for which any person should have accounted, shall be deducted or accounted for in accordance with any such provision as may be made by regulations under section 203 of the Taxes Act 1988.
(1) After section 203F of the Taxes Act 1988 there shall be inserted the following section—
(1) Where—
(a) any assessable income of an employee is provided in the form of anything enhancing the value of an asset in which the employee or a member of his family or household already has an interest, and
(b) that asset, with its value enhanced, would be treated as a readily convertible asset for the purposes of section 203F if assessable income were provided to the employee in the form of that asset at the time of the enhancement,
that section shall have effect (subject to subsection (2) below) as if the employee had been provided, at that time, with assessable income in the form of the asset (with its value enhanced), instead of with whatever enhanced its value.
(2) Where section 203F has effect in accordance with subsection (1) above, subsection (3) of that section shall apply as if the reference in subsection (3) of that section to the provision of the asset were a reference to the enhancement of its value.
(3) Subject to subsection (4) below, any reference in this section to enhancing the value of an asset is a reference to—
(a) the provision of any services by which that asset or any right or interest in it is improved or otherwise made more valuable,
(b) the provision of any property the addition of which to the asset in question improves it or otherwise increases its value, or
(c) the provision of any other enhancement by the application of money or property to the improvement of the asset in question or to securing an increase in its value or in the value of any right or interest in it.
(4) PAYE regulations may make provision excluding such matters as may be described in the regulations from the scope of what constitutes enhancing the value of an asset for the purposes of this section.
(5) Expressions used in this section and in section 203F have the same meanings in this section as in that section.”
(2) The preceding provisions of this section have effect in relation to any assessable income provided on or after 6th April 1998 and shall be deemed, in accordance with subsection (3) below, to have come into force on that date.
(3) This section shall not be taken to have changed—
(a) the amounts which were deductible by any person under section 203 of the Taxes Act 1988 at any time on or before the day on which this Act is passed; or
(b) the amounts which should have been accounted for to the Board under section 203J(3) of that Act at any time on or before the fifth of the month following that in which this Act is passed;
but, the amounts which (but for this subsection) would have been deductible, or would have been amounts for which any person should have accounted, shall be deducted or accounted for in accordance with any such provision as may be made by regulations under section 203 of the Taxes Act 1988.
(1) After the section 203FA of the Taxes Act 1988 that is inserted by section 66 above there shall be inserted the following section—
(1) This section applies where an event occurs by virtue of which an amount is assessable on any person (“the relevant person”) by virtue of section 135, 140A(4) or 140D.
(2) If that event is the exercise of a right to acquire shares, section 203F shall have effect, subject to subsection (7) below, as if the relevant person were being provided—
(a) at the time he acquires the shares in exercise of that right, and
(b) in respect of the office or employment by reason of which he was granted the right,
with assessable income in the form of those shares.
(3) If that event is the assignment or release of a right to acquire shares, sections 203 to 203F shall have effect, subject to subsection (7) below—
(a) in so far as the consideration for the assignment or release takes the form of a payment, as if so much of that payment as does not exceed the amount assessable by virtue of section 135 were a payment of assessable income of the relevant person; and
(b) in so far as that consideration consists in the provision of an asset, as if the provision of that asset were the provision—
(i) to the relevant person, and
(ii) in respect of the office or employment by reason of which he was granted the right,
of assessable income in the form of that asset.
(4) If that event is an event falling within subsection (4)(a) or (b) of section 140A, sections 203 to 203F shall have effect, subject to subsection (7) below, as if—
(a) the provision to the relevant person of the employee’s interest in the shares included the provision to him at the time of the event of a further interest in those shares; and
(b) the further interest were not subject to any terms by virtue of which it would fall for the purposes of section 140A to be treated as only conditional.
(5) If that event is an event falling within subsection (3) of section 140D, sections 203 to 203F shall have effect, subject to subsection (7) below, as if the original provision to the relevant person of the convertible shares or securities included the provision to him at the time of the event of the shares or securities into which they are converted.
(6) Subsection (5) above shall apply in a case where the convertible shares or securities were themselves acquired by means of a taxable conversion (as defined in section 140D(7)), or by a series of such conversions, as if the reference to the original provision of the convertible shares or securities were a reference to the provision of the shares or securities which were converted by the earlier or earliest conversion.
(7) Where section 203F has effect in accordance with any of the preceding provisions of this section, subsection (3) of section 203F shall apply as if the reference in that subsection to the amount of income likely to be chargeable to tax under Schedule E in respect of the provision of the asset were a reference to the amount on which tax is likely to be chargeable by virtue of section 135, 140A or 140D in respect of the event in question.
(8) PAYE regulations may make provision for excluding payments from the scope of subsection (3)(a) above in such circumstances as may be specified in the regulations.
(9) In this section “asset” means—
(a) any asset within the meaning of section 203F; or
(b) any non-cash voucher, credit-token or cash voucher (as defined for the purposes of section 141, 142 or, as the case may be, 143).
(10) Expressions used in this section and in any of sections 135 and 140A to 140H have the same meanings in this section as in that section, and any reference in this section to—
(a) an event falling within subsection (4)(a) or (b) of section 140A, or
(b) an event falling within subsection (3) of section 140D,
includes a reference to an event which is treated for the purposes of that section as such an event by virtue of section 140A(8) or 140F(1).”
(2) The preceding provisions of this section have effect in relation to events occurring on or after 6th April 1998 and shall be deemed, in accordance with subsection (3) below, to have come into force on that date.
(3) This section shall not be taken to have changed—
(a) the amounts which were deductible by any person under section 203 of the Taxes Act 1988 at any time on or before the day on which this Act is passed; or
(b) the amounts which should have been accounted for to the Board under section 203J(3) of that Act at any time on or before the fifth of the month following that in which this Act is passed;
but, the amounts which (but for this subsection) would have been deductible, or would have been amounts for which any person should have accounted, shall be deducted or accounted for in accordance with any such provision as may be made by regulations under section 203 of the Taxes Act 1988.
(1) For subsections (3) and (4) of section 203G of the Taxes Act 1988 (conditions for the receipt of a non-cash voucher to be treated as a payment for PAYE purposes) there shall be substituted the following subsections—
“(3) The first condition is fulfilled with respect to a non-cash voucher if it is capable of being exchanged for anything which, if provided to the employee at the time when the voucher is received, would fall to be regarded as a readily convertible asset for the purposes of section 203F.
(4) The second condition is fulfilled with respect to a non-cash voucher if (but for section 203F(4)(b)) it would itself fall to be regarded as a readily convertible asset for the purposes of section 203F.
(5) Subsection (5) of section 141 (time of receipt of voucher appropriated to employee) shall apply for the purposes of this section as it applies for the purposes of subsections (1) and (2) of that section.”
(2) In subsection (1) of section 203H of that Act (use of credit tokens to be treated as payment for PAYE purposes), for paragraph (b) there shall be substituted—
“(b) anything which, if provided to the employee at the time when the credit-token is used, would fall to be regarded as a readily convertible asset for the purposes of section 203F,”; and subsection (2) of that section shall cease to have effect.
(3) In section 203I of that Act (cash vouchers), after subsection (2) there shall be inserted the following subsection—
“(3) Subsection (2) of section 143 (time of receipt of voucher appropriated to employee) shall apply for the purposes of this section as it applies for the purposes of subsections (1) and (5) of that section.”
(4) The preceding provisions of this section have effect—
(a) in relation to non-cash vouchers or cash vouchers received on or after 6th April 1998, and
(b) in relation to any use of a credit-token on or after that date,
and shall be deemed, in accordance with subsection (5) below, to have come into force on that date.
(5) This section shall not be taken to have changed—
(a) the amounts which were deductible by any person under section 203 of the Taxes Act 1988 at any time on or before the day on which this Act is passed; or
(b) the amounts which should have been accounted for to the Board under section 203J(3) of that Act at any time on or before the fifth of the month following that in which this Act is passed;
but, the amounts which (but for this subsection) would have been deductible, or would have been amounts for which any person should have accounted, shall be deducted or accounted for in accordance with any such provision as may be made by regulations under section 203 of the Taxes Act 1988.
(1) In section 203C of the Taxes Act 1988 (application of PAYE to payments to employees of a non-UK employer working for another where payment made without deduction by the employer or his intermediary), in subsection (1)(b), (c) and (d), after “of the employer” there shall be inserted “or of the relevant person”.
(2) In that section, the following subsections shall be inserted after subsection (3)—
“(3A) Where, by virtue of any of sections 203F to 203I, an employer would be treated for the purposes of PAYE regulations (if they applied to him) as making a payment of any amount to an employee, this section shall have effect—
(a) as if the employer were also to be treated for the purposes of this section as making an actual payment of that amount; and
(b) as if paragraph (a) of subsection (3) above were omitted.
(3B) References in this section to the making of any payment by an intermediary of the relevant person shall be construed in accordance with subsection (4) of section 203B as if references in that subsection to the employer were references to the relevant person.”
(3) For subsections (1) and (2) of section 203L of that Act (interpretation) there shall be substituted the following subsections—
“(1) Subject to subsections (1A) and (1B) below and section 203J(2)(b), in sections 203B to 203J—
“employee” means a person who holds or has held any office or employment under or with another person; and
“employer”—
in relation to an employee, means a person under or with whom that employee holds or has held an office or employment; and
in relation to any assessable income of an employee, means the person who is the employer of that employee in relation to the office or employment in respect of which that income is or was provided or, as the case may be, by reference to which it falls to be regarded as assessable.
(1A) Subject to subsection (1B) below, where the remuneration receivable by an individual under or in consequence of any contract falls to be treated under section 134 (agency workers) as the emoluments of an office or employment, sections 203B to 203K (except section 203E) shall have effect as if that person held that office or employment under or with the agency.
(1B) Where—
(a) the remuneration receivable by an individual under or in consequence of any contract falls to be so treated under section 134, and
(b) a payment of, or on account of, assessable income of that individual is made by a person acting on behalf of the client and at the expense of the client or a person connected with the client,
section 203B and, in relation to any payment treated as made by the client under section 203B, section 203J shall have effect in relation to that payment as if the client and not the agency were the employer for the purposes of sections 203B to 203K.
(1C) In subsections (1A) and (1B) above “the agency” and “the client” have the same meanings as in section 134; and section 839 applies for the purposes of those subsections.
(2) In sections 203B to 203K and in this section “assessable” means assessable to income tax under Schedule E.”
(4) In section 144A(2) of that Act (payments etc. received free of tax), after “employer” there shall be inserted “, in relation to any provision of sections 203B to 203J, is a reference to the person taken to be the employer for the purposes of that provision and”.
(5) The preceding provisions of this section have effect in relation to payments made, assets provided and vouchers received at any time on or after 6th April 1998 and in relation to any use of a credit-token on or after that date.
(6) Nothing in this section shall be taken to have changed—
(a) the amounts which were deductible by any person under section 203 of the Taxes Act 1988 at any time on or before the day on which this Act is passed; or
(b) the amounts which should have been accounted for to the Board under section 203J(3) of that Act at any time on or before the fifth of the month following that in which this Act is passed;
but, the amounts which (but for this subsection) would have been deductible, or would have been amounts for which any person should have accounted, shall be deducted or accounted for in accordance with any such provision as may be made by regulations under section 203 of the Taxes Act 1988.
(1) Schedule 12 to this Act (which amends the definition of qualifying trade for the purposes of the enactments relating to the enterprise investment scheme and venture capital trusts) shall have effect.
(2) In section 298(4) of the Taxes Act 1988 (power to amend sections 297 and 298), for “section 297” there shall be substituted “sections 293 and 297”.
(3) In paragraph 12(a) of Schedule 28B to that Act (power to amend paragraphs 4 and 5 of that Schedule), for “4 and 5” there shall be substituted “3 to 5”.
(4) The power conferred by subsection (2) above shall not be exercisable in relation to any shares issued before 17th March 1998.
(1) After section 299A of the Taxes Act 1988 there shall be inserted the following section—
(1) An individual is not eligible for relief in respect of any shares in a company if the relevant arrangements include—
(a) arrangements with a view to the subsequent repurchase, exchange or other disposal of those shares or of other shares in or securities of the same company;
(b) arrangements for or with a view to the cessation of any trade which is being or is to be or may be carried on by the company or a person connected with the company;
(c) arrangements for the disposal of, or of a substantial amount of, the assets of the company or of a person connected with the company;
(d) arrangements the main purpose of which, or one of the main purposes of which, is (by means of any insurance, indemnity or guarantee or otherwise) to provide partial or complete protection for persons investing in shares in that company against what would otherwise be the risks attached to making the investment.
(2) The arrangements referred to in subsection (1)(a) above do not include any arrangements with a view to such an exchange of shares, or shares and securities, as is mentioned in section 304A(1).
(3) The arrangements referred to in subsection (1)(b) and (c) above do not include any arrangements applicable only on the winding up of a company except in a case where—
(a) the relevant arrangements include arrangements for the company to be wound up; or
(b) the company is wound up otherwise than for bona fide commercial reasons.
(4) The arrangements referred to in subsection (1)(d) above do not include any arrangements which are confined to the provision—
(a) for the company itself, or
(b) in the case of a company which is a parent company of a trading group, for the company itself, for the company itself and one or more of its subsidiaries or for one or more of its subsidiaries,
of any such protection against the risks arising in the course of carrying on its business as it might reasonably be expected so to provide in normal commercial circumstances.
(5) The reference in subsection (4) above to the parent company of a trading group shall be construed in accordance with the provision contained for the purposes of section 293 in that section.
(6) In this section “the relevant arrangements” means—
(a) the arrangements under which the shares are issued to the individual; and
(b) any arrangements made before the issue of the shares to him in relation to or in connection with that issue.
(7) In this section “arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable.”
(2) In section 307(6)(a) of that Act (interest on overdue tax where relief withdrawn), after “289(6)” there shall be inserted “or 299B(1)”.
(3) In section 310 of that Act (information powers), in subsection (5), after “293(8)” there shall be inserted “, 299B(1)”.
(4) For subsection (6) of that section there shall be substituted the following subsection—
“(6) For the purposes of subsection (5) above the persons who are persons concerned are—
(a) in relation to section 289(6), the claimant, the company and any person controlling the company;
(b) in relation to section 291B(5), the claimant;
(c) in relation to section 293(8) or 308(2)(e), the company and any person controlling the company; and
(d) in relation to section 299B(1), the claimant, the company and any person connected with the company;
and for those purposes references in this subsection to the claimant include references to any person to whom the claimant appears to have made a transfer such as is mentioned in section 304(1) of any of the shares in question.”
(5) The preceding provisions of this section apply in relation to shares issued on or after 2nd July 1997.
(1) After paragraph 10 of Schedule 28B to the Taxes Act 1988 there shall be inserted the following paragraph—
10A (1) The requirement of this paragraph is that there are no securities relating to a guaranteed loan in the relevant holding.
(2) For the purposes of this paragraph a security relates to a guaranteed loan if (and only if) there are arrangements for the trust company to be or become entitled, in the event of a failure by any person to comply with—
(a) the terms of the loan to which the security relates, or
(b) the terms of the security,
to receive anything (whether directly or indirectly) from a third party.
(3) For the purposes of sub-paragraph (2) above it shall be immaterial whether the arrangements apply in all cases of a failure to comply or only in certain such cases.
(4) For the purposes of this paragraph “third party” means any person except—
(a) the relevant company; and
(b) if the relevant company is the parent company of a trading group for the purposes of paragraph 3 above, the subsidiaries of the relevant company.”
(2) After the paragraph 10A inserted by subsection (1) above there shall be inserted the following paragraph—
10B (1) The requirement of this paragraph is that eligible shares represent at least 10 per cent. by value of the totality of the shares in or securities of the relevant company (including the relevant holding) which are held by the trust company.
(2) For the purposes of this paragraph the value at any time of any shares in or securities of a company shall be taken (subject to sub-paragraph (4) below) to be their value immediately after—
(a) any relevant event occurring at that time; or
(b) where no relevant event occurs at that time, the last relevant event to occur before that time.
(3) In sub-paragraph (2) above “relevant event”, in relation to any shares in or securities of the relevant company, means—
(a) the acquisition by the trust company of those shares or securities;
(b) the acquisition by the trust company of any other shares in or securities of the relevant company which—
(i) are of the same description as those shares or securities, and
(ii) are acquired otherwise than by virtue of being allotted to the trust company without that company’s becoming liable to give any consideration;
or
(c) the making of any such payment in discharge, in whole or in part, of any obligation attached to any shares in or securities of the relevant company held by the trust company as (by discharging that obligation) increases the value of any such shares or securities.
(4) If at any time the value of any shares or securities held by the trust company is less than the amount of the consideration given by the trust company for those shares or securities, it shall be assumed for the purposes of this paragraph that the value of those shares or securities at that time is equal to the amount of that consideration.
(5) In this paragraph “eligible shares” has the same meaning as in section 842AA.”
(3) Subject to subsections (4) and (5) below, the preceding provisions of this section have effect in relation to accounting periods ending on or after 2nd July 1997.
(4) Subsection (1) above shall not have effect for the purpose of determining whether any shares or securities acquired by a company by means of the investment of—
(a) money raised by the issue before 2nd July 1997 of shares in or securities of the trust company, or
(b) money derived from the investment by that company of any such money,
constitute qualifying holdings of the trust company at any time.
(5) If at any time the requirement of paragraph 10B of Schedule 28B to the Taxes Act 1988—
(a) would be satisfied in relation to a relevant holding and a company if none of the old investments were held by the trust company at that time, but
(b) would not otherwise be satisfied,
that paragraph shall apply in relation to that holding as if the old investments were not held by the trust company at that time.
(6) In subsection (5) above, “old investments” means shares in or securities of the relevant company acquired by means of the investment of—
(a) money raised by the issue before 2nd July 1997 of shares in or securities of the trust company; or
(b) money derived from the investment of such money.
(1) In each of—
(a) subsection (14) of section 842AA of the Taxes Act 1988, and
(b) sub-paragraph (1) of paragraph 6 of Schedule 15B to that Act,
(which define “eligible shares” for the purposes of enactments relating to VCTs), the word “preferential”, in the second place where it occurs in that subsection or sub-paragraph, shall be omitted.
(2) In paragraph 10(3) of Schedule 28B to that Act (subsidiary to be qualifying subsidiary if it is a 90 per cent subsidiary), for “90”, wherever it occurs, there shall be substituted “75”.
(3) In paragraph 3 of Schedule 28B to that Act, in sub-paragraph (3) (requirement in relation to qualifying trade of relevant company or qualifying subsidiary), for “qualifying subsidiary” there shall be substituted “relevant qualifying subsidiary”; and after paragraph (b) of that sub-paragraph there shall be inserted the following— “and for the purposes of this sub-paragraph a company is a relevant qualifying subsidiary of another company at any time when it would be a qualifying subsidiary of that company if “90” were substituted for “75” in every place where “75” occurs in paragraph 10(3) below.”
(4) In paragraph 6 of Schedule 28B to that Act, in sub-paragraphs (1)(b), (2A)(c) and (2B) (requirement as to use of money raised), for “qualifying subsidiary”, wherever it occurs, there shall be substituted “relevant qualifying subsidiary”; and after sub-paragraph (4) of that paragraph there shall be inserted the following sub-paragraph—
“(5) For the purposes of this paragraph a company is a relevant qualifying subsidiary of another company at any time when it would be a qualifying subsidiary of that company if “90” were substituted for “75” in every place where “75” occurs in paragraph 10(3) below.”
(5) In paragraph 8(1) of Schedule 28B to that Act (requirement as to capital of the relevant company), for “£10 million” and “£11 million” there shall be substituted, respectively, “£15 million” and “£16 million”.
(6) Subsections (1) to (4) above have effect for the purpose of determining whether shares or securities are, as at any time on or after 6th April 1998, to be regarded as comprised in a company’s qualifying holdings; and subsection (5) above has effect in relation to relevant holdings issued on or after that date.
Finance Act 1998 (C. 36)