TaxPersonal Tax21 MARCH 2000 BUDGET-COMPANY GAINS ON SUBSTANTIAL HOLDINGS

21 MARCH 2000 BUDGET-COMPANY GAINS ON SUBSTANTIAL HOLDINGS

The Government is to consult on the possibility of introducing a rollover relief for gains on substantial shareholdings held by companies.

Summary of measures

The Government is to consult on the possibility of introducing a rollover relief for gains on substantial shareholdings held by companies. This would be a major relaxation to the capital gains rules for companies. By removing the immediate tax charge when companies rationalise their substantial shareholdings, it will promote business efficiency.

The Inland Revenue will be publishing a Technical Note containing detailed proposals for consultation. Subject to the outcome of that consultation, the relief will be included in next year’s Finance Bill.

Further details

1. The Government’s present thinking is that a rollover relief for gains on shareholdings held by companies should be along the following lines:
– shareholdings in excess of a threshold of 30% would qualify;
– only shareholdings in trading companies or trading groups would be within the scope;
– rollover would be possible into other substantial shareholdings or into the wider range of assets which presently qualify for business asset rollover relief, and vice-versa;
– life insurance companies would be included, but only in respect of their structural shareholdings;
– it will be necessary to consider the application of the relief to other specific sectors (such as the oil industry).

2. There will be a large number of detailed issues to be considered. These will be set out in a Technical Note to be published by the Inland Revenue in the early summer. If the Government decides to proceed, draft clauses will be published in due course, comments invited and the clauses included in Finance Bill 2001.

Background notes

1. The present business asset rollover relief applies to both companies and individuals and enables gains on a range of assets (land and buildings, fixed plant machinery, goodwill etc) to be rolled over against the cost of replacement assets in the same range. The assets must be used for the purposes of a trade and the proceeds of sale of the old asset have to be reinvested into the new asset for full rollover to be available.

2. Shares are not included in the range of assets which qualify for rollover relief. Introducing relief for companies’ gains on substantial shareholdings will, if implemented, be a significant extension of the existing rules.

3. Full details of the cost and implications of the relief will be published when the details are settled in the light of consultation and the Government has decided whether or not to proceed.

Related Articles

LITRG urges government to consider tax changes in disability work plan

Administration LITRG urges government to consider tax changes in disability work plan

5d Lucy Skoulding, Reporter
HMRC appeal rejected in Tottenham Hotspur case

Administration HMRC appeal rejected in Tottenham Hotspur case

3w Emma Smith, Managing Editor
HMRC urged to clarify impact of income allowances on Self-Assessments

Personal Tax HMRC urged to clarify impact of income allowances on Self-Assessments

2m Alia Shoaib, Reporter
New trading allowance: simplicity, but not as we know it

Administration New trading allowance: simplicity, but not as we know it

2m Emma Rawson, ATT Technical Officer
Wealthy individuals could circumvent top tax rate rises

Personal Tax Wealthy individuals could circumvent top tax rate rises

4m Alia Shoaib, Reporter
Italy grants first successful non-dom status application to former UK non-dom

Personal Tax Italy grants first successful non-dom status application to former UK non-dom

5m Emma Smith, Managing Editor
Industry reaction: Taylor Review does not go far enough in addressing tax issues

Legal Industry reaction: Taylor Review does not go far enough in addressing tax issues

5m Alia Shoaib, Reporter
Does the Taylor Review sufficiently address the gig economy?

Corporate Tax Does the Taylor Review sufficiently address the gig economy?

5m Alia Shoaib, Reporter