Section 809VI — Income Tax Act 2007: The appropriate mitigation steps

The appropriate mitigation steps 809VI 1 If the potentially chargeable event is a disposal of all or part of the holding, the appropriate mitigation steps are regarded as taken if the whole of the disposal proceeds have been taken offshore or re-invested.

2 For any other case, the appropriate mitigation steps are regarded as taken if—

a P has disposed of the entire holding (or so much of it as P retains when the potentially chargeable event occurs),

and b the whole of the disposal proceeds have been taken offshore or re-invested.

3 But —

a see also section 809VIA (which makes provision treating the disposal proceeds as reduced where TRF capital is involved),

and b if the disposal proceeds exceed X, subsections (1) and (2)(b) apply only to so much of the proceeds as is equal to X. 4 “X” is—

a the sum originally invested, less b so much of that sum as has, on previous occasions involving the same investment—

i been taken into account in determining the affected income or gains under section 809VG(2),

ii been taken offshore or re-invested in order to avoid the application of that section, or iii been used to make a tax deposit without which the amount actually taken offshore or re-invested would not have been enough to satisfy subsection (1) or (2)(b) (see section 809VK). 5 “ The sum originally invested ” means the amount of the money, or the market value of the other property, used to make the investment.

6 Market value is to be assessed for these purposes as at the date of the relevant event (see section 809VA).

7 Proceeds are “re-invested” if a relevant person uses them to make another qualifying investment (or the proceeds are themselves a qualifying investment) whether in the same or a different company.

8 In cases where a breach of the extraction of value rule occurs in connection with the winding-up or dissolution of the target company—

a subsection (2)(a) does not apply, b the reference in subsection (2)(b) to the disposal proceeds is to the value received, and c references in this section and in succeeding provisions of the business investment provisions to the disposal proceeds are to be read as references to the value received.