ANNEX 1:: MINOR CHANGES IN THE LAW MADE BY THE BILL This change is in taxpayers’ favour in principle and may benefit some in practice. But the numbers affected and the amounts involved are likely to be small. Change 31: Share loss relief: shares to which section 127 of TCGA applies: section 149
This change makes explicit the time at which, among others, corresponding bonus shares are treated as issued for the purposes of section 148. It is, in part, consequential on the inclusion of section 135(4) (see Change 23) which treats corresponding bonus shares as subscribed for by an individual.
The time at which such shares are treated as issued to or acquired by the individual claiming relief needs to be ascertained for a number of purposes. See section 150(3) and Change 34. The sections to which section 150(3) applies relate only to shares to which EIS relief is not attributable.
The time at which corresponding bonus shares are treated as issued to or acquired by the individual claiming relief also needs to be ascertained for the purpose of determining which shares are disposed of in accordance with the identification rules in section 576(1) to (1B) of ICTA, rewritten in section 148.
Section 149(2) has been included for this purpose. A different approach from that in section 150(3) has been adopted, as section 148 applies both to shares to which EIS relief is attributable and to those to which it is not.
Section 149(2) follows the wording in section 246(6) which applies to shares to which EIS relief is attributable issued on or after 6 April 2007. Section 246(6) is based on section 299(6D) of ICTA which applies to such shares issued before that date but not before 1 January 1994. Section 299(6D) of ICTA is in the same terms as section 299(4C) of ICTA which applies to shares issued before 1 January 1994 to which BES relief is attributable
Section 148(6) applies section 299(4C) or section 299(6D) of ICTA or section 246(6) of this Act if the mixed holding includes shares to which BES relief or EIS income tax relief or deferral relief is attributable. Section 149(2) ensures that the same provision also applies if the mixed holding does not contain any of such shares.
But sections 149(2) and 246(6) (and the equivalent provisions of ICTA) do not apply only to issues of corresponding bonus shares. They also apply to allotments of shares for payment, for example by way of rights, which meet the requirements of section 126(2)(a) of TCGA and to which section 127 of that Act applies.
This ensures that, if neither BES relief nor EIS income tax relief nor EIS deferral relief is attributable to the shares in the existing holding or the new shares, new shares issued by way of rights within section 126(2)(a) of TCGA are treated for the purposes of section 148 as acquired at the same time as the shares in the existing holding.
But if any such relief is attributable to the shares in the existing holding or to new shares allotted for payment, section 149(2) does not apply to the allotment. This is because TCGA provides that, if there is such an allotment for payment and any of such reliefs is attributable either to the shares in the existing holding or to the allotted shares, section 127 of that Act does not apply (see sections 150(9) and 150A(7) of and paragraph 7 of Schedule 5B to TCGA).