Finance Act 1983

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

This Part of this Schedule has effect for affording relief from income tax where— In this Part " eligible shares" means new ordinary shares which, throughout the period of five years beginning with the date on which they are issued, carry no present or future preferential right to dividends or to a company's assets on its winding up and no present or future preferential right to be redeemed. The relief in respect of the amount subscribed by an individual for any eligible shares shall be given as a deduction of that amount from his total income for the year of assessment in which the shares are issued, and references in this Part to the amount of the relief are references to the amount of that deduction. The relief shall be given on a claim and shall not be allowed— A claim for the relief may be allowed at any time after the trade has been carried on by the company for four months if the conditions for the relief are then satisfied; but no claim shall be allowed before 1st January 1984. In the case of a claim allowed before the end of the relevant period, the relief shall be withdrawn if by reason of any subsequent event it appears that the claimant was not entitled to the relief allowed. In this Part, " the relevant period ", in relation to relief in respect of any eligible shares issued by a company, means— Where by reason of its being wound up, or dissolved without winding up, the company carries on the qualifying trade for a period shorter than four months, sub-paragraph (4)(a) above shall have effect as if it referred to that shorter period but only if it is shown that the winding up or dissolution was for bona fide commercial reasons and not as part of a scheme or arrangement the main purpose or one of the main purposes of which was the avoidance of tax. Section 52(7) to (8A) of Chapter II shall apply, but in the case of subsection (7) with the deletion of the reference to section 204(3) of the Taxes Act (pay as you earn) and, in the case of subsection (8), with the substitution for the reference to subsection (3)(a) of section 52 of a reference to sub-paragraph (4)(a) above.

Subject to paragraph 19 below, the relief shall not be given in respect of any amount subscribed by an individual for eligible shares issued to him by any company in any year of assessment unless the amount or total amount subscribed by him for the eligible shares issued to him by the company in that year is £500 or more. The relief shall not be given to the extent to which the amount or total amount subscribed by an individual for eligible shares issued to him in any year of assessment (whether or not by the same company) exceeds £40,000.

An individual qualifies for the relief if he subscribes for the eligible shares on his own behalf, is resident and ordinarily resident in the United Kingdom throughout the year of assessment in which they are issued and is not at any time in the relevant period connected with the company. Section 54(2) to (8) of Chapter LI shall apply. In determining, for the purposes of this paragraph, whether an individual is connected with a company, no debt incurred by the company by overdrawing an account with a person carrying on a business of banking shall be treated as loan capital of the company if the debt arose in the ordinary course of that business. Where an individual subscribes for shares in a company with which he is not connected (either within the meaning of this paragraph or by virtue of paragraph 2(1B)(b) of Schedule 12, as applied by paragraph 18(5) below) he shall nevertheless be treated as connected with it if he subscribes for the shares as part of any arrangement which provides for another person to subscribe for shares in another company with which that or any other individual who is a party to the arrangement is connected (within the meaning of this paragraph or by virtue of that paragraph).

A company is a qualifying company if it is incorporated in the United Kingdom and complies with the requirements of this paragraph. The company must, throughout the relevant period, be an unquoted company which is resident in the United Kingdom and not resident elsewhere, and be— In this paragraph "qualifying subsidiary", in relation to a company, means a subsidiary of that company of a kind which may be held by virtue of paragraph 17 below. Without prejudice to the generality of sub-paragraph (2) above, but subject to sub-paragraph (5) below, a company ceases to comply with that sub-paragraph if before the end of the relevant period a resolution is passed, or an order is made, for the winding up of the company (or, in the case of a winding up otherwise than under the Companies Act 1948 or the Companies Act (Northern Ireland) 1960, any other act is done for the like purpose) or the company is dissolved without winding up. A company shall not be regarded as ceasing to comply with sub-paragraph (2) above if it does so by reason of being wound up or dissolved without winding up and— The company's share capital must not, at any time in the relevant period, include any issued shares that are not fully paid up. Subject to paragraph 17 below, the company must not at any time in the relevant period— and no arrangements must be in existence at any time in that period by virtue of which the company could fall within paragraph (a) or (b) above. A company is not a qualifying company if— Section 56(8) and (9) of Chapter II shall apply for the purposes of sub-paragraph (8) above. The period referred to in sub-paragraph (8) above is the period beginning two years before and ending three years after—

A trade is a qualifying trade if it complies with the requirements of this paragraph, The trade must not at any time in the relevant period consist to any substantial extent of any of the activities mentioned in section 56(2) of Chapter II (as read with section 56(3) and Schedule 11). The trade must, during the relevant period, be conducted on a commercial basis and with a view to the realisation of profits. Section 56(10) of Chapter II shall apply.

Where an individual disposes of any eligible shares before the end of the relevant period, then— Where an individual holds ordinary shares in a company and the relief has been given in respect of some but not others, any disposal by him of ordinary shares in the company shall be treated for the purposes of this paragraph as relating— Section 57(3) and (4) of Chapter II shall apply but, in the case of subsection (4), with the substitution for the reference to subsection (2) of a reference to sub-paragraph (2) above.

Where an individual who subscribes for eligible shares in a company— the amount of the relief to which he is entitled in respect of the shares shall be reduced by the value received ; but the value received shall be disregarded to the extent to which relief under Chapter II has, by virtue of section 58(1) of that Chapter, been reduced on its account. Subject to sub-paragraph (3) below, section 58(2) to (9) of Chapter II shall apply but, in the case of subsection (3), with the substitution for the reference to section 55(5) of a reference to paragraph 5(5) above. For the purposes of this paragraph an individual also receives value from the company if any person connected with the company (within the meaning of section 54 of Chapter II)— and the value received by the individual is the amount receivable by the individual or, if greater, the market value of the shares or securities in question.

An individual is not entitled to relief in respect of any shares in a company where— This sub-paragraph applies in relation to an individual where— and the individual is that person or one of those persons. An individual is not entitled to relief in respect of any shares in a company where— and the individual is that person, or one of those persons. For the purposes of sub-paragraph (2) above— In this paragraph—

The relief to which an individual is entitled in respect of any shares in a company shall be reduced in accordance with section 59(3) of Chapter II, as applied by sub-paragraph (2) below, if at any time in the relevant period the company repays, redeems or repurchases any of its share capital which belongs to any member other than— or makes any payment to any such member for giving up his right to any of the company's share capital on its cancellation or extinguishment. Section 59(3) to (8) of Chapter II shall apply, but with the deletion, in subsection (4), of the reference to section 53(3) and (7) and, in subsection (6), of paragraphs (a) and (b). Sub-paragraph (1) above does not apply in relation to the redemption of any share capital for which the redemption date was fixed before 15th March 1983. Where— sub-paragraph (1) above shall not apply in relation to any redemption of any of the original shares within 12 months of the date on which those shares were issued. Where— then, for the purposes of section 59(3) of Chapter LT (as it applies both to this Part and to Chapter II), the relief given under Chapter II shall be treated as if it were relief given under this Part.

An individual is not entitled to relief in respect of any shares unless the shares are subscribed for and issued for bona fide commercial purposes and not as part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.

In the case of any amount subscribed by a married woman for eligible shares issued to her at a time— the deduction under paragraph 2(3) above shall, subject to sub-paragraph (2) below, be made from his total income, and references in this Part to the relief to which an individual is entitled in respect of any shares shall be construed accordingly. Section 60(2) to (7) of Chapter II shall apply, with the substitution, for references to sections 52(2), 53(1) and (2) and 57(1) of references to, respectively, paragraphs 2(3), 3(1) and (2) and 7(1) above.

A claim for the relief in respect of eligible shares issued by a company in any year of assessment shall be made— A claim for relief in respect of eligible shares in a company shall not be allowed unless it is accompanied by a certificate issued by the company in such form as the Board may direct and certifying that the conditions for the relief, so far as applying to the company and the trade, are satisfied in relation to those shares. Before issuing a certificate for the purposes of sub-paragraph (2) above a company shall furnish the inspector with a statement to the effect that it satisfies the conditions for the relief, so far as they apply in relation to the company and the trade, and has done so at all times since the beginning of the relevant period. No such certificate shall be issued without the authority of the inspector or where the company, or a person connected with the company, has given notice to the inspector under paragraph 15(2) below. Any statement under sub-paragraph (3) above shall contain such information as the Board may reasonably require, shall be in such form as the Board may direct and shall contain a declaration that it is correct to the best of the company's knowledge and belief. Where a company has issued a certificate for the purposes of sub-paragraph (2) above, or furnished a statement under sub-paragraph (3) above and— the company shall be liable to a penalty not exceeding £250 or, in the case of fraud, £500. For the purpose of regulations made under section 204 of the Taxes Act (pay as you earn), no regard shall be had to the relief unless a claim for it has been duly made and admitted. Section 61(6) of Chapter II shall apply. For the purposes of section 86 of the Taxes Management Act 1970 (interest on overdue tax), tax charged by an assessment— and section 91 of that Act (effect on interest of reliefs) shall not apply in consequence of any discharge or repayment for giving effect to the relief.

Where any relief has been given which is subsequently found not to have been due, it shall be withdrawn by the making of an assessment to tax under Case VI of Schedule D for the year of assessment for which the relief was given. Section 62(2) to (7) of Chapter II shall apply but, in the case of subsection (4), with the substitution for the reference to section 57(1)(b) of a reference to paragraph 7(1)(b) above and, in the case of subsection (6), with the substitution for paragraphs (a) to (d) of the following paragraphs—

Where an event occurs by reason of which any relief given to an individual falls to be withdrawn by virtue of paragraph 4, 7, 8 or 12(2) above the individual shall within sixty days of his coming to know of the event give a notice in writing to the inspector containing particulars of the event Where an event occurs by reason of which any relief in respect of any shares in a company falls to be withdrawn by virtue of paragraph 5, 6, 8, 9, 10 or 11 above— shall within sixty days of the event or, in the case of a person within paragraph (b) above, of his coming to know of it, give a notice in writing to the inspector containing particulars of the event or payment If the inspector has reason to believe that a person has not given a notice which he is required to give under sub-paragraph (1) or (2) above in respect of any event the inspector may by notice in writing require that person to furnish him within such time (not being less than sixty days) as may be specified in the notice with such information relating to the event as the inspector may reasonably require for the purposes of this Part. Where relief is claimed in respect of shares in a company and the inspector has reason to believe that it may not be due by reason of any such arrangement or scheme as is mentioned in paragraph 4(4), 5(7) or 11 above, he may by notice in writing require any person concerned to furnish him within such time (not being less than sixty days) as may be specified in the notice with— References in sub-paragraph (4) above to the person concerned are, in relation to paragraphs 4(4) and 11, the claimant and, in relation to paragraphs 5(7) and 11, the company and any person controlling the company. Section 63(7) to (9) of Chapter II shall apply but with the substitution, for the reference to section 58, of a reference to paragraph 8 above.

The sums allowable as deductions from the consideration in the computation for the purposes of capital gains tax of the gain or loss accruing to an individual on the disposal of shares in respect of which any relief has been given and not withdrawn shall be determined without regard to that relief, except that where those sums exceed the consideration they shall be reduced by an amount equal to— whichever is the less, but the foregoing provisions of this sub-paragraph shall not apply to a disposal falling within section 44(1) of the Capital Gains Tax Act 1979 (disposals between husband and wife). Sections 88 and 89 of the Finance Act 1982 (identification of securities disposed of) shall not apply to shares in respect of which any relief has been given and not withdrawn ; and any question— shall for the purposes of capital gains tax be determined as for the purposes of paragraph 7 above. Where an individual holds ordinary shares in a company and the relief has been given in respect of some but not others, then, if there is within the meaning of section 77 of the Act of 1979 a reorganisation affecting those shares, section 78 of that Act shall apply separately to the shares in respect of which the relief has been given and to the other shares (so that the shares of each kind are treated as a separate holding of original shares and identified with a separate new holding). There shall be made all such adjustments of capital gains tax, whether by way of assessment or by way of discharge or repayment of tax, as may be required in consequence of the relief being given or withdrawn.

A qualifying company may, in the relevant period, have one or more subsidiaries if— Where a qualifying company has one or more subsidiaries in the relevant period this Part shall have effect subject to paragraph 18 below.

The shares issued by the qualifying company may, instead of or as well as being issued for the purpose mentioned in sub-paragraph (1)(b) of paragraph 2 above, be issued for the purpose of raising money for a qualifying trade which is being carried on by a subsidiary or which a subsidiary intends to carry on within the next four months; and where shares are so issued sub-paragraphs (4), (5) (7)(6) and (8) of that paragraph shall have effect as if references to the company were or, as the case may be, included references to the subsidiary. In relation to a qualifying trade carried on by a subsidiary the reference in section 56(2)(f) of Chapter II (as applied for the purposes of this Part) to another person shall not include a reference to the company of which it is a subsidiary. In sub-paragraph (1) of paragraph 10 above references to the company (except the first) shall include references to a company which during the relevant period is a subsidiary of the company, whether it becomes a subsidiary before or after the redemption, repayment, repurchase or payment referred to in that sub-paragraph. Sub-paragraphs (4) and (5) of paragraph 15 above shall have effect in relation to any such arrangements as are mentioned in section 65(2)(c) of Chapter II as they have effect in relation to any such arrangement as is mentioned in paragraph 11 above. The following provisions of Chapter II shall apply: paragraphs 2 and 4 of Schedule 12; but paragraph 4 shall apply with the substitution of a reference to paragraph 8(1) above for the reference to section 58(1).

Shares subscribed for, issued to, held by or disposed of for an individual by a nominee shall be treated for the purposes of this Part as subscribed for, issued to, held by or disposed of by that individual. Paragraph 3(1) above shall not apply where the amount is subscribed as nominee for an individual by the person or persons having the management of an investment fund approved for the purposes of this paragraph by the Board ("the managers of an approved fund "). Where an individual claims relief in respect of eligible shares in a company which have been issued to the managers of an approved fund as nominee for that individual, paragraph 13(2) above shall apply as if it required— The managers of an approved fund may be required by a notice given to them by an inspector or other officer of the Board to deliver to the officer, within the time limited by the notice, a return of the holdings of eligible shares shown on certificates issued by them in accordance with sub-paragraph (3) above in the year of assessment to which the return relates. Paragraph 13(6) above shall not apply in relation to any certificate issued by the managers of an approved fund for the purposes of sub-paragraph (3) above.

Subject to sub-paragraph (2) below, section 67 of Chapter II shall apply. In this Part, including provisions of Chapter II as applied by this Part—

In section 2(9) of the principal Act (amounts to be taken into account in respect of expenditure) at the end of paragraph (e) there shall be addedand

At the end of subsection (3) of section 3 of the principal Act (expenditure not allowable under that section if already allowed under other provisions) there shall be added the words “ but where expenditure allowable under section 5A of this Act has been allowed on a claim under Schedule 7 to this Act, nothing in this subsection shall prevent a claim being made for an allowance under this section in respect of the same expenditure unless the person making the claim is the participator who made the claim under that Schedule ”.

In section 5 of the principal Act (allowance of abortive exploration expenditure) in subsection (1) after the words “1st January 1960” there shall be inserted the words “ and before 16th March 1983 ”.

In section 9 of the principal Act (limit on amount of tax payable) in subsection (2)(a)(ii) for the words “and (e)” there shall be substituted the words “ (e) and (f) ”.

Every participator in an oil field shall, in the first return under this paragraph which he makes for that field, state whether any and, if any, how much exploration and appraisal expenditure to which section 5A of this Act applies and which relates to, or to a licence for, any part of the field has been claimed under Schedule 7 to this Act— and subsection (7) of section 5 of this Act applies for the purposes of this sub-paragraph as it applies for the purposes of that section.

In Schedule 7 to the principal Act (claims for allowance of abortive exploration expenditure) in paragraph 1(1), for the words from “of any” to “of this Act” there shall be substituted:—. In paragraph 1(3) of that Schedule, after the words “section 5” there shall be added the words “ or, as the case may be, section 5A. ”

In the Schedule to the Petroleum Revenue Tax Act 1980 (computation of payment on account) in paragraph 2(4) for the words “or (d)” there shall be substituted the words “ (d) or (f) ”.

In Schedule 17 to the Finance Act 1980 (transfers of interests in oil fields) after paragraph 16 (abortive exploration expenditure) there shall be inserted—

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .