CG17963A - Taper relief: assets qualifying as business assets for only part of the relevant period of ownership - interaction with ESC/C16: Taper relief does not apply to disposals before 6 April 1998 or after 6 April 2008
Whether or not shares qualify as business assets at any time may
depend on whether or not the company in which the shares are held
is a trading company. CG17963 makes clear that business assets
status for shares is not determined by whether or not a company is
in liquidation and being formally wound up.
Extra-statutory concession C16 may be applicable where a
company is wound up "informally". If all the relevant conditions
for ESC/C16 to apply are satisfied, distributions made in
circumstances described in CTM36205 will be treated as if they were
capital distributions made in the course of a formal winding-up.
The company is treated as if it had begun a formal winding-up
either on the date the company declared its intentions to seek or
accept striking off and dissolution, or at an earlier date if the
company had then ceased to carry on business and commenced to
distribute its assets. Liability under ICTA88/S209 will not arise
on distributions to shareholders made on or after the date the
informal winding up is treated as beginning. But capital gains may
arise on such capital distributions, see CG57825+ and CTM36220.
As in the case of a formal winding up, the start of an
informal winding-up in accordance with ESC/C16 is irrelevant to
determining whether or not shares qualify as business assets. Where
business asset status for shares requires a company to be a trading
company you will need to know when a company ceased to be a trading
company to calculate the amount of any chargeable gains after taper
relief. Any disposal of shares which results from a capital
distribution made in accordance with ESC/C16 may occur before or
after, or coincide with the time the company in question ceased to
be a trading company.
Example
Anne is a director of a trading company. She acquires 20% of
the company's ordinary class of shares on 1 September 2000. Anne
therefore has a material interest in the company, see CG17954a. The
company will therefore only be Anne's qualifying company, see
CG17948, for times when it is a trading company and she is an
officer or employee of the company. On 1 May 2003 the company
permanently ceased to carry on its trade and, accordingly, ceased
to be Anne's qualifying company. Anne's shares will, from then, no
longer be business assets for taper relief purposes.
On 1 July 2003 the company begins an informal winding-up. On
1 August 2003 the company makes a capital distribution to
shareholders. The company's tax inspector agrees that ESC/C16 can
apply to the distribution. This has no effect on the status of
Anne's shares for taper relief. They continue to qualify as
business assets only for the period between 1 September 2000 and 30
April 2003. They are not, and cannot become, business assets for
the period between 1 May 2003 and 1 August 2003.
