597AA Revised entrepreneur relief

(1) (a) In this section—

“51 per cent subsidiary” has the same meaning as it has in section 9(1)(a);

“development land” has the same meaning as it has in section 648;

“group” means a holding company and all companies which are 51 per cent subsidiaries of the holding company;

“holding company” means a company whose business consists wholly or mainly of the holding of shares of all companies which are its 51 per cent subsidiaries;

“qualifying business” means a business other than—

(a) the holding of securities or other assets as investments,

(b) the holding of development land, or

(c) the development or letting of land;

“qualifying group” means a group, the business of each 51 per cent subsidiary (other than a holding company) in which consists wholly or mainly of the carrying on of a qualifying business;

“qualifying person” means an individual who is or has been a director or employee of a company (or companies in a qualifying group) who—

(a) is or was required to spend not less than 50 per cent of that individual’s working time in the service of that company (or those companies) in a managerial or technical capacity, and

(b) has served in that capacity for a continuous period of 3 years in the period of 5 years immediately prior to the disposal of the chargeable business assets of which the disposal of shares in the company (or one of those companies) forms the whole or part;

“relevant company” means a company (including a company in a qualifying group) the disposal of shares in which forms the whole or part of the disposal of chargeable business assets;

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“relevant individual” means an individual who has been the beneficial owner of the chargeable business assets for a continuous period of not less than 3 years in the 5 years immediately prior to the disposal of those assets;

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“relevant individual” means an individual—

(a) who has been the beneficial owner of an asset or an interest in an asset to which subparagraph (i) of the definition of ‘chargeable business asset’ in subsection (2)(a) applies for a continuous period of not less than 3 years in the 5 years immediately prior to the disposal of that asset, or

(a) who has been the beneficial owner of a holding of ordinary shares to which subparagraph (ii) of the definition of ‘chargeable business asset’ in subsection (2)(a) applies for a continuous period of not less than 3 years at any time prior to the disposal of those shares;

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“working time” means any time that an employee or director is—

(a) at his or her place of work or, in the case of an employee, at his or her employer’s disposal, and

(b) carrying on or performing the activities or duties of his or her work.

(b) (i) For the purposes of the definition of ‘qualifying person’ in paragraph (a), any period during which the individual was a director or employee of—

(I) a company that was treated as being the same company, for the purposes of section 586, as a relevant company, or

(II) a company involved in a scheme of reconstruction or amalgamation under section 587 with a relevant company,

shall be taken into account in calculating the periods during which the individual was a director or employee.

(ii) For the purposes of the definition of ‘relevant individual’ in paragraph (a), any period during which the individual owned shares in—

(I) a company that was treated as being the same company, for the purposes of section 586, as a relevant company, or

(II)a company involved in a scheme of reconstruction or amalgamation under section 587 with a relevant company,

shall be taken into account in calculating the periods during which the individual was a beneficial owner.

(2) (a) Subject to paragraph (b), ‘chargeable business asset’ means an asset, including goodwill which—

(i)is, or is an interest in, an asset used for the purposes of a qualifying business carried on by an individual, or

(ii)is a holding of ordinary shares in—

(I) a company whose business consists wholly or mainly of carrying on a qualifying business, or

(II) a holding company of a qualifying group,

in respect of which an individual—

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(A) owns not less than 5 per cent of the ordinary share capital, and

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(A) has owned not less than 5 per cent of the ordinary shares for a continuous period of not less than 3 years at any time prior to the disposal of those shares, and

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(B) is a qualifying person in respect of the company or, if the company is a member of a qualifying group, of one or more companies which are members of the qualifying group.

(b) “Chargeable business asset” does not include—

(i)shares (other than shares mentioned in paragraph (a)(ii)), securities or other assets held as investments,

(ii)development ^[3]>land, or^<[3][3]>land,^<[3]

(iii) assets on the disposal of which no gains accruing would be ^[4]>chargeable gains.^<[4][4]>chargeable gains,^<[4]

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(iv) subject to subsection (8), goodwill which is disposed of directly or indirectly to a company, where, immediately following the disposal, the individual is connected with the company, or

(v) subject to subsection (8), shares or securities in a company which are disposed of directly or indirectly to another company, where, immediately following the disposal, the individual is connected with the first-mentioned company.

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(3) Subject to subsection (4), the rate of capital gains tax chargeable on a chargeable gain or chargeable gains accruing in respect of a disposal or disposals of the whole or part of chargeable business assets made by a relevant individual shall be ^[2]>20 per cent^<[2][2]>10 per cent^<[2].

(4) (a) The rate of capital gains tax referred to in subsection (3) shall be chargeable only on so much, if any, of the chargeable gain or chargeable gains accruing, when added to the aggregate amount of any chargeable gain or chargeable gains accruing in respect of any previous disposal of the whole or part of chargeable business assets made by the relevant individual in the lifetime of that individual on or after 1 January 2016, that does not exceed €1,000,000.

(b) The rate of capital gains tax referred to in section 28(3) shall be chargeable on so much, if any, of the chargeable gain or chargeable gains accruing, when added to the aggregate amount of any chargeable gain or chargeable gains accruing in respect of any previous disposal of the whole or part of chargeable business assets made by the relevant individual in the lifetime of that individual on or after 1 January 2016, that exceeds €1,000,000.

(5) This section shall not apply, and section 597A shall apply, to a disposal of the whole or part of chargeable business assets made by a relevant individual where the amount of capital gains tax payable in respect of the disposal under this section is greater than the amount of capital gains tax payable in respect of the disposal were section 597A to apply.

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(6) Subject to section 600 and subsection (8), this section shall not apply to such portion of the chargeable gain or gains accruing in respect of a disposal or disposals by a relevant individual of chargeable business assets which form part of a transfer to which section 600 applies as bears the same proportion to the total of such gains as the value of the consideration received by the relevant individual out of the assets of the company in respect of the transfer bears to the value of the consideration received by the relevant individual other than by way of shares or securities in respect of such transfer.

(7) Where a relevant individual enters into arrangements, the main purpose, or one of the main purposes, of which is to secure that the relevant individual is not connected with a company for the purpose of either or both of subparagraphs (iv) or (v) of subsection (2)(b), this section shall not apply.

(8) Subsections (2)(b)(iv), (2)(b)(v) and (6) shall not apply in relation to a disposal of assets where it would be reasonable to consider that the disposal is made for bona fide commercial reasons and does not form part of any arrangement or scheme the main purpose or one of the main purposes of which is the avoidance of liability to tax.

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