Finance Act, 1993

Amendment of section 16 (market value of certain shares) of Principal Act.

125.—(1) Section 16 of the Principal Act is hereby amended—

(a) by the substitution of the following subsection for subsection (1):

“(1) (a) The market value of each share in a private company which (after the taking of the gift or of the inheritance) is, on the date of the gift or on the date of the inheritance, a company controlled by the donee or successor, shall be ascertained by the Commissioners, for the purposes of tax, as if, on the date on which the market value is to be ascertained, it formed an apportioned part of the market value of a group of shares in that company, such apportionment, as between shares of a particular class, to be by reference to nominal amount, and, as between different classes of shares, to have due regard to the rights attaching to each of the different classes.

(b) For the purpose of ascertaining the market value of a share in a private company in the manner described in paragraph (a), the benefit to any private company (in this paragraph referred to as ‘the first-mentioned company’) by virtue of its ownership of an interest in shares in another private company (in this paragraph referred to as ‘the second-mentioned company’), shall, where each of the companies so connected is a company which (after the taking of the gift or of the inheritance) is, on the date of the gift or on the date of the inheritance, a company controlled by the donee or successor, be deemed to be—

(i) such benefit as would be appropriate to the ownership of that interest if the second-mentioned company were under the control of the first-mentioned company in the same manner as (on the date on which the market value is to be ascertained) the second-mentioned company is under the control of the following, that is to say, the first-mentioned company, the donee or successor, the relatives of the donee or successor, nominees of the donee or successor, nominees of relatives of the donee or successor, and the trustees of a settlement whose objects include the donee or successor or relatives of the donee or successor, or

(ii) the actual benefit appropriate to the ownership of that interest,

whichever is the greater.”,

and

(b) in subsection (2)—

(i) by the insertion of the following definition before the definition of “nominee”:

“‘group of shares’, in relation to a private company, means the aggregate of the shares in the company of the donee or successor, the relatives of the donee or successor, nominees of the donee or successor, nominees of relatives of the donee or successor, and the trustees of a settlement whose objects include the donee or successor or relatives of the donee or successor;”,

(ii) by the deletion of the definition of “private trading company”, and

(iii) by the insertion of the following definition after the definition of “private company”:

“‘share’, in relation to a private company and in addition to the interpretation of ‘share’ in section 2 (1), includes every debenture, or loan stock, issued otherwise than as part of a transaction which is wholly and exclusively a bonafide commercial transaction.”.

(2) This section shall have effect in relation to gifts or inheritances taken on or after the 24th day of February, 1993.