CG67862 - Reliefs: employee-ownership trusts: 'disqualifying events': transitional rules

TCGA92/S236P and FA14/Sch37, Para 3(d)

Where relief has, or could have, been claimed on a gain which accrues on a disposal on or after 6 April 2014 and before 26 June 2014, the transitional rules below will apply.

In these circumstances the trustees of a settlement are treated as making a disposal and immediate reacquisition of the ordinary share capital of C, at its market value at that time.

The transitional rules apply where a 바카라 사이트˜disqualifying event바카라 사이트™ occurs in relation to an acquisition to which TCGA92/S236H applies. Such an event happens if and when

  • at any time after the tax year in which the acquisition took place
    • C ceases to meet the 바카라 사이트˜trading requirement바카라 사이트™, or
    • the settlement ceases to meet the 바카라 사이트˜controlling interest requirement바카라 사이트™, or
  • at any time after the acquisition
    • the settlement ceases to meet the 바카라 사이트˜all-employee benefit requirement바카라 사이트™, or
    • the 바카라 사이트˜participator fraction바카라 사이트™ exceeds two-fifths, or
    • the trustees act in a way which the trusts, as required by the 바카라 사이트˜all-employee benefit requirement바카라 사이트™, see CG67840 and CG67841, do not permit.

The rules apply on the occasion of the first 바카라 사이트˜disqualifying event바카라 사이트™ after the acquisition.

The disposal and reacquisition

  • is in relation only to shares of C to which this treatment has not applied before, and
  • is treated as taking place immediately after the 바카라 사이트˜disqualifying event바카라 사이트™.

Note that under the normal rules the disposal is deemed to take place immediately before the 바카라 사이트˜disqualifying event바카라 사이트™, see CG67861.

The limits on the situations in which the 바카라 사이트˜all-employee benefit requirement바카라 사이트™ is treated as met, see CG67861, apply for the purposes of the transitional rules.

Example 29

Chertan Widgets Limited EOT was established on 8 April 2014. Chris transferred the entire ordinary share capital of Chertan Widgets Limited to the trustees on 7 May 2014. The relief requirements were met and Chris made a claim to relief in his self-assessment tax return for the year ended 5 April 2015. On 24 June 2015 Chertan Widgets Limited ceased to meet the 바카라 사이트˜trading requirement바카라 사이트™. The 바카라 사이트˜participator fraction바카라 사이트™ had risen steadily during the previous year, going above 2/5 from 21 February 2015. These were both 바카라 사이트˜disqualifying events바카라 사이트™, the former happening after the end of the tax year in which the acquisition took place and the latter occurring after the acquisition itself but in the same tax year as the acquisition. The trustees are therefore treated as having disposed of and immediately reacquired the entire ordinary share capital of Chertan Widgets Limited, at its then market value, immediately after the 바카라 사이트˜disqualifying event바카라 사이트™ which occurred on 21 February 2015.