HC Deb 04 July 2002 vol 388 cc458-9

Amendment made: No. 12, in page 153, line 36, leave out paragraph 5 and insert— 5 (1) Where in pursuance of arrangements to which this paragraph applies—

  1. an untaxed gain accrues to a company ("company A") on a disposal of shares, or an interest in shares or an asset related to shares, in another company ("company B"), and
  2. before the accrual of that gain—
    1. company A acquired control of company B, or the same person or persons acquired control of both companies, or
    2. there was a significant change of trading activities affecting company B at a time when it was controlled by company A, or when both companies were controlled by the same person or persons,
none of the exemptions in this Schedule applies to the disposal. (2) This paragraph applies to arrangements from which the sole or main benefit that (but for this paragraph) could be expected to arise is that the gain on the disposal would, by virtue of this Schedule, not be a chargeable gain. (3) For the purposes of sub-paragraph (1)(a) a gain is "untaxed" if the gain, or all of it but a part that is not substantial, represents profits that have not been brought into account (in the United Kingdom or elsewhere) for the purposes of tax on profits for a period ending on or before the date of the disposal. (4) The reference in sub-paragraph (3) to profits being brought into account for the purposes of tax on profits includes a reference to the case where—
  1. an amount in respect of those profits is apportioned to a company resident in the United Kingdom by virtue of subsection (3) of section 747 of the Taxes Act 1988 (imputation of chargeable profits etc of controlled foreign companies), and
  2. a sum is chargeable on that company in respect of that amount by virtue of subsection (4) of that section for an accounting period of that company ending on or before the date of the disposal.
 (5) For the purposes of sub-paragraph (1)(b)(ii) there is a "significant change of trading activities affecting company B" if—
  1. there is a major change in the nature or conduct of a trade carried on by company B or a 51% subsidiary of company B, or
  2. there is a major change in the scale of the activities of a trade carried on by company B or a 51% subsidiary of company B, or
  3. company B or a 51% subsidiary of company B begins to carry on a trade.
 (6) In this paragraph— arrangements" includes any scheme, agreement or understanding, whether or not legally enforceable; major change in the nature or conduct of a trade" has the same meaning as in section 768 of the Taxes Act (change of ownership of company: disallowance of trading losses); profits" means income or gains (including unrealised income or gains).'.—[Dawn Primarolo.]

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