HC Deb 13 July 1988 vol 137 cc502-3

5.—(1) Where, in connection with the transfer, there are conferred on members of the society—

  1. (a) any rights to acquire shares in the successor company in priority to other persons, or
  2. (b) any rights to acquire shares in that company for consideration of an amount or value lower than the market value of the shares, or
  3. (c) any rights to free shares in that company, any such right so conferred on a member shall be regarded for the purposes of capital gains tax as an option (within the meaning of section 137 of the Capital Gains tax Act 1979) granted to, and acquired by, him for no consideration and having no value at the time of that grant and acquisition.

(2) Where, in connection with the transfer, shares in the successor company are issued by that company, or disposed of by the society, to a member of the society, those shares shall be regarded for the purposes or capital gains tax—

  1. (a) as acquired by the member for a consideration of an amount or value equal to the amount or value of any new consideration given by him for the shares (or, if no new consideration is given, as acquired for no consideration); and
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  3. (b) as having, at the time of their acquisition by the member, a value equal to the amount or value of the new consideration so given (or, if no new consideration is given, as having no value); but this sub-paragraph is without prejudice to the operation of sub-paragraph (1) above, where applicable.

(3) Sub-paragraph (4) below applies in any case where—

  1. (a) in connection with the transfer, shares in the successor company are issued by that company, or disposed of by the society, to trustees on terms which provide for the transfer of those shares to members of the society for no new consideration; and
  2. (b) the circumstances are such that in the hands of the trustees the shares constitute settled property, within the meaning of the Capital Gains Tax Act 1979.

(4) Where this sub-paragraph applies, then, for the purposes of capital gains tax—

  1. (a) the shares shall be regarded as acquired by the trustees for no consideration;
  2. (b) the interest of any member in the settled property constituted by the shares shall be regarded as acquired by him for no consideration and as having no value at the time of its acquisition;
  3. (c) where a member becomes absolutely entitled as against the trustees to any of the settled property, both the trustees and the member shall be treated as if, on his becoming so entitled, the shares in question had been disposed of and immediately reacquired by the trustees, in their capacity as trustees within section 46(1) of the Capital Gains Tax Act 1979, for a consideration of such an amount as would secure that on the disposal neither a gain nor a loss would accrue to the trustees (and accordingly section 54 of that Act shall not apply in relation to that occasion); and
  4. (d) on the disposal by a member of an interest in the settled property, other than the disposal treated as occurring for the purposes of paragraph (c) above, any gain accruing shall be a chargeable gain (and accordingly section 58(1) of the Capital Gains Tax Act 1979 shall not apply in relation to the disposal).

(5) Where, in connection with the transfer, the society disposes of any shares in the successor company, then, for the purposes of the Capital Gains Tax Act 1979, any gains arising on the disposal shall not be chargeable gains.

(6) In this paragraph— free shares", in relation to a member of the society, means any shares issued by the successor company, or disposed of by the society, to that member in connection with the transfer but for no new consideration; member", in relation to the society, means a person who is or has been a member of it, in that capacity, and any reference to a member includes a reference to a member of any particular class or description; new consideration" means consideration other than—

  1. (a) consideration provided directly or indirectly out of the assets of the society; or
  2. (b) consideration derived from a member's shares or other rights in the society.

(7) References in this paragraph to the case where a member becomes absolutely entitled to settled property as against the trustees shall be taken to include references to the case where he would become so entitled but for being an infant or otherwise under disability.

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