1. Lost in Legislation? Birmingham & District Workshop Karen Bullen Tolley Exam Training

2. What is the legislation? Effectively the same Yellow = Red Orange = Green Minor differences e.g. stamp taxes in CCH Red books and in Tolleys Orange But at the end of the day all the legislation is in there somewhere 2

3. Book 1 Income Tax, Corporation Tax and CGT Chronological order Grey shading = key statutes for us – Consolidation Acts In-between grey shading = Finance Acts and minor statutes 3

4. Book 1a Taxes Management Act (TMA) 1970 Administration But Finance Acts 2007, 2008 and 2009 (in Book 1c) have made lots of changes to administration especially in relation to penalties Income and Corporation Taxes Act 1988 (ICTA 1988) Largely replaced by newer acts 4

5. Book 1a Taxation of Chargeable Gains Act 1992 (TCGA 1992) CGT for individuals and chargeable gains for companies Reliefs – PPR, Rollover Relief, Gift Relief……. No blobs……… Finance Acts to 2000 Probably most useful is Finance Act 1998 as Schedule 18 has Corporation Tax administration in it. 5

6. Book 1b Capital Allowances Act (CAA) 2001 Very useful with definition of ‘plant’ Section 21 – what is a building so not plant Section 22 – list of structures which are not plant Section 23 – list of items that look like building / structure BUT are plant Most of items in Section 23 come from case law 6

7. Book 1b Capital Allowances Act (CAA) 2001 Very useful with definition of ‘plant’ Section 21 – what is a building so not plant Section 22 – list of structures which are not plant Section 23 – list of items that look like building / structure BUT are plant Most of items in Section 23 come from case law 7

8. CAA 2001 Buildings, structures and land 21 Buildings (1) For the purposes of this Act, expenditure on the provision of plant or machinery does not include expenditure on the provision of a building. (2) The provision of a building includes its construction or acquisition. (3) In this section, “building” includes an asset which— (a) is incorporated in the building, (b) although not incorporated in the building (whether because the asset is moveable or for any other reason), is in the building and is of a kind normally incorporated in a building, or (c) is in, or connected with, the building and is in list A. LIST A ASSETS TREATED AS BUILDINGS 1 Walls, floors, ceilings, doors, gates, shutters, windows and stairs. 2 Mains services, and systems, for water, electricity and gas. 3 Waste disposal systems. 4 Sewerage and drainage systems. 5 Shafts or other structures in which lifts, hoists, escalators and moving walkways are installed. 6 Fire safety systems. (4) This section is subject to section 23. 8

9. CAA 2001 22 Structures, assets and works (1) For the purposes of this Act, expenditure on the provision of plant or machinery does not include expenditure on— (a) the provision of a structure or other asset in list B, or (b) any works involving the alteration of land. LIST B EXCLUDED STRUCTURES AND OTHER ASSETS 1 A tunnel, bridge, viaduct, aqueduct, embankment or cutting. 2 A way, hard standing (such as a pavement), road, railway, tramway, a park for vehicles or containers, or an airstrip or runway. 3 An inland navigation, including a canal or basin or a navigable river. 4 A dam, reservoir or barrage, including any sluices, gates, generators and other equipment associated with the dam, reservoir or barrage. 5 A dock, harbour, wharf, pier, marina or jetty or any other structure in or at which vessels may be kept, or merchandise or passengers may be shipped or unshipped. 6 A dike, sea wall, weir or drainage ditch. 9

10. 2001 23 Expenditure unaffected by sections 21 and 22 (1) Sections 21 and 22 do not apply to any expenditure to which any of the provisions listed in subsection (2) applies. (2) The provisions are— section 28 (thermal insulation of... buildings);... section 30 (safety at designated sports grounds); section 31 (safety at regulated stands at sports grounds); section 32 (safety at other sports grounds); section 33 (personal security); [section 33A (integral features);] section 71 (software and rights to software); section [143 of ITTOIA 2005 or section] 40D of F(No 2)A 1992 (election relating to tax treatment of films expenditure).ITTOIA 2005F(No 2)A 1992 (3) Sections 21 and 22 also do not affect the question whether expenditure on any item described in list C is, for the purposes of this Act, expenditure on the provision of plant or machinery. (4) But items 1 to 16 of list C do not include any asset whose principal purpose is to insulate or enclose the interior of a building or to provide an interior wall, floor or ceiling which (in each case) is intended to remain permanently in place. 10

11. CAA 2001 LIST C EXPENDITURE UNAFFECTED BY SECTIONS 21 AND 22 1 Machinery (including devices for providing motive power) not within any other item in this list. 2... Gas and sewerage systems provided mainly— (a) to meet the particular requirements of the qualifying activity, or (b) to serve particular plant or machinery used for the purposes of the qualifying activity. 3... 4 Manufacturing or processing equipment; storage equipment (including cold rooms); display equipment; and counters, checkouts and similar equipment. 5 Cookers, washing machines, dishwashers, refrigerators and similar equipment; washbasins, sinks, baths, showers, sanitary ware and similar equipment; and furniture and furnishings. 6 [Hoists]. 7 Sound insulation provided mainly to meet the particular requirements of the qualifying activity. 8 Computer, telecommunication and surveillance systems (including their wiring or other links). 9 Refrigeration or cooling equipment. 10 Fire alarm systems; sprinkler and other equipment for extinguishing or containing fires. 11 Burglar alarm systems. 12 Strong rooms in bank or building society premises; safes. 13 Partition walls, where moveable and intended to be moved in the course of the qualifying activity. 14 Decorative assets provided for the enjoyment of the public in hotel, restaurant or similar trades. 15 Advertising hoardings; signs, displays and similar assets. 11

12. Book 1b Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) Employment income How to tax it – what benefits to tax / exempt Schedules 2 to 5 – very useful Schedules come at the end of the Act after all the section numbers end Schedule 2 – Approved share incentive plans Schedule 3 – Approved SAYE option plans Schedule 4 – Approved CSOP schemes Schedule 5 – Enterprise Management Incentives 12

13. ITEPA 2003 – Contents pages Contents pages Chapter 4 Taxable Benefits: Vouchers and Credit-tokens Cash vouchers: introduction 73 Cash vouchers to which this Chapter applies 74 Provision for, or receipt by, member of employee's family Meaning of “cash voucher” 75 Meaning of “cash voucher” 76 Sickness benefits-related voucher 77 Apportionment of cost of provision of voucher Cash vouchers: exceptions 78 Voucher made available to public generally 79 Voucher issued under approved scheme 80 Vouchers where payment of sums exempt from tax Benefit of cash voucher treated as earnings 81 Benefit of cash voucher treated as earnings Non-cash vouchers: introduction 82 Non-cash vouchers to which this Chapter applies 83 Provision for, or receipt by, member of employee's family Meaning of “non-cash voucher” 84 Meaning of “non-cash voucher” 13

14. ITTEPA 2003 Chapter 5 Taxable Benefits: Living Accommodation Living accommodation 97 Living accommodation to which this Chapter applies Exceptions 98 Accommodation provided by local authority 99 Accommodation provided for performance of duties 100 Accommodation provided as result of security threat [100A Homes outside UK owned through company etc] [100B Section 100A(1): exceptions] 101 Chevening House Benefit of living accommodation treated as earnings 102 Benefit of living accommodation treated as earnings Calculation of cash equivalent 103 Method of calculating cash equivalent 104 General rule for calculating cost of providing accommodation Accommodation costing £75,000 or less 105 Cash equivalent: cost of accommodation not over £75,000 14

15. ITEPA 2003 Chapter 6 Taxable Benefits: Cars, Vans and Related Benefits General 114 Cars, vans and related benefits 115 Meaning of “car” and “van” 116 Meaning of when car or van is available to employee 117 Meaning of car or van made available by reason of employment 118 Availability for private use 119 Where alternative to benefit of car offered Cars: benefit treated as earnings 120 Benefit of car treated as earnings 121 Method of calculating the cash equivalent of the benefit of a car Cars: the price of a car 122 The price of the car 123 The list price of a car 124 The notional price of a car with no list price 124A Automatic car for a disabled employee Cars: treatment of accessories 125 Meaning of “accessory” and related terms 15

16. ITEPA 2003 Cars: capital contributions by employee 132 Capital contributions by employee Cars: the appropriate percentage 133 How to determine the “appropriate percentage” 134 Meaning of car with or without a CO2 emissions figure Cars: appropriate percentage: first registered on or after 1st January 1998 135 Car with a CO2 emissions figure: pre-October 1999 registration 136 Car with a CO2 emissions figure: post-September 1999 registration 137 Car with a CO2 emissions figure: bi-fuel cars 138 Car with a CO2 emissions figure: automatic car for a disabled employee 139 Car with a CO2 emissions figure: the appropriate percentage [139 Cars with a CO22 emissions figure: the appropriate percentage] 140 Car without a CO2 emissions figure: the appropriate percentage 141 Diesel cars: the appropriate percentage 16

17. ITEPA 2003 Chapter 7 Taxable Benefits: Loans Introduction 173 Loans to which this Chapter applies [173A Alternative finance arrangements] 174 Employment-related loans Benefit of taxable cheap loan treated as earnings 175 Benefit of taxable cheap loan treated as earnings 176 Exception for loans on ordinary commercial terms 177 Exceptions for loans at fixed rate of interest 178 Exception for loans where interest qualifies for tax relief 179 Exception for certain advances for necessary expenses 180 Threshold for benefit of loan to be treated as earnings 17

18. ITEPA 2003 Part 4 Employment Income: Exemptions Chapter 1 Exemptions: General 227 Scope of Part 4 228 Effect of exemptions on liability under provisions outside Part 2 Chapter 2 Exemptions: Mileage Allowances and Passenger Payments Mileage allowances 229 Mileage allowance payments 230 The approved amount for mileage allowance payments 231 Mileage allowance relief 232 Giving effect to mileage allowance relief Passenger payments 233 Passenger payments 234 The approved amount for passenger payments Supplementary 235 Vehicles to which this Chapter applies 236 Interpretation of this Chapter Chapter 3 Exemptions: Other Transport, Travel and Subsistence 237 Parking provision and expenses 238 Modest private use of heavy goods vehicles 239 Payments and benefits connected with taxable cars and vans and exempt heavy goods vehicles 240 Incidental overnight expenses and benefits 18

19. ITEPA 2003 Chapter 4 Exemptions: Education and Training Work-related training 250 Exemption of work-related training provision 251 Meaning of “work-related training” 252 Exception for non-deductible travel expenses 253 Exception where provision for excluded purposes 254 Exception where unrelated assets are provided Individual learning account training 255 Exemption for contributions to individual learning account training 256 Meaning of “individual learning account training” 257 Exception for non-deductible travel expenses 258 Exception where provision for excluded purposes 259 Exception where unrelated assets are provided 260 Exception where training not generally available to staff Chapter 5 Exemptions: Recreational Benefits Recreational facilities 261 Exemption of recreational benefits 262 Benefits not exempted by section 261 263 Power to alter benefits to which section 261 applies Annual parties and functions 264 Annual parties and functions 19

20. ITEPA 2003 Chapter 11 Miscellaneous Exemptions Living accommodation 313 Repairs and alterations to living accommodation 314 Council tax etc paid for certain living accommodation 315 Limited exemption for expenses connected with certain living accommodation Work accommodation, supplies etc 316 Accommodation, supplies and services used in employment duties [316A Homeworker's additional household expenses] Workplace meals 317 Subsidised meals Childcare [318 Childcare: exemption for employer-provided care] [318A Childcare: limited exemption for other care] [318B Childcare: meaning of “care”, “child” and “parental responsibility”] [318C Childcare: meaning of “qualifying child care”] [318D Childcare: power to vary exempt amount and qualifying conditions] Telephones and computer equipment [319 Mobile telephones] 20

21. Book 1b Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005) Trading income Property income What is a deductible expense? Contents pages are very useful here as a reminder 21

22. ITTOIA 2005 - contents pages Chapter 4 Trade Profits: Rules Restricting Deductions Introduction 32 Professions and vocations Capital expenditure 33 Capital expenditure Wholly and exclusively and losses rules 34 Expenses not wholly and exclusively for trade and unconnected losses Bad and doubtful debts 35 Bad and doubtful debts Unpaid remuneration 36 Unpaid remuneration 37 Unpaid remuneration: supplementary 22

23. ITTOIA 2005 - Contents pages Employee benefit contributions 38 Restriction of deductions 39 Making of “employee benefit contributions” 40 Provision of qualifying benefits 41 Timing and amount of certain qualifying benefits 42 Provision or payment out of employee benefit contributions 43 Profits calculated before end of 9 month period 44 Interpretation of sections 38 to 44 Business entertainment and gifts 45 Business entertainment and gifts: general rule 46 Business entertainment: exceptions 47 Business gifts: exceptions 23

24. ITTOIA 2005 Contents pages Interest payments 52 Exclusion of double relief for interest Social security contributions 53 Social security contributions Penalties, interest and VAT surcharges 54 Penalties, interest and VAT surcharges Crime-related payments 55 Crime-related payments [Integral features] [55A Expenditure on integral features] [Rental rebates] [55B Rental rebates] Chapter 5 Trade Profits: Rules Allowing Deductions Introduction 56 Professions and vocations Pre-trading expenses 57 Pre-trading expenses 24

25. Book 1c Income Taxes Act 2007 (ITA 2007) All about individuals and Income Tax Think “calculation of the Income Tax bill” Especially Loss reliefs 25

26. ITA 2007 Chapter 2 Trade Losses Introduction 60 Overview of Chapter 61 Non-partners: losses of a tax year 62 Partners: losses of a tax year etc 63 Prohibition against double counting Trade loss relief against general income 64 Deduction of losses from general income 65 How relief works Restriction on relief for uncommercial trades 66 Restriction on relief unless trade is commercial Restriction on relief for “hobby” farming or market gardening 67 Restriction on relief in case of farming or market gardening 68 Reasonable expectation of profit 69 Whether trade is the same trade 70 Determining losses in previous tax years 26

27. ITA 2007 Use of trading loss as CGT loss 71 Treating trade losses as CGT losses Early trade losses relief 72 Relief for individuals for losses in first 4 years of trade 73 How relief works 74 Restrictions on relief unless trade is commercial etc 27

28. ITA 2007 Carry-forward trade loss relief 83 Carry forward against subsequent trade profits 84 How relief works 85 Use of trade-related interest and dividends if trade profits insufficient 86 Trade transferred to a company 87 Ring fence trades 88 Carry forward of certain interest as loss Terminal trade loss relief 89 Carry back of losses on a permanent cessation of a trade 90 Losses that are “terminal losses” 28

29. Book 1c Corporation Tax Act 2009 (CTA 2009) It is almost the Corporation Tax equivalent of ITTOIA e.g. Rules in S47 ITTOIA re Business Entertaining are found in S1300 CTA 09 29

30. Book 1c Corporation Tax Act 2010 (CTA 2010) More Corporation Tax laws! Taxation (International etc ) Act 2010 DTR Transfer pricing Tax avoidance Etc……… 30

31. Book 1c Not a consolidation Act BUT Also in 1c are FA 2007, 2008 and 2009 – very important with regards to Tax administration FA 2007 Sch 24Incorrect return penalties FA 2008 Sch 41Failure to notify penalties FA 2009 Sch 55late return penalties FA 2009 Sch 56 late payment penalties 31

32. Book 1c INDEX Two parts to index 1 st – normal index 2 nd – Words and Phrases = commonly used expressions ( in CCH called Definitions and Meanings) Index not overly useful and things not listed in the way you might expect but could save your bacon in a sticky situation 32

33. Book 1c Index – connected persons Connected persons – “Words and Phrases” (capital allowances) CAA 2001 s 232 (capital gains tax) TCGA 1992 s 286 (corporation tax) CTA 2010 ss 1122, 1123 (income and corporation tax) TA 1988 s 839(1)-(4), (7) “Main Index” application of definition ITA 2007 s 1021 capital allowances, application to CAA 2001 s 575 chargeable gains, application to TCGA 1992 s18 company purchase of own shares, TA 1988 s 228 employee share schemes, unapproved, application to FA 1988 s 83(1), (4) meaning, TA 1988 s 839, TCGA 1992 s 286, ITA 2007 ss 993-994 33

34. Q on conditions re EMI scheme Index look up Enterprise Management incentive scheme Not there Look up share schemes Not there Look up share option schemes EMI 34

35. More helpful than the index……. …are the contents pages at the front of the consolidation acts But in the exam………. 35

36. Part 2 Income Tax, Corporation Tax and CGT Secondary legislation And Non-statutory legislation INDEX 36

37. Part 2 Statutory Instruments Revenue Interpretations Press Releases HMRC Code of Practice Miscellaneous At front of each section is a contents page – very useful 37

38. Part 2;SI contents - highlight SI 1998/3175Payment of tax – large Cos - instalments SI 2003/2682PAYE Heaven!!!!! 38

39. Part 2;ESC Contents - highlight D2CGT residence – year of arrival / departure D3PPR periods of absence (a) D4PPR Periods of absence (b) D6PPR separated couples D22Rollover – assets not brought into immediate use 39

40. PPR Relief 223 Amount of relief (1) No part of a gain to which section 222 applies shall be a chargeable gain if the dwelling-house or part of a dwelling-house has been the individual's only or main residence throughout the period of ownership, or throughout the period of ownership except for all or any part of the last 36 months of that period.......... ……….at end of section you find info re ESCD3PPR periods of absence (a) D4PPR Periods of absence (b) D6PPR separated couples SP Cases Cross references 40

41. Part 2;Miscellaneous My favourite part is Miscellaneous Misc II – HMRC 6 Residence, Domicile and remittance basis Misc III – HMRC Booklet – Employed or self-employed? Misc V- IR 35 – Revised Guidance Book 2 is well worth a few hours of looking through 41

42. Part 3 IHT NIC Tax credits and PRT “All aspects” in each of these 4 sections So first section is IHT and starts with Acts, then SIs then ESCs the SPs and then non-statutory material. Ending with the IHT index 42

43. Orange / Green Book Contains all aspects of VAT Stamp Taxes Other indirect taxes (IPT and the ‘green’ taxes) ‘All aspects’ means Acts Statutory instruments Other stuff – eg Notices, Press releases Index 43

44. Grey blobs! 1 st grey blob is VAT statutes – VATA 1994 is most interesting 2 nd blob is Statutory instruments re VAT Then EC material, VAT ESCs, VAT Notices, then Miscellaneous Press Releases. Finally VAT INDEX 44

45. Orange / Green Book 1 For VAT there are two bits of the first and second grey blob you really need to be familiar with VATA 1994 SI 1995 / 2518 45

46. -CHARGE TO TAX -RELIEFS, EXEMPTIONS AND REPAYMENTS -APPLICATION OF ACT IN PARTICULAR AREAS -ADMINISTRATION, COLLECTION AND ENFORCEMENT -SUPPLEMENTARY PROVISIONS -SCHEDULES VATA 1994

47. VATA 1994 Schedule 8 Part IIThe Groups Group 1 — Food The supply of anything comprised in the general items set out below, except— (a) a supply in the course of catering; and (b) a supply of anything comprised in any of the excepted items set out below, unless it is also comprised in any of the items overriding the exceptions set out below which relates to that excepted item. General items Item No 1 Food of a kind used for human consumption. 2 Animal feeding stuffs. 47

48. VATA 1994 Schedule 8 Excepted items Item No 1 Ice cream, ice lollies, frozen yoghurt, water ices and similar frozen products, and prepared mixes and powders for making such products. 2 Confectionery, not including cakes or biscuits other than biscuits wholly or partly covered with chocolate or some product similar in taste and appearance. 3 Beverages chargeable with any duty of excise specifically charged on spirits, beer, wine or made-wine and preparations thereof. 4 Other beverages (including fruit juices and bottled waters) and syrups, concentrates, essences, powders, crystals or other products for the preparation of beverages. 5 Any of the following when packaged for human consumption without further preparation, namely, potato crisps, potato sticks, potato puffs, and similar products made from the potato, or from potato flour, or from potato starch, and savoury food products obtained by the swelling of cereals or cereal products; and salted or roasted nuts other than nuts in shell. 48

49. VATA 1994 Schedule 8 Items overriding the exceptions Item No 1 Yoghurt unsuitable for immediate consumption when frozen. 2 Drained cherries. 3 Candied peels. 4 Tea, maté, herbal teas and similar products, and preparations and extracts thereof. 5 Cocoa, coffee and chicory and other roasted coffee substitutes, and preparations and extracts thereof. 49

50. VATA 1994 Schedule 8 NOTES: (1) “Food” includes drink. (2) “Animal” includes bird, fish, crustacean and mollusc. (3) A supply of anything in the course of catering includes— (a) any supply of it for consumption on the premises on which it is supplied; and (b) any supply of hot food for consumption off those premises; and for the purposes of paragraph (b) above “hot food” means food which, or any part of which— (i) has been heated for the purposes of enabling it to be consumed at a temperature above the ambient air temperature; and [(ii) is above that temperature at the time it is provided to the customer.] 1 50

51. preliminary registration & provisions for special cases VAT invoices & other invoicing requirements EC sales statements accounting, payment and records payments on account annual accounting SI 1995 / 2518

52. cash accounting supplies by retailers time of supply & time of acquisition valuation of acquisitions place of supply input tax & partial exemption adjustments to the deduction of input tax on capital items importations, exportations and removals

53. fiscal & other warehousing schemes new means of transport bad debt relief repayment of input tax (BDR) repayments to community traders repayments to third country traders repayment supplement refunds to “do-it-yourself” builders flat-rate scheme for farmers distress & diligence

54. Know your way around the books Get a feel for what is in each book and then for what the different acts are all about. Capital allowances – CAA 2001 Employee – ITEPA 2003 Self-employed – ITTOIA 2005 Use of Sole trader losses – relates to calculation of tax ITA 2007 – Income Tax Act 2007 Companies – CTA 2009 / 2010 54

55. Can I write in the books “Publications brought into the examination must be bound copies. They can be underlined, sidelined and highlighted. Annotating, use of “post-its” and tagging is NOT allowed” You can write your name on the books 55

56. How do I study with them? In the exam you will have little time to use the legislation Not much time to translate what is in the book into something that answers a question in a meaningful way. 56

57. So what use are they? Aide memoire! Instead of using your brain to remember things like Definitions Conditions Time limits Useful highlighting of the books can do this for you 57

58. Example Conditions for a company to qualify for Enterprise Investment Scheme (EIS) ITA 2007 Part 5 – EIS Section 180 = good overview 58

59. ITA 2007 180 Overview of Chapter The issuing company is a qualifying company in relation to the relevant shares if the requirements of this Chapter are met as to— (a) trading (see section 181), (b) the issuing company to carry on the qualifying business activity (see section 183), (c) unquoted status (see section 184), (d) control and independence (see section 185), (e) gross assets (see section 186), [(ea) number of employees (see section 186A),] (f) qualifying subsidiaries (see section 187), and (g) property managing subsidiaries (see section 188). 59

60. ITA 2007 180 Overview of Chapter The issuing company is a qualifying company in relation to the relevant shares if the requirements of this Chapter are met as to— (a) trading (see section 181), (b) the issuing company to carry on the qualifying business activity (see section 183), (c) unquoted status (see section 184), (d) control and independence (see section 185), (e) gross assets (see section 186), [(ea) number of employees (see section 186A),] (f) qualifying subsidiaries (see section 187), and (g) property managing subsidiaries (see section 188). 60

61. 183 The issuing company to carry on the qualifying business activity requirement (1) The requirement of this section is met in relation to the issuing company if, at no time in period B, is any of the following— (a) the relevant qualifying trade, (b) relevant preparation work (if any), and (c) relevant research and development (if any), carried on by a person other than the issuing company or a qualifying 90% subsidiary of that company. (2) Subsection (3) has effect for the purpose of determining whether the requirement of this section is met in relation to the issuing company in a case where relevant preparation work is carried out by that company or a qualifying 90% subsidiary of that company. (3) The carrying on of the relevant qualifying trade by a company other than the issuing company or a subsidiary of that company is to be ignored if it takes place at any time in period B before the issuing company or any qualifying 90% subsidiary of that company begins to carry on that trade. 61

62. 183 The issuing company to carry on the qualifying business activity requirement (1) The requirement of this section is met in relation to the issuing company if, at no time in period B, is any of the following— (a) the relevant qualifying trade, (b) relevant preparation work (if any), and (c) relevant research and development (if any), carried on by a person other than the issuing company or a qualifying 90% subsidiary of that company. (2) Subsection (3) has effect for the purpose of determining whether the requirement of this section is met in relation to the issuing company in a case where relevant preparation work is carried out by that company or a qualifying 90% subsidiary of that company. (3) The carrying on of the relevant qualifying trade by a company other than the issuing company or a subsidiary of that company is to be ignored if it takes place at any time in period B before the issuing company or any qualifying 90% subsidiary of that company begins to carry on that trade. 62

63. 189 Meaning of “qualifying trade” (1) For the purposes of this Part, a trade is a qualifying trade if— (a) it is conducted on a commercial basis and with a view to the realisation of profits, and (b) it does not at any time in period B consist wholly or as to a substantial part in the carrying on of excluded activities. (2) References in this section and sections 192 to 198 to a trade are to be read without regard to the definition of “trade” in section 989. 63

64. 189 Meaning of “qualifying trade” (1) For the purposes of this Part, a trade is a qualifying trade if— (a) it is conducted on a commercial basis and with a view to the realisation of profits, and (b) it does not at any time in period B consist wholly or as to a substantial part in the carrying on of excluded activities. (2) References in this section and sections 192 to 198 to a trade are to be read without regard to the definition of “trade” in section 989. 64

65. 192 Meaning of “excluded activities” (1) The following are excluded activities for the purposes of sections 181 and 189— (a) dealing in land, in commodities or futures or in shares, securities or other financial instruments, (b) dealing in goods otherwise than in the course of an ordinary trade of wholesale or retail distribution, (c) banking, insurance, money-lending, debt-factoring, hire-purchase financing or other financial activities, (d) leasing (including letting ships on charter or other assets on hire), (e) receiving royalties or licence fees, (f) providing legal or accountancy services, (g) property development, (h) farming or market gardening, (i) holding, managing or occupying woodlands, any other forestry activities or timber production, [(ia) shipbuilding, (ib) producing coal, (ic) producing steel,] (j) operating or managing hotels or comparable establishments or managing property used as an hotel or comparable establishment, (k) operating or managing nursing homes or residential care homes or managing property used as a nursing home or residential care home, and (l) any activities which are excluded activities under section 199 (provision of services or facilities for another business). 65

66. 192 Meaning of “excluded activities” (1) The following are excluded activities for the purposes of sections 181 and 189— (a) dealing in land, in commodities or futures or in shares, securities or other financial instruments, (b) dealing in goods otherwise than in the course of an ordinary trade of wholesale or retail distribution, (c) banking, insurance, money-lending, debt-factoring, hire-purchase financing or other financial activities, (d) leasing (including letting ships on charter or other assets on hire), (e) receiving royalties or licence fees, (f) providing legal or accountancy services, (g) property development, (h) farming or market gardening, (i) holding, managing or occupying woodlands, any other forestry activities or timber production, [(ia) shipbuilding, (ib) producing coal, (ic) producing steel,] (j) operating or managing hotels or comparable establishments or managing property used as an hotel or comparable establishment, (k) operating or managing nursing homes or residential care homes or managing property used as a nursing home or residential care home, and (l) any activities which are excluded activities under section 199 (provision of services or facilities for another business). 66

67. 186 The gross assets requirement (1) In the case of relevant shares issued by a single company, the value of the company's assets— (a) must not exceed £7 million immediately before the relevant share issue, and (b) must not exceed £8 million immediately afterwards. (2) In the case of relevant shares issued by a parent company, the value of the group assets— (a) must not exceed £7 million immediately before the relevant share issue, and (b) must not exceed £8 million immediately afterwards. 67

68. 186 The gross assets requirement (1) In the case of relevant shares issued by a single company, the value of the company's assets— (a) must not exceed £7 million immediately before the relevant share issue, and (b) must not exceed £8 million immediately afterwards. (2) In the case of relevant shares issued by a parent company, the value of the group assets— (a) must not exceed £7 million immediately before the relevant share issue, and (b) must not exceed £8 million immediately afterwards. 68

69. [186A The number of employees requirement] [(1) If the issuing company is a single company, the full-time equivalent employee number for it must be less than 50 when the relevant shares are issued. (2) If the issuing company is a parent company, the sum of— (a) the full-time equivalent employee number for it, and (b) the full-time equivalent employee numbers for each of its qualifying subsidiaries, must be less than 50 when the relevant shares are issued. (3) The full-time equivalent employee number for a company is 69

70. [186A The number of employees requirement] [(1) If the issuing company is a single company, the full-time equivalent employee number for it must be less than 50 when the relevant shares are issued. (2) If the issuing company is a parent company, the sum of— (a) the full-time equivalent employee number for it, and (b) the full-time equivalent employee numbers for each of its qualifying subsidiaries, must be less than 50 when the relevant shares are issued. (3) The full-time equivalent employee number for a company is 70

71. ITA contents pages Part 5 Enterprise Investment Scheme Chapter 1 Introduction EIS relief 156 Meaning of “EIS relief” and commencement 157 Eligibility for EIS relief 158 Form and amount of EIS relief Miscellaneous 159 Periods A, B and C 160 Overview of other Chapters of Part 161 Other tax reliefs relating to EIS 71

72. Chapter 4 The Issuing Company Introduction 180 Overview of Chapter The requirements [180A The UK permanent establishment requirement] [180B The financial health requirement] 181 The trading requirement 182 Ceasing to meet trading requirement because of administration or receivership 183 The issuing company to carry on the qualifying business activity requirement 184 The unquoted status requirement 185 The control and independence requirement 186 The gross assets requirement [186A The number of employees requirement] 187 The qualifying subsidiaries requirement 188 The property managing subsidiaries requirement 72

73. Highlighting Golden Rules 1.Less is better than more – can always add more later but cannot take away 2.Think before you put the highlighter on to paper 3.Always highlight contents pages of Acts also 4.Consider a highlight of the index if the Act is not obvious to you 5.Consider using different colours 6.Cannot highlight everything 73

74. e.g. Rollover Relief TCGA 1992 Section 155 155 Relevant classes of assets The classes of assets for the purposes of section 152(1) are as follows. 74

75. S 155 TCGA 1992 Class 1 Assets within heads A and B below. Head A 1. Any building or part of a building and any permanent or semi-permanent structure in the nature of a building, occupied (as well as used) only for the purposes of the trade. 2. Any land occupied (as well as used) only for the purposes of the trade. Head A has effect subject to section 156. Head B Fixed plant or machinery which does not form part of a building or of a permanent or semi-permanent structure in the nature of a building. Class 2 Ships, aircraft and hovercraft (“hovercraft” having the same meaning as in the Hovercraft Act 1968). Hovercraft Act 1968 Class 3.......... 75

76. S 153 Assets only partly replaced (1) Section 152(1) shall not apply if part only of the amount or value of the consideration for the disposal of, or of the interest in, the old assets is applied as described in that subsection, but if all of the amount or value of the consideration except for a part which is less than the amount of the gain (whether all chargeable gain or not) accruing on the disposal of, or of the interest in, the old assets is so applied, then the person carrying on the trade, on making a claim as respects the consideration which has been so applied, shall be treated for the purposes of this Act— (a) as if the amount of the gain so accruing were reduced to the amount of the said part (and, if not all chargeable gain, with a proportionate reduction in the amount of the chargeable gain), and (b) as if the amount or value of the consideration for the acquisition of, or of the interest in, the new assets were reduced by the amount by which the gain is reduced (or as the case may be the amount by which the chargeable gain is proportionately reduced) under paragraph (a) of this subsection, but neither paragraph (a) nor paragraph (b) above shall affect the treatment for the purposes of this Act of the other party to the transaction involving the old assets, or of the other party to the transaction involving the new assets. (2) Subsections (3) to (11) of 152 shall apply as if this section formed part of that section. 76

77. Highlighting DO NOT highlight whole sections If you have to read and interpret and decide what it means in the exam it will waste valuable time So BE SELECTIVE – key words 77

78. “Helpful highlighting” This is what you are aiming for Be creative / clever! 78

79. Restricted securities A further charge will arise under s.426 ITEPA 2003 when the restriction is lifted. This further charge is based on the formula in s.428 ITEPA 2003. The formula in the legislation contains a number of steps but, in the majority of cases, this can be simplified to the following: UMV x IUMV – DA IUMV where: “UMV” = the market value of the shares at the date the risk of forfeiture is lifted “IUMV” = “unrestricted” value of the shares at the date of award i.e. Initial UMV “DA” = the amount paid by the employee for the shares plus the amount charged as employment income on the initial award 79

80. S428 ITEPA 2003 428 Amount of charge [(1) The taxable amount for the purposes of section 426 (charge on occurrence of chargeable event) is— UMV x (IUP – PCP – OP) – CE (2) UMV is what would be the market value of the employment-related securities immediately after the chargeable event but for any restrictions. (3) IUP is— IUMV – DA / IUMV where— IUMV is what would have been the market value of the employment-related securities at the time of the acquisition but for any restrictions, and DA is the total of any deductible amounts. 80

81. S428 ITEPA 2003 428 Amount of charge [(1) The taxable amount for the purposes of section 426 (charge on occurrence of chargeable event) is— UMV x (IUP – PCP – OP) – CE (2) UMV is what would be the market value of the employment-related securities immediately after the chargeable event but for any restrictions. (3) IUP is— IUMV – DA / IUMV where— IUMV is what would have been the market value of the employment-related securities at the time of the acquisition but for any restrictions, and DA is the total of any deductible amounts. 81

82. S223 TCGA 1992 223 Amount of relief (1) No part of a gain to which section 222 applies shall be a chargeable gain if the dwelling-house or part of a dwelling-house has been the individual's only or main residence throughout the period of ownership, or throughout the period of ownership except for all or any part of the last 36 months of that period. (2) Where subsection (1) above does not apply, a fraction of the gain shall not be a chargeable gain, and that fraction shall be— (a) the length of the part or parts of the period of ownership during which the dwelling-house or the part of the dwelling-house was the individual's only or main residence, but inclusive of the last 36 months of the period of ownership in any event, divided by (b) the length of the period of ownership. 82

83. S223 TCGA 1992 (3) For the purposes of subsections (1) and (2) above— (a) a period of absence not exceeding 3 years (or periods of absence which together did not exceed 3 years), and in addition (b) any period of absence throughout which the individual worked in an employment or office all the duties of which were performed outside the United Kingdom [or lived with a spouse or civil partner who worked in such an employment or office], and in addition (c) any period of absence not exceeding 4 years (or periods of absence which together did not exceed 4 years) throughout which the individual was prevented from residing in the dwelling-house or part of the dwelling-house in consequence of the situation of his place of work or in consequence of any condition imposed by his employer requiring him to reside elsewhere, being a condition reasonably imposed to secure the effective performance by the employee of his duties, [and in addition,] [(d) any period of absence not exceeding 4 years (or periods of absence which together did not exceed 4 years) throughout which the individual lived with a spouse or civil partner in respect of whom paragraph (c) applied in respect of that period (or periods),] 83

84. Highlighting It’s a personal thing No one right way You know what will work for you People use the legislation in different ways – do what you are happy with 84

85. Using the legislation Use the legislation whilst studying Highlight things early on that you think will be useful to you When revising open your legislation and think if there is a way you could use the Acts to help you answer a question in the exam What are the conditions for……. What is the definition of…….. What is the time limit for…….. 85

86. A Warning Look after your books. Be careful lending your books to others in case they write in them etc making them useless for the exam! 86