In Parliament

Finance Bill amendments

A number of amendments and new clauses to the Finance Bill have been tabled recently.

Substantial shareholdings

Schedule 8 to the Bill introduces an exemption régime for companies disposing of substantial shareholdings. The provisions contain an anti-avoidance rule to prevent companies from indirectly realising untaxed investment returns by way of a share disposal that would be exempt under the new régime. The amendment replaces the existing paragraph with a redrafted paragraph which makes clearer the scope of the rule, while maintaining protection against schemes of this kind.

Stamp duty

Clause 114 brings contracts for the sale of interests in land with a market value in excess of £10 million into charge, to tackle the avoidance of stamp duty on large deals through resting on contract.

The amendments introduce a new Schedule into the Finance Bill which contains supplementary provisions to clause 114. The supplementary provisions ensure that relief will apply where stamp duty has been paid on a contract under clause 114 and there is a subsequent subsale or conveyance of either the whole or part of the property. The Schedule also allows for repayments to be made where the duty that has been paid on a contract under clause 114 is higher than the duty which is payable on the final conveyance or conveyances.

Clause 114 will take effect from Royal Assent to the Finance Bill.

The new clause will enable the Treasury to decide to allow the exemptions to apply to markets that are prescribed markets under the provisions to discourage market abuse contained in section 118, Financial Services and Markets Act 2000.

Intangible assets

Amendments correct a mismatch between the capital gains rules on company reconstructions and cross-border transactions and the provisions in Schedule 29. The relevant capital gains legislation provides for assets to be transferred between companies on certain company reconstructions or cross-border transactions for a consideration which ensures the transferor makes neither a gain nor a loss.

Without the proposed amendment, there would be cases where intangible assets transferred in either of these circumstances would be within the rules in Schedule 29, and not the capital gains rules, in the hands of the transferee company. In these cases, the transferee company would be regarded as acquiring the intangible assets at fair value, as defined for accounting purposes. But the transferor company would still be treated as having made a no gain/no loss disposal under the capital gains rules.

The amendments correct this mismatch by providing that an asset transferred on a no gain/no loss basis under section 139 or section 140A, Taxation of Chargeable Gains Act 1992 remains an existing asset in the hands of the transferee company.

This will ensure that there will continue to be a tax neutral result on a company reconstruction or relevant cross-border transaction involving intangible assets which are outside Schedule 29 in the hands of the transferor company. The new intangibles régime itself contains a provision to ensure that tax neutral treatment applies in the case of assets within Schedule 29 in the hands of the transferor company.

The amendments apply to the transfer of assets on or after 28 June 2002.

Minor points

The other two amendments address minor drafting issues. Paragraphs 127(3) and 128(4) of Schedule 29 were designed to ensure that rollover relief on a disposal of certain telecommunications rights or of Lloyd's syndicate capacity was not restricted by virtue of the fact that the company had held the asset in question prior to periods to which the rules in Schedule 29 apply.

However, doubts were expressed as to the effect of these provisions, as currently drafted, when the Finance Bill came before Standing Committee. The amendments ensure the provisions work as intended.

(Source: Inland Revenue news release dated 28 June 2002.)

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