§ Mr. Simon Coombs
To ask the Chancellor of the Exchequer if he will make a statement about the treatment for capital gains tax of shares issued under the business start-up and business expansion schemes before 19 March 1986.
§ Mr. Lilley
Up to 5 April 1988, when shares issued before 19 March 1986 under the business start-up scheme or business expansion scheme were exchanged for shares in another company on a takeover or company reconstruction, the transaction was generally not regarded as giving rise to a disposal for capital gains tax purposes. Instead 179W any gain or loss which would otherwise have accrued was effectively rolled over into the new share holding. The Income and Corporation Taxes Act 1988 changed the law affecting business start-up and business expansion scheme shares issued before 19 March 1986 so that after 5 April 1988 roll-over treatment was no longer available where incomes tax relief had been given on these shares and not withdrawn. This change in the law was not intended.
The Government therefore propose to bring forward legislation in the 1990 Finance Bill to restore the previous capital gains tax treatment for exchange or cancellations of business start-up and business expansion scheme shares after 5 April 1988 which are affected by this change in the law. For a limited period shareholders will, however, be able to choose to have an exchange or cancellation of shares which takes place before 1 January 1990 treated under the provisions as they currently apply, if this is to their advantage.