Basic Principles
TAXES CONSOLIDATION ACT
Taxation of Chargeable Gains (ss. 532-638)
Part 19 Principal Provisions Relating to Taxation of Chargeable Gains (ss. 532-613A)
Chapter 1
Assets and acquisitions and disposals of assets (ss. 532-543)
532.
Assets.
All forms of property shall be assets for the purposes of the Capital Gains Tax Acts whether situated in the State or not, including –
(a)options, debts and incorporeal property generally,
(b)any currency other than the currency of the State, and
(c)any form of property created by the person disposing of it, or otherwise becoming owned without being acquired.
533.
Location of assets.
The situation of assets specified in this section shall, except where otherwise provided by section 29, be determined for the purposes of the Capital Gains Tax Acts in accordance with the following provisions:
(a)the situation of rights or interests (otherwise than by means of security) in or over immovable property shall be that of the immovable property;
(b)subject to this section, the situation of rights or interests (otherwise than by means of security) in or over tangible movable property shall be that of the tangible movable property;
(c)subject to this section, a debt, secured or unsecured, shall be situated in the State only if the creditor is resident in the State;
(d)shares or securities issued by any municipal or governmental authority, or by any body created by such an authority, shall be situated in the country of that authority;
(da)subject to paragraph (d), shares in, or securities of, a company incorporated in the State shall be situated in the State and, for the purposes of this paragraph, ‘shares’ includes any instrument or security the value of which is derived from, or calculated by reference to, shares;
(e)subject to paragraphs (d) and (da), registered shares or securities shall be situated where they are registered and, if registered in more than one register, where the principal register is situated;
(f)a ship or aircraft shall be situated in the State only if the owner is resident in the State, and an interest or right in or over a ship or aircraft shall be situated in the State only if the person entitled to the interest or right is resident in the State;
(g)the situation of goodwill as a trade, business or professional asset shall be at the place where the trade, business or profession is carried on;
(h)patents, trade marks and designs shall be situated where they are registered and, if registered in more than one register, where each register is situated, and copyright, franchises, rights and licences to use any copyright material, patent, trade mark or design shall be situated in the State if they, or any rights derived from them, are exercisable in the State;
(i)a judgment debt shall be situated where the judgment is recorded.
534.
Disposals of assets.
For the purposes of the Capital Gains Tax Acts –
(a)references to a disposal of an asset include, except where the context otherwise requires, references to a part disposal of an asset, and
(b)there shall be a part disposal of an asset where an interest or right in or over the asset is created by the disposal, as well as where it subsists before the disposal, and, generally, there shall be a part disposal of an asset where, on a person making a disposal, any description of property derived from the asset remains undisposed of.
535.
Disposals where capital sums derived from assets.
(1)In this section, “capital sum” means any money or money’s worth not excluded from the consideration taken into account in the computation of the gain under Chapter 2 of this Part.
(2)
(a)Subject to sections 536 and 537(1) and to any other exceptions in the Capital Gains Tax Acts, there shall be for the purposes of those Acts a disposal of an asset by its owner where any capital sum is derived from the asset notwithstanding that no asset is acquired by the person paying the capital sum, and this paragraph shall apply in particular to –
(i)capital sums received by means of compensation for any kind of damage or injury to an asset or for the loss, destruction or dissipation of an asset or for any depreciation or risk of depreciation of an asset,
(ii)capital sums received under a policy of insurance of the risk of any kind of damage or injury to, or the loss or depreciation of, an asset,
(iii)capital sums received in return for forfeiture or surrender of a right or for refraining from exercising a right, and
(iv)capital sums received as consideration for use or exploitation of an asset.
(b)Without prejudice to paragraph (a)(ii) but subject to paragraph (c), neither the rights of the insurer nor the rights of the insured under any policy of insurance, whether the risks insured relate to property or not, shall constitute an asset on the disposal of which a gain may accrue, and in this paragraph “policy of insurance” does not include a policy of assurance on human life.
(c)Paragraph (b) shall not apply where the right to any capital sum within paragraph (a)(ii) is assigned after the event giving rise to the damage or injury to, or the loss or depreciation of, an asset has occurred, and for the purposes of the Capital Gains Tax Acts such an assignment shall be deemed to be a disposal of an interest in the asset concerned.
536.
Capital sums: receipt of compensation and insurance moneys not treated as a disposal in certain cases.
(1)
(a)Subject to paragraph (b), where the recipient so claims, receipt of a capital sum within subparagraph (i), (ii), (iii) or (iv) of section 535(2)(a) derived from an asset which is not lost or destroyed shall not be treated as a disposal of the asset if –
(i)the capital sum is wholly applied in restoring the asset, or
(ii)the capital sum is applied in restoring the asset except for a part of the capital sum which is not reasonably required for the purpose and which is small as compared with the whole capital sum;
but, if the receipt is not treated as a disposal, all sums which, if the receipt had been so treated, would have been taken into account as consideration for that disposal in the computation of a gain accruing on the disposal shall be deducted from any expenditure allowable under Chapter 2 of this Part as a deduction in computing a gain on the subsequent disposal of the asset.
(b)Paragraph (a) shall not apply to cases within subparagraph (ii) of that paragraph if immediately before the receipt of the capital sum there is no expenditure attributable to the asset under paragraphs (a) and (b) of section 552(1) or if the consideration for the part disposal deemed to be effected on receipt of the capital sum exceeds that expenditure.
(2)Where an asset is lost or destroyed and a capital sum received as compensation for the loss or destruction, or under a policy of insurance of the risk of the loss or destruction, is, within one year of receipt or such longer period as the inspector may allow, applied in acquiring an asset in replacement of the asset lost or destroyed, the owner shall on due claim be treated for the purposes of the Capital Gains Tax Acts as if –
(a)the consideration for the disposal of the old asset were (if otherwise of a greater amount) of such amount as would secure that on the disposal neither a loss nor a gain accrued to such owner, and
(b)the amount of the consideration for the acquisition of the new asset were reduced by the excess of the amount of the capital sum received as compensation or under the policy of insurance, together with any residual or scrap value, over the amount of the consideration which such owner is treated as receiving under paragraph (a).
(3)A claim shall not be made under subsection (2) if part only of the capital sum is applied in acquiring the new asset; but, if all of that capital sum except for a part which is less than the amount of the gain (whether all chargeable gain or not) accruing on the disposal of the old asset is so applied, the owner shall on due claim be treated for the purposes of the Capital Gains Tax Acts as if –
(a)the amount of the gain so accruing were reduced to the amount of that part of the capital sum not applied in acquiring the new asset (and, if not all chargeable gain, with a proportionate reduction in the amount of the chargeable gain), and
(b)the amount of the consideration for the acquisition of the new asset were reduced by the amount by which the gain is reduced under paragraph (a).
(4)This section shall not apply in relation to a wasting asset.
(5)This section shall not apply to a disposal or deemed disposal of, or of an interest in, property situate in the State to an authority possessing compulsory purchase powers, where the disposal or deemed disposal, as the case may be, would not have been made but for –
(a)the exercise of those powers, or
(b)the giving by the authority of formal notice of its intention to exercise those powers.
537.
Mortgages and charges not to be treated as disposals.
(1)The conveyance or transfer as security of an asset or of an interest or right in or over an asset, or the transfer of a subsisting interest or right as security in or over an asset (including a retransfer on redemption of the security), shall not be treated for the purposes of the Capital Gains Tax Acts as involving any acquisition or disposal of the asset.
(2)Where a person entitled to an asset as security or to the benefit of a charge or incumbrance on an asset deals with the asset for the purpose of enforcing or giving effect to the security, charge or incumbrance, such person’s dealings with the asset shall be treated for the purposes of the Capital Gains Tax Acts as if they were done through such person as nominee by the person entitled to the asset subject to the security, charge or incumbrance, and this subsection shall apply to the dealings of any person appointed to enforce or give effect to the security, charge or incumbrance as receiver and manager or judicial factor as it applies to the dealings of the person so entitled.
(3)An asset shall be treated as having been acquired free of any interest or right as security subsisting at the time of any acquisition of the asset, and as being disposed of free of any such interest or right subsisting at the time of the disposal and, where an asset is acquired subject to any such interest or right, the full amount of the liability thereby assumed by the person acquiring the asset shall form part of the consideration for the acquisition and disposal in addition to any other consideration.
538.
Disposals where assets lost or destroyed or become of negligible value.
(1)Subject to the Capital Gains Tax Acts and in particular to section 540, the occasion of the entire loss, destruction, dissipation or extinction of an asset shall for the purposes of those Acts constitute a disposal of the asset whether or not any capital sum as compensation or otherwise is received in respect of the destruction, dissipation or extinction of the asset.
(2)Where on a claim by the owner of an asset the inspector is satisfied that the value of an asset has become negligible, the inspector may allow the claim, and thereupon the Capital Gains Tax Acts shall apply as if the claimant had sold and immediately reacquired the asset for a consideration of an amount equal to the value specified in the claim.
(2A)
(a)Where as a result of the dissolution of a body corporate, property of the body corporate becomes property of the State by virtue of Part III of the State Property Act, 1954, and the Minister for Finance, in accordance with that Part of that Act, waives the right of the State to that property in favour of a person who holds or has held shares in the body corporate, then, notwithstanding section 31 and subject to paragraph (c), any allowable loss (in this subsection referred to as a ‘claimed loss’) accruing to the person by virtue of a claim made under subsection (2) in respect of those shares shall not be allowable as a deduction from chargeable gains in any year of assessment earlier than the year of assessment in which the property is disposed of by the person and any necessary adjustments may be made by way of assessment or amended assessment to give effect to this paragraph.
(b)Paragraph (a) shall apply in relation to a body corporate which has no share capital as if references to shares included references to any interest in the body corporate possessed by members of the body corporate.
(c)For the purposes of paragraph (a) –
(i)where in a year of assessment there is a Part disposal (within the meaning of section 534) of property, only so much of the claimed loss shall be allowable as a deduction from chargeable gains in that year of assessment as bears to the amount of the claimed loss the same proportion as the market value, when acquired, of the Part of the property which is disposed of bears to the market value of the whole of that property when acquired,
(ii)the year of assessment in which property is disposed of by a person—
(I)where the disposal, being a disposal to the husband or wife of the person, is a disposal to which section 1028(5) applies, or
(II)where the disposal, being a disposal to the civil partner of the person, is a disposal to which section 1031M(5) applies,
shall mean the year of assessment in which the property is subsequently disposed of by the person’s wife, husband or civil partner, as the case may be, where the subsequent disposal is a disposal to which section 1028(5) or 1031M(5), as the case may be, does not apply.
(3)For the purposes of subsections (1) and (2), a building and any permanent or semi-permanent structure in the nature of a building may be regarded as an asset separate from the land on which it is situated; but, where either of those subsections applies in accordance with this subsection, the person deemed to make the disposal of the building shall be treated as if such person had also sold and immediately reacquired the site of the building or structure (including in the site any land occupied for purposes ancillary to the use of the building or structure) for a consideration equal to its market value at that time.
539.
Disposals in cases of hire purchase and similar transactions.
(1)A hire purchase or other transaction under which the use and enjoyment of an asset is obtained by a person for a period at the end of which the property in the asset will or may pass to such person shall be treated for the purposes of the Capital Gains Tax Acts, both in relation to such person and in relation to the person from whom the use and enjoyment of the asset is obtained, as if it amounted to an entire disposal of the asset to such person at the beginning of the period for which such person obtains the use and enjoyment of the asset, but subject to such adjustments of tax, whether by means of repayment or discharge of tax or otherwise, as may be required where the period for which such person has the use and enjoyment of the asset terminates without the property in the asset passing to such person.
(2)Subsection (4) or (6) of section 865 shall not prevent the Revenue Commissioners from repaying an amount of tax as a consequence of an adjustment of tax made under this section, where a claim for any such adjustment is made within 4 years from the end of the chargeable period (within the meaning of section 321) in which the termination referred to in subsection (1) occurs.
540.
Options and forfeited deposits.
(1)In this section –
“quoted option” means an option which at the time of abandonment or other disposal is quoted and dealt in on a stock exchange in the State or elsewhere in the same manner as shares;
“traded option” means an option which at the time of abandonment or other disposal is quoted on a stock exchange or a futures exchange in the State or elsewhere;
references to an option include references to an option binding the grantor to grant a lease for a premium or to enter into any other transaction which is not a sale, and references to buying and selling in pursuance of an option shall be construed accordingly.
(2)Without prejudice to sections 534 and 535, the grant of an option, including –
(a)the grant of an option binding the grantor to sell an asset the grantor does not own and, because the option is abandoned, never has occasion to own, and
(b)the grant of an option binding the grantor to buy an asset which, because the option is abandoned, the grantor does not acquire,
shall constitute the disposal of an asset (being the option) for the purposes of the Capital Gains Tax Acts, but subject to the following provisions of this section as to treating the grant of an option as part of a larger transaction.
(3)Where an option is exercised, the grant of the option and the transaction entered into by the grantor in fulfilment of the grantor’s obligations under the option shall be treated as a single transaction, and accordingly for the purposes of the Capital Gains Tax Acts –
(a)if the option binds the grantor to sell, the consideration for the option shall be part of the consideration for the sale, and
(b)if the option binds the grantor to buy, the consideration for the option shall be deducted from the cost of acquisition incurred by the grantor in buying in pursuance of the grantor’s obligations under the option.
(4)The exercise of an option by the person for the time being entitled to exercise it shall not constitute the disposal of an asset for the purposes of the Capital Gains Tax Acts by that person; but, if an option is exercised, the acquisition of the option (whether directly from the grantor or not) and the transaction entered into by the person exercising the option in exercise of that person’s rights under the option shall be treated as a single transaction, and accordingly for the purposes of the Capital Gains Tax Acts –
(a)if the option binds the grantor to sell, the cost of acquiring the option shall be part of the cost of acquiring the asset which is sold, and
(b)if the option binds the grantor to buy, the cost of the option shall be treated as a cost incidental to the disposal of the asset which is bought by the grantor of the option.
(5)
(a)The abandonment of an option by the person for the time being entitled to exercise it shall constitute the disposal of an asset (being the option) for the purposes of the Capital Gains Tax Acts by that person.
(b)Subject to subsections (7) and (8)(a), the abandonment of an option by the person for the time being entitled to exercise it shall not for the purposes of the Capital Gains Tax Acts give rise to an allowable loss.
(6)In relation to the disposal by means of transfer of an option binding the grantor to sell or buy shares or securities which have a quoted market value on a stock exchange in the State or elsewhere, the option shall be regarded for the purposes of the Capital Gains Tax Acts as a wasting asset the life of which ends when the right to exercise the option ends, or when the option becomes valueless, whichever is the earlier, but without prejudice to the application of the provisions of Chapter 2 of this Part relating to wasting assets to other descriptions of options.
(7)Where an option, being an option to acquire assets exercisable by a person intending to use the assets, if acquired, for the purposes of a trade carried on by that person or which that person commences to carry on within 2 years of that person’s acquisition of the option, is disposed of or abandoned, then –
(a)if the option is abandoned, subsection (5)(b) shall not apply, and
(b)section 560(3) shall not apply.
(8)
(a)Where –
(i)a quoted option to subscribe for shares in a company, or
(ii)a traded option,
is disposed of or abandoned, then –
(I)if the option is abandoned, subsection (5)(b) shall not apply, and
(II)section 560(3) and subsection (6) shall not apply.
(b)Where a quoted option to subscribe for shares in a company is dealt in within 3 months after the taking effect, with respect to the company granting the option, of any reorganisation, reduction, conversion or amalgamation to which section 584, 585, 586 or 587 applies (or within such longer period as the Revenue Commissioners may by notice in writing allow), the option shall for the purposes of section 584, 585, 586 or 587 be regarded as the shares which could be acquired by exercising the option, and section 548(3) shall apply for determining its market value.
(9)This section shall apply in relation to an option binding the grantor both to sell and to buy as if it were 2 separate options with 50 per cent of the consideration attributed to each option.
(10)This section shall apply in relation to a forfeited deposit of purchase money or other consideration money for a prospective purchase or other transaction which is abandoned as it applies in relation to the consideration for an option which binds the grantor to sell and which is not exercised.
540A.
Disposal of certain emissions allowances.
(1)In this section –
‘Agency’ means the Environmental Protection Agency, being a competent authority designated under Article 18 of the Directive;
‘aircraft operator’ has the same meaning as in Article 3 of the Directive;
‘Directive’ means Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 (as amended by Directive 2004/101/EC of the European Parliament and of the Council of 27 October 2004 , Directive 2008/101/EC of the European Parliament and of the Council of 19 November 2008 and Directive 2009/29/EC of the European Parliament and of the Council of 23 April 2009 );
emissions allowance’ means an allowance within the meaning of Article 3 of the Directive;
‘installation’ and ‘operator’ have the same meanings respectively as in Article 3 of the Directive;
‘permit’ means a greenhouse gas emissions permit within the meaning of Article 3 of the Directive;
‘relevant person’ means –
(a)a person to whom a permit has been issued in accordance with Articles 5 and 6 of the Directive in respect of an installation in relation to which the person is an operator, or
(b)an aircraft operator;
‘relevant scheme’ means –
(a)a scheme of reconstruction or amalgamation in relation to which section 615 applies,
(b)a transfer of an asset in relation to which section 617 applies, or
(c)a transfer of a trade, or part of a trade, in relation to which section 631 applies.
(2)
(a)Subject to paragraphs (b), (c) and (d) and notwithstanding section 110 or any other provision of the Tax Acts, where –
(i)a relevant person sells, transfers or otherwise disposes of an emissions allowance (in this section referred to as a ‘relevant emissions allowance’) received or receivable free of charge by that person from the Agency in accordance with the Directive, or
(ii)a company sells, transfers or otherwise disposes of a relevant emissions allowance which the company acquired under, or as part of, a relevant scheme,
such a sale, transfer or disposal shall constitute the disposal of an asset for the purposes of the Capital Gains Tax Acts and be treated as not being a disposal of trading stock for such purposes.
(b)References in paragraph (a) to the sale, transfer or disposal of a relevant emissions allowance shall include references to the sale, transfer or disposal of any interest or rights in or over such an allowance.
(c)Paragraph (a) shall not apply to a surrender and cancellation of an emissions allowance in accordance with Article 12 of the Directive.
(d)Paragraph (a)(ii) shall not apply to any sale, transfer or disposal of a relevant emissions allowance where, at any time before that event, the relevant emissions allowance was transferred from one company to another company in circumstances where the transfer was not made under, or as part of, a relevant scheme.
(3)For the purposes of the computation under this Part of any gain accruing to a relevant person or a company, as the case may be, on a disposal referred to in subsection (2) –
(a)no sum shall, notwithstanding section 547 or 552, be allowed as a deduction from the consideration for the disposal apart from incidental costs to the person or company making the disposal, and
(b)emissions allowances other than relevant emissions allowances shall be deemed to have been disposed of before relevant emissions allowances are disposed of by the person or company.
(4)Section 596 shall not apply where a relevant emissions allowance acquired by a person is appropriated as trading stock of the trade carried on by the person.
541.
Debts.
(1)
(a)For the purposes of the Capital Gains Tax Acts but subject to paragraph (b), where a person incurs a debt to another person (being the original creditor), whether in the currency of the State or in some other currency, no chargeable gain shall accrue to that creditor or to that creditor’s personal representative or legatee on a disposal of the debt.
(b)Paragraph (a) shall not apply in the case of a debt on a security within the meaning of section 585.
(1A)
(a)In this subsection ‘division’, ‘merger’, ‘successor company’ and ‘transferor company’ have the same meaning as in section 638A (inserted by the Finance Act 2017).
(b)For the purposes of subsection (1)(a), a successor company shall be deemed to be the original creditor in respect of a debt in a case in which that debt is transferred from a transferor company to the first-mentioned company as a result of a merger or division and the transferor company was the original creditor in respect of that debt.
(2)Subject to subsection (1) and sections 585 and 586, the satisfaction of a debt or part of a debt (including a debt on a security within the meaning of section 585) shall be treated for the purposes of the Capital Gains Tax Acts as a disposal of the debt or of that part by the creditor made at the time when the debt or that part is satisfied.
(3)Where property is acquired by a creditor in satisfaction of the creditor’s debt or part of that debt, then, subject to sections 585 and 586, the property shall not be treated for the purposes of the Capital Gains Tax Acts as disposed of by the debtor or acquired by the creditor for a consideration greater than its market value at the time of the creditor’s acquisition of it; but, if under subsection (1) (and in a case not within either section 585 or 586) no chargeable gain is to accrue on a disposal of the debt by the original creditor and a chargeable gain accrues to that creditor on a disposal by that creditor of the property, the amount of the chargeable gain shall (where necessary) be reduced so as not to exceed the chargeable gain which would have accrued if that creditor had acquired the property for a consideration equal to the amount of the debt or that part of the debt.
(4)For the purposes of the Capital Gains Tax Acts, a loss accruing on the disposal of a debt acquired by the person making the disposal from the original creditor or the original creditor’s personal representative or legatee at a time when the creditor or the creditor’s personal representative or legatee is a person connected with the person making the disposal, and so acquired either directly or by one or more than one purchase through persons all of whom are connected with the person making the disposal, shall not be an allowable loss.
(5)Where the original creditor is a trustee and the debt when created is settled property, subsections (1) and (4) shall apply as if for the references to the original creditor’s personal representative or legatee there were substituted references to any person becoming absolutely entitled as against the trustee to the debt on its ceasing to be settled property and to that person’s personal representative or legatee.
(6)This section shall not apply to a debt owed by a bank which is not in the currency of the State and which is represented by a sum standing to the credit of a person in an account in the bank, unless it represents currency acquired by the holder for the personal expenditure outside the State of the holder or his or her family, dependants or civil partner, or any child of his or her civil partner (including expenditure on the maintenance of any residence outside the State).
(6A)
(a)Notwithstanding subsection (6), where a debt owed by a bank which is not in the currency of the State, and which is represented by a sum standing to the credit of a person in an account in the bank, is transferred by the person in whole or in part to another account of that person in the bank concerned, or in any other bank, in the same currency, the transfer (referred to in paragraph (b) as a ‘transfer to which paragraph (a) applies’) shall be treated as if it were made for a consideration of such amount as would secure that neither a gain nor a loss would accrue to that person on that transfer.
(b)On any disposal of the debt or part of the debt by the person who is the holder of the account referred to in paragraph (a), other than any further transfer to which paragraph (a) applies, the acquisition cost of the debt or part of the debt taken into account in computing the amount of any gain accruing to that person on the disposal shall be determined as if the transfer, or any further transfer, to which paragraph (a) applies had not occurred.
(7)For the purposes of this section, a debenture issued by any company shall be deemed to be a security (within the meaning of section 585) if it is issued –
(a)on a reorganisation referred to in section 584(2) or in pursuance of the debenture’s allotment on any such reorganisation,
(b)in exchange for shares in or debentures of another company where the requirements of section 586(2) are satisfied in relation to the exchange,
(c)under any arrangements referred to in section 587(2),
(d)in connection with any transfer of assets referred to in section 631,
(e)in connection with any disposal of assets referred to in section 632,
(f)in the course of a transaction which is the subject of an application under section 637, or
(g)in pursuance of rights attached to any debenture within paragraph (a), (b), (c), (d), (e) or (f).
(8)Paragraphs (d), (e) and (f), and (in so far as it relates to debentures within those paragraphs) paragraph (g), of subsection (7) shall apply as respects the disposal of a debenture on or after the 26th day of March, 1997.
541A.
Treatment of debts on a change in currency.
(1)Where on any day a debt (to which section 541 does not apply by virtue of subsection (6) of that section) owed to a person in a currency other than the currency of the State, becomes a debt in the currency of the State as a result of the currency of a State being substituted by another currency, which other currency also on that day becomes the currency of the State, then, subject to subsection (2), that debt shall be deemed, for the purposes of the Capital Gains Tax Acts, on the day preceding that day, to be disposed of by the person and immediately reacquired by the person at its market value.
(2)Subject to subsection (4) and notwithstanding any other provision of the Capital Gains Tax Acts, where in respect of a debt a chargeable gain accrues to a person by virtue of subsection (1), that chargeable gain shall be assessed and charged as if it were a chargeable gain which accrued to the person at the time of the disposal of the debt and shall not be assessed and charged otherwise.
(3)For the purposes of subsection (2), in relation to a debt owed to a person, the satisfaction of the debt or Part of the debt shall be treated as a disposal of the debt or of that Part at the time when the debt or that Part is satisfied.
(4)
(a)In this subsection –
‘assurance company’ has the meaning assigned to it in section 706;
‘life business fund’ has the meaning assigned to it in section 719;
‘special investment fund’ has the meaning assigned to it in section 723;
‘special investment scheme’ has the meaning assigned to it in section 737;
‘undertaking for collective investment’ has the meaning assigned to it in section 738.
(b)Where the person referred to in subsection (1) is a company and either –
(i)the company is an assurance company and the debt referred to in that subsection is an asset of the company’s life business fund, or
(ii)the company is an undertaking for collective investment and the debt referred to in that subsection is an asset of the undertaking,
subsection (1) shall not apply and where the day (in this paragraph referred to as ‘the deemed disposal day’) on which, but for this paragraph, the debt would be deemed to be disposed of and reacquired in accordance with subsection (1), is not the day on which an accounting period of the company ends –
(I)in case of an assurance company, section 719(2) shall apply in respect of the debt as if, for this purpose only, the deemed disposal day was the day on which an accounting period of the company ends and the chargeable gain or allowable loss thereby accruing shall be included in the net amount (within the meaning of section 720) in respect of the accounting period in which the deemed disposal day falls, and
(II)in case of an undertaking for collective investment, section 738(4)(a) shall apply in respect of the debt as if, for this purpose only, the deemed disposal day was the day on which an accounting period of the company ends and the chargeable gain or allowable loss thereby accruing shall be included in the net amount (within the meaning of section 738(4)(b)) in respect of the accounting period in which the deemed disposal day falls.
(c)Where the person referred to in subsection (1) is an undertaking for collective investment and is not a company, subsection (2) shall not apply but the chargeable gain or allowable loss which accrues to the undertaking by virtue of subsection (1) shall be treated as accruing to the undertaking by virtue of paragraph (a) of section 738(4) and the provisions of that section shall apply accordingly.
(d)Subsection (2) shall not apply to a debt which is –
(i)an asset of a special investment fund of an assurance company, or
(ii)an asset which is subject to any trust created pursuant to a special investment scheme.
541B.
Restrictive covenants.
(1)Where –
(a)a person gives an undertaking (whether absolute or qualified and whether legally valid or not), the tenor or effect of which is to restrict the person as to the person’s conduct or activities,
(b)in respect of the giving of that undertaking by the person, or of the total or partial fulfilment of that undertaking by the person, any sum is paid either to the person or to any other person, and
(c)that sum is neither –
(i)treated, for the purposes of the Tax Acts, as profits or gains chargeable to tax under Schedule D or Schedule E, nor
(ii)treated as consideration for the disposal of an asset for the purposes of the Capital Gains Tax Acts,
the amount of the sum shall be deemed for the purposes of the Capital Gains Tax Acts to be the amount of a chargeable gain accruing to the person referred to in paragraph (a) (for the year of assessment in which it is paid) on the disposal of a chargeable asset.
(2)Where valuable consideration otherwise than in the form of money is given in respect of the giving of, or the total or partial fulfilment of, any undertaking, subsection (1) applies as if a sum had instead been paid equal to the value of that consideration.
541C.
Tax treatment of certain venture fund managers.
(1)In this section –
‘carried interest’, in relation to a qualifying venture capital fund, means the share of profits (where the share ratio was agreed at the commencement of the qualifying venture capital fund) referred to in paragraph (b) of the definition of ‘total profits’ that are received by a company, partnership or individual in respect of the management of the qualifying venture capital fund;
‘carried interest to which this section applies’, in relation to a qualifying venture capital fund, means an amount of carried interest which is not greater than 20 per cent of the total profits of a qualifying venture capital fund and which is a proportion of carried interest derived from the relevant investment;
‘EEA Agreement’ means the Agreement on the European Economic Area signed in Oporto on 2 May 1992, as adjusted by all subsequent amendments to that Agreement;
‘EEA State’ means a state which is a contracting party to the EEA Agreement;
‘innovation activities’ means development of new technological, telecommunication, scientific or business processes;
‘investor’, in relation to a relevant investment, means a person other than a person entitled to carried interest or a person connected with that person;
‘proportion of carried interest derived from the relevant investment’ means an amount of carried interest determined by the formula –
where –
Ais carried interest,
Bis the value of all relevant investments in an EEA State (including the State), or in the United Kingdom, of the qualifying venture capital fund, and
Cis the value of all relevant investments of the qualifying venture capital fund;
‘qualifying venture capital fund’ means an entity structured in the form of a partnership the main purpose of which is to make relevant investments and where the individuals, companies or partnerships which invest in the partnership are either limited partners or general partners (as defined in the partnership agreement) who are obliged under a legally binding agreement to provide capital sums for investment purposes over a period of time;
‘relevant investment’ means any investment made in unquoted shares or securities of a private trading company on or after 1 January 2009, where the qualifying venture capital fund retains the shares or securities in the company for a period of at least 3 years from the date of the initial investment and that company is –
(a)carrying on a business of research and development activities or innovation activities, and
(b)not carrying on an excepted trade within the meaning of section 21A
‘research and development activities’ has the same meaning as in section 766(1);
‘total profits’, in relation to a qualifying venture capital fund, means the sum of –
(a)the profits which are attributable to investors in the fund by reference to an agreed initial rate of return, and
(b)the balance of the profits of the fund over and above those calculated by reference to the agreed initial rate of return.
(2)
(a)Notwithstanding any other provision of the Tax Acts or the Capital Gains Tax Acts, carried interest to which this section applies and which is received by a partnership shall be deemed to be an amount of chargeable gains to which section 28(1) applies.
(b)Notwithstanding any other provision of the Tax Acts or the Capital Gains Tax Acts, carried interest to which this section applies and which is received by a company shall be deemed to be an amount of chargeable gains to which section 28(1) applies.
(3)
(a)Notwithstanding any other provision of the Tax Acts or the Capital Gains Tax Acts, the rate of capital gains tax in respect of chargeable gains to which subsection (2)(a) apply shall be 15 per cent.
(b)Notwithstanding any other provision of the Tax Acts or the the Capital Gains Tax Acts, the rate of corporation tax in respect of chargeable gains to which subsection (2)(b) apply shall be 12.5 per cent.
542.
Time of disposal and acquisition.
(1)
(a)Subject to paragraph (b) and subsection (2), for the purposes of the Capital Gains Tax Acts, where an asset is disposed of and acquired under a contract, the time at which the disposal and acquisition is made shall be the time at which the contract is made(and not, if different, the time at which the asset is conveyed or transferred).
(b)Where the contract is conditional (and in particular where it is conditional on the exercise of an option), the time at which the disposal and acquisition is made shall be the time at which the condition is satisfied.
(c)For the purposes of the Capital Gains Tax Acts, where an interest in land is acquired, otherwise than under a contract, by an authority possessing compulsory purchase powers, the time at which the disposal and acquisition is made shall be the time at which the compensation for the acquisition is agreed or otherwise determined (variations on appeal being disregarded for this purpose) or, if earlier, the time at which the authority enters on the land in pursuance of its powers.
(d)Notwithstanding paragraph (c), for the purposes of the Capital Gains Tax Acts, where a person makes a disposal of land to an authority possessing compulsory purchase powers, and the disposal would not have been made but for the exercise of those powers or the giving by the authority of formal notice of its intention to exercise those powers, then the chargeable gain (if any) on the disposal shall be deemed to accrue –
(i)on the day on which the payment of the compensation amount is received by the person making the disposal, or
(ii)at a time immediately before the person’s death if the consideration has not been received at the date of his or her death.
(1A)Notwithstanding subsection (1)(c), the time of the disposal of land which has been compulsorily acquired shall be the time at which the compensation amount in respect of that compulsory acquisition is received, where that amount is received on or after 1 January 2016.
(1B)Notwithstanding subsection (1)(d), the time of the deemed accrual of a chargeable gain in respect of a disposal of land which has been compulsorily acquired shall be the time at which the compensation amount in respect of that compulsory acquisition is received, where that amount is received on or after 1 January 2016.
(2)For the purposes of subparagraphs (i) to (iv) of section 535(2)(a), the time of disposal shall be the time at which any capital sum is received.
543.
Transfers of value derived from assets.
(1)Without prejudice to the generality of the provisions of the Capital Gains Tax Acts as to the transactions which are disposals of assets, any transaction which under this section is to be treated as a disposal of an asset –
(a)shall be so treated (with a corresponding acquisition of an interest in the asset) notwithstanding that there is no consideration, and
(b)in so far as, on the assumption that the parties to the transaction were at arm’s length, the party making the disposal could have obtained consideration or additional consideration for the disposal, shall be treated as not being at arm’s length, and the consideration so obtainable, added to the consideration actually passing, shall be treated as the market value of what is acquired.
(2)
(a)Where a person having control of a company exercises that control so that value passes out of shares in the company owned by such person or a person with whom such person is connected, or out of rights over the company exercisable by such person or by a person with whom such person is connected, and passes into other shares in or rights over the company, that exercise of such person’s control shall be a disposal of the shares or rights out of which the value passes by the person by whom they were owned or exercisable.
(b)References in paragraph (a) to a person include references to 2 or more persons connected with one another.
(3)Where, after a transaction which results in the owner of land or of any other description of property becoming the lessee of the property, there is any adjustment of the rights and liabilities under the lease (whether or not involving the grant of a new lease) which as a whole is favourable to the lessor, that shall constitute a disposal by the lessee of an interest in the property.
(4)Where an asset is subject to any description of right or restriction, the extinction or abrogation in whole or in part of the right or restriction by the person entitled to enforce it shall constitute a disposal by that person of the right or restriction.