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Income Tax Act 2007

Type Public General Act

Publication 2007-03-20

Last updated 2026-01-20

State In force

Department Statute Law Database

Source legislation.gov.uk

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(2A) But any allowance under Part 2A of CAA 2001 (structures and buildings allowances) is to be ignored for the purposes of subsection (2).

(3) The business has a relevant agricultural connection if—

(a) the business is carried on in relation to land that consists of or includes an agricultural estate, and

(b) allowable agricultural expenses deducted in calculating the loss are attributable to the estate.

(4) “Agricultural estate” means land—

(a) which is managed as one estate, and

(b) which consists of or includes land occupied wholly or mainly for purposes of husbandry.

(5) “Allowable agricultural expenses”, in relation to an agricultural estate, means any expenses attributable to the estate which are deductible—

(a) in respect of maintenance, repairs, insurance or management of the estate, and

(b) otherwise than in respect of interest payable on a loan.

(6) But expenses attributable to the parts of the estate used wholly for purposes other than those of husbandry are to be ignored.

(7) And if parts of the estate are used both—

(a) for purposes of husbandry, and

(b) for other purposes,

the expenses in respect of those parts are to be reduced so far as those parts are used for the other purposes.

Supplementary

124

(1) A claim for property loss relief against general income must be made on or before the first anniversary of the normal self-assessment filing date for the tax year specified in the claim.

(2) If a loss has previously been carried forward under section 118, the claim must be accompanied by the amendments of any return made under—

(a) section 8 of TMA 1970, or

(b) section 8A of TMA 1970,

that are necessary to give effect to section 118(5) (reducing the amount of the loss carried forward (if necessary, to nil)).

Post-cessation property relief

125

(1) A person may make a claim for post-cessation property relief if, after permanently ceasing to carry on a UK property business (whether carried on alone or in partnership)—

(a) the person makes a qualifying payment, or

(b) a qualifying event occurs in relation to a debt owed to the person,

and the payment is made, or the event occurs, within 7 years of that cessation.

(2) If the claim is made in respect of a payment, the claim is for the payment to be deducted in calculating the person's net income for the tax year in which the payment is made (see Step 2 of the calculation in section 23).

(3) If the claim is made in respect of an event, the claim is for the appropriate amount of the debt to be deducted in calculating the person's net income for the relevant tax year (see Step 2 of the calculation in section 23).

(4) The claim must be made on or before the first anniversary of the normal self-assessment filing date for the tax year for which the deduction is to be made.

(5) If—

(a) the person is a company within the charge to income tax under Chapter 3 of Part 3 of ITTOIA 2005 in respect of a UK property business, and

(b) the company ceases at any time to be within that tax charge in respect of the business,

the company is treated for the purposes of this section as permanently ceasing to carry on the business at that time.

(6) The following provisions apply for the purposes of post-cessation property relief as they apply for the purposes of post-cessation trade relief (but as if any reference to a trade were to a UK property business)—

(a) section 97 (meaning of “qualifying payment”),

(b) section 98 (meaning of “qualifying event” etc),

(ba) section 98A (denial of relief for tax-generated payments or events),

(d) section 100 (prohibition against double counting).

Treating excess post-cessation property relief as CGT loss

126

A person who cannot deduct all of an amount under a claim for post-cessation property relief may be able to treat the unused part as an allowable loss for capital gains tax purposes: see sections 261D and 261E of TCGA 1992.

...

UK furnished holiday lettings business treated as trade

127

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Chapter 5 — Losses in an employment or office

Employment loss relief against general income

128

(1) A person may make a claim for employment loss relief against general income if the person—

(a) is in employment or holds an office in a tax year, and

(b) makes a loss in the employment or office in the tax year (“the loss-making year”).

(2) The claim is for the loss to be deducted in calculating the person's net income—

(a) for the loss-making year,

(b) for the previous tax year, or

(See Step 2 of the calculation in section 23.)

(3) If the claim is made in relation to both tax years, the claim must specify the year for which a deduction is to be made first.

(4) Otherwise the claim must specify either the loss-making year or the previous tax year.

(5) The claim must be made on or before the first anniversary of the normal self-assessment filing date for the loss-making year.

(5A) No claim may be made in respect of the loss if and to the extent that it is made as a result of anything done in pursuance of arrangements the main purpose, or one of the main purposes, of which is the avoidance of tax.

(6) Nothing in this section prevents a person who makes a claim specifying a particular tax year in respect of a loss from making a further claim specifying the other tax year in respect of the unused part of the loss.

(7) This Chapter is subject to paragraph 2 of Schedule 1B to TMA 1970 (claims for loss relief involving two or more years).

(8) This section needs to be read with section 129 (how relief works).

How relief works

129

(1) This subsection explains how the deductions are to be made.

The amount of the loss to be deducted at any step is limited in accordance with sections 24A and 25(4) and (5).

Step 1

Deduct the loss in calculating the person's net income for the specified tax year.

Step 2

This step applies only if the claim is made in relation to both tax years.

Deduct the part of the loss not deducted at Step 1 in calculating the person's net income for the other tax year.

(2) There is a priority rule if a person—

(a) makes a claim for employment loss relief against general income (“the first claim”) in relation to the loss-making year, and

(b) makes a separate claim in respect of a loss made in the following tax year in relation to the same tax year as the first claim.

(3) The rule is that priority is given to making deductions under the first claim.

(4) For this purpose a “separate claim” means—

(a) a claim for employment loss relief against general income, or

(b) a claim for trade loss relief against general income (see sections 64 to 70).

Treating loss in employment or office as CGT loss

130

A person who cannot deduct all of a loss in an employment or office under a claim for employment loss relief against general income may be able to treat the unused part as an allowable loss for capital gains tax purposes: see sections 261B and 261C of TCGA 1992.

Chapter 6 — Losses on disposal of shares

131

(1) An individual is eligible for relief under this Chapter (“share loss relief”) if—

(a) the individual incurs an allowable loss for capital gains tax purposes on the disposal of any shares in any tax year (“the year of the loss”), and

(b) the shares are qualifying shares.

This is subject to subsections (3) and (4) and section 136(2).

(2) Shares are qualifying shares for the purposes of this Chapter if—

(a) EIS relief is attributable to them, or

(b) if EIS relief is not attributable to them, they are shares in a qualifying trading company which have been subscribed for by the individual.

(3) Subsection (1) applies only if the disposal of the shares is—

(a) by way of a bargain made at arm's length,

(b) by way of a distribution in the course of dissolving or winding up the company,

(d) a deemed disposal under section 24(2) of that Act (claim that value of the asset has become negligible).

(4) Subsection (1) does not apply to any allowable loss incurred on the disposal if—

(a) the shares are the subject of an exchange or arrangement of the kind mentioned in section 135 or 136 of TCGA 1992 (company reconstructions etc), and

(b) because of section 137 of that Act, the exchange or arrangement involves a disposal of the shares.

Entitlement to claim

132

(1) An individual who is eligible for share loss relief may make a claim for the loss to be deducted in calculating the individual's net income—

(a) for the year of the loss,

(b) for the previous tax year, or

(See Step 2 of the calculation in section 23.)

(2) If the claim is made in relation to both tax years, the claim must specify the year for which a deduction is to be made first.

(3) Otherwise the claim must specify either the year of the loss or the previous tax year.

(4) The claim must be made on or before the first anniversary of the normal self-assessment filing date for the year of the loss.

How relief works

133

(1) This subsection explains how the deductions are to be made.

The amount of the loss to be deducted at any step is limited in accordance with sections 24A and 25(4) and (5) .

Step 1

Deduct the loss in calculating the individual's net income for the specified tax year.

Step 2

This step applies only if the claim is made in relation to both tax years.

Deduct the part of the loss not deducted at Step 1 in calculating the individual's net income for the other tax year.

(2) Subsection (1) is subject to sections 136(5) and 147 (which set limits on the amounts of share loss relief that may be obtained in particular cases).

(3) If an individual—

(a) makes a claim for share loss relief against income (“the first claim”) in relation to the year of the loss, and

(b) makes a separate claim for share loss relief against income in respect of a loss made in the following tax year in relation to the same tax year as the first claim,

priority is to be given to making deductions under the first claim.

(4) Any share loss relief claimed in respect of any income has priority over any relief claimed in respect of that income under section 64 (deduction of losses from general income) or 72 (early trade losses relief).

(5) A claim for share loss relief does not affect any claim for a deduction under TCGA 1992 for so much of the allowable loss as is not deducted under subsection (1).

Shares to which EIS relief is not attributable

Qualifying trading companies

134

(1) In relation to shares to which EIS relief is not attributable (see section 131(2)(b)), a qualifying trading company is a company which meets each of conditions A to C.

(2) Condition A is that the company either—

(a) meets each of the following requirements on the date of the disposal—

(i) the trading requirement (see section 137),

(ii) the control and independence requirement (see section 139),

(iii) the qualifying subsidiaries requirement (see section 140), and

(iv) the property managing subsidiaries requirement (see section 141), or

(b) has ceased to meet any of those requirements at a time which is not more than 3 years before that date and has not since that time been an excluded company, an investment company or a trading company.

(3) Condition B is that the company either—

(a) has met each of the requirements mentioned in condition A for a continuous period of 6 years ending on that date or at that time, or

(b) has met each of those requirements for a shorter continuous period ending on that date or at that time and has not before the beginning of that period been an excluded company, an investment company or a trading company.

(4) Condition C is that the company—

(a) met the gross assets requirement (see section 142) both immediately before and immediately after the issue of the shares in respect of which the share loss relief is claimed, and

(b) met the unquoted status requirement (see section 143) at the relevant time within the meaning of that section.

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Subscriptions for shares

135

(1) This section has effect in relation to shares to which EIS relief is not attributable.

(2) An individual subscribes for shares in a company if they are issued to the individual by the company in consideration of money or money's worth.

(3) If—

(a) an individual (“A”) subscribed for, or is treated under subsection (4) or this subsection as having subscribed for, any shares,

(b) A transferred the shares to another individual (“B”) during their lives, and

B is treated as having subscribed for the shares.

(4) If—

(a) an individual has subscribed for, or is treated under subsection (3) or this subsection as having subscribed for, any shares, and

(b) any corresponding bonus shares are subsequently issued to the individual,

the individual is treated as having subscribed for the bonus shares.

Disposals of new shares

136

(1) This section has effect in relation to shares to which EIS relief is not attributable.

(2) If—

(a) an individual disposes of shares (“the new shares”), and

(b) the new shares are, by virtue of section 127 of TCGA 1992 (reorganisation etc treated as not involving disposal), identified with other shares (“the old shares”) previously held by the individual,

the individual is not eligible for share loss relief on the disposal of the new shares unless condition A or B is met.

This is subject to section 145(3).

(3) Condition A is that the individual would have been eligible for share loss relief on a disposal of the old shares—

(a) if the individual had incurred an allowable loss in disposing of them by way of a bargain made at arm's length on the occasion of the disposal that would have occurred but for section 127 of TCGA 1992, and

(b) where applicable, if this Chapter had then been in force.

(4) Condition B is that the individual gave for the new shares consideration in money or money's worth other than consideration of the kind mentioned in paragraph (a) or (b) of section 128(2) of TCGA 1992 (“new consideration”).

(5) If the individual relies on condition B, the amount of share loss relief on the disposal of the new shares must not exceed the amount or value of the new consideration taken into account as a deduction in calculating the amount of the loss incurred on the disposal.

Qualifying trading companies: the requirements

The trading requirement

137

(1) The trading requirement is that—

(a) the company, ignoring any incidental purposes, exists wholly for the purpose of carrying on one or more qualifying trades, or

(b) the company is a parent company and the business of the group does not consist wholly or as to a substantial part in the carrying on of non-qualifying activities.

(2) If the company intends that one or more other companies should become its qualifying subsidiaries with a view to their carrying on one or more qualifying trades—

(a) the company is treated as a parent company for the purposes of subsection (1)(b), and

(b) the reference in subsection (1)(b) to the group includes the company and any existing or future company that will be its qualifying subsidiary after the intention in question is carried into effect.

This subsection does not apply at any time after the abandonment of that intention.

(3) For the purpose of subsection (1)(b) the business of the group means what would be the business of the group if the activities of the group companies taken together were regarded as one business.

(4) For the purpose of determining the business of a group, activities are ignored so far as they are activities carried on by a mainly trading subsidiary otherwise than for its main purpose.

(5) For the purposes of determining the business of a group, activities of a group company are ignored so far as they consist in—

(a) the holding of shares in or securities of a qualifying subsidiary of the parent company,

(b) the making of loans to another group company,

(c) the holding and managing of property used by a group company for the purpose of one or more qualifying trades carried on by a group company, or

(d) the holding and managing of property used by a group company for the purpose of research and development from which it is intended—

(i) that a qualifying trade to be carried on by a group company will be derived, or

(ii) that a qualifying trade carried on or to be carried on by a group company will benefit.

(6) Any reference in subsection (5)(d)(i) or (ii) to a group company includes a reference to any existing or future company which will be a group company at any future time.

(7) In this section—

“excluded activities” has the meaning given by section 192 read with sections 193 to 199,

“group” means a parent company and its qualifying subsidiaries,

“group company”, in relation to a group, means the parent company or any of its qualifying subsidiaries,

“incidental purposes” means purposes having no significant effect (other than in relation to incidental matters) on the extent of the activities of the company in question,

“mainly trading subsidiary” means a subsidiary which, apart from incidental purposes, exists wholly for the purpose of carrying on one or more qualifying trades, and any reference to the main purpose of such a subsidiary is to be read accordingly,

“non-qualifying activities” means—excluded activities, andactivities (other than research and development) carried on otherwise than in the course of a trade,

“parent company” means a company that has one or more qualifying subsidiaries,

“qualifying subsidiary” is to be read in accordance with section 191,

“qualifying trade” has the meaning given by section 189, and

“research and development” has the meaning given by section 1006.

(8) In sections 189(1)(b) and 194(4)(c) (as applied by subsection (7) for the purposes of the definitions of “excluded activities” and “qualifying trade”) “period B” means the continuous period that is relevant for the purposes of section 134(3).

(9) In section 195 as applied by subsection (7) for the purposes mentioned in subsection (8), references to the issuing company are to be read as references to the company mentioned in subsection (1).

Ceasing to meet trading requirement because of administration or receivership

138

(1) A company is not regarded as ceasing to meet the trading requirement merely because of anything done in consequence of the company or any of its subsidiaries being in administration or receivership.

This has effect subject to subsections (2) and (3).

(2) Subsection (1) applies only if—

(a) the entry into administration or receivership, and

(b) everything done as a result of the company concerned being in administration or receivership,

is for genuine commercial reasons, and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.

(3) A company ceases to meet the trading requirement if before the time that is relevant for the purposes of section 134(2)—

(a) a resolution is passed, or an order is made, for the winding up of the company or any of its subsidiaries (or, in the case of a winding up otherwise than under the Insolvency Act 1986 or the Insolvency (Northern Ireland) Order 1989, any other act is done for the like purpose), or

(b) the company or any of its subsidiaries is dissolved without winding up.

This is subject to subsection (4).

(4) Subsection (3) does not apply if —

(a) the winding up is for genuine commercial reasons, and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax, and

(b) the company continues, during the winding up, to be a trading company.

(5) References in this section to a company being “in administration” or “in receivership” are to be read in accordance with section 252.

The control and independence requirement

139

(1) The control element of the requirement is that—

(a) the company must not control (whether on its own or together with any person connected with it) any company which is not a qualifying subsidiary of the company, and

(b) no arrangements must be in existence by virtue of which the company could fail to meet paragraph (a) (whether at a time during the continuous period that is relevant for the purposes of section 134(3) or otherwise).

(2) The independence element of the requirement is that—

(a) the company must not—

(i) be a 51% subsidiary of another company, or

(ii) be under the control of another company (or of another company and any other person connected with that other company), without being a 51% subsidiary of that other company, and

(b) no arrangements must be in existence by virtue of which the company could fail to meet paragraph (a) (whether at a time during the continuous period that is relevant for the purposes of section 134(3) or otherwise).

(3) This section is subject to section 145(3).

(4) In this section—

“arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable,

“control”, in subsection (1)(a), is to be read in accordance with sections 450 and 451 of CTA 2010,

“qualifying subsidiary” is to be read in accordance with section 191.

The qualifying subsidiaries requirement

140

(1) The qualifying subsidiaries requirement is that any subsidiary that the company has must be a qualifying subsidiary of the company.

(2) In this section “qualifying subsidiary” is to be read in accordance with section 191.

The property managing subsidiaries requirement

141

(1) The property managing subsidiaries requirement is that any property managing subsidiary that the company has must be a qualifying 90% subsidiary of the company.

(2) In this section—

“property managing subsidiary” has the meaning given by section 188(2),

“qualifying 90% subsidiary” has the meaning given by section 190.

The gross assets requirement

142

(1) The gross assets requirement in the case of a single company is that the value of the company's gross assets—

(a) must not exceed £7 million immediately before the shares in respect of which the share loss relief is claimed are issued, and

(b) must not exceed £8 million immediately afterwards.

(2) The gross assets requirement in the case of a parent company is that the value of the group assets—

(a) must not exceed £7 million immediately before the shares in respect of which the share loss relief is claimed are issued, and

(b) must not exceed £8 million immediately afterwards.

(3) The value of the group assets means the sum of the values of the gross assets of each of the members of the group, ignoring any that consist in rights against, or shares in or securities of, another member of the group.

(4) In this section—

“group” means a parent company and its qualifying subsidiaries,

“parent company” means a company that has one or more qualifying subsidiaries,

“qualifying subsidiary” is to be read in accordance with section 191, and

“single company” means a company that does not have one or more qualifying subsidiaries.

The unquoted status requirement

143

(1) The unquoted status requirement is that, at the time (“the relevant time”) at which the shares in respect of which the share loss relief is claimed are issued—

(a) the company must be an unquoted company,

(b) there must be no arrangements in existence for the company to cease to be an unquoted company, and

(c) there must be no arrangements in existence for the company to become a subsidiary of another company (“the new company”) by virtue of an exchange of shares, or shares and securities, if—

(i) section 145 applies in relation to the exchange, and

(ii) arrangements have been made with a view to the new company ceasing to be an unquoted company.

(2) The arrangements referred to in subsection (1)(b) and (c)(ii) do not include arrangements in consequence of which any shares, stocks, debentures or other securities of the company or the new company are at any subsequent time—

(a) listed on a stock exchange that is a recognised stock exchange by virtue of an order made under section 1005(1)(b), or

(b) listed on an exchange, or dealt in by any means, designated by an order made for the purposes of section 184(3)(b) or (c),

if the order was made after the relevant time.

(3) In this section—

“arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable, and

“unquoted company” has the meaning given by section 184(2).

Power to amend requirements by Treasury order

144

The Treasury may by order make such amendments of sections 137 to 143 as they consider appropriate.

Qualifying trading companies: supplementary

Relief after an exchange of shares for shares in another company

145

(1) This section and section 146 apply in relation to shares to which EIS relief is not attributable if—

(a) a company (“the new company”) in which the only issued shares are subscriber shares acquires all the shares (“old shares”) in another company (“the old company”),

(b) the consideration for the old shares consists wholly of the issue of shares (“new shares”) in the new company,

(c) the consideration for the new shares of each description consists wholly of old shares of the corresponding description,

(d) new shares of each description are issued to the holders of old shares of the corresponding description in respect of and in proportion to their holdings, and

(e) by virtue of section 127 of TCGA 1992 as applied by section 135(3) of that Act (company reconstructions etc), the exchange of shares is not to be treated as involving a disposal of the old shares or an acquisition of the new shares.

In this subsection references to shares, except in the expressions “shares to which EIS relief is not attributable” and “subscriber shares”, include securities.

(2) For the purposes of this Chapter the exchange of shares is not regarded as involving any disposal of the old shares or any acquisition of the new shares.

(3) Nothing in—

(a) section 136(2) (disposals of new shares), and

(b) section 139 (the control and independence requirement),

applies in relation to such an exchange of shares, or shares and securities, as is mentioned in subsection (1) or, in the case of section 139, arrangements with a view to such an exchange.

(4) For the purposes of this section old shares and new shares are of a corresponding description if, on the assumption that they were shares in the same company, they would be of the same class and carry the same rights.

(5) References in section 146 to “old shares”, “new shares”, “the old company” and “the new company” are to be read in accordance with this section.

Substitution of new shares for old shares

146

(1) Subsection (2) applies if, in the case of any new shares held by an individual or by a nominee for an individual, the old shares for which they were exchanged were shares—

(a) to which EIS relief was not attributable, and

(b) which had been subscribed for by the individual.

(2) This Chapter has effect in relation to any subsequent disposal or other event as if—

(a) the new shares had been subscribed for by the individual at the time when, and for the amount for which, the old shares were subscribed for by the individual,

(b) the new shares had been issued by the new company at the time when the old shares were issued to the individual by the old company, and

(c) any requirements of this Chapter which were met at any time before the exchange by the old company had been met at that time by the new company.

(3) Nothing in subsection (2) applies in relation to section 195(7) as applied by section 137(7) for the purposes mentioned in section 137(8).

147

(1) Subsection (2) applies if—

(a) an individual disposes of any qualifying shares,

(b) those shares either—

(i) form part of a section 104 holding ... at the time of the disposal, ...

(ii) at a time earlier than the time of the disposal but after 5 April 2008 formed part of a section 104 holding, or

(iii) at a time earlier than that time and than 6 April 2008 formed part of an old section 104 holding or a 1982 holding, and

(2) The amount of share loss relief on the disposal is not to exceed the sums that would be allowed as deductions in calculating the amount of the loss if the qualifying shares had not formed part of the holding.

(3) Subsection (4) applies if—

(a) an individual disposes of any qualifying shares,

(b) the qualifying shares, and other shares that are not capable of being qualifying shares, are for the purposes of TCGA 1992 to be treated as acquired by a single transaction by virtue of section 105(1)(a) of that Act (disposal of shares acquired on same day etc), and

(4) The amount of share loss relief on the disposal is not to exceed the sums that would be allowed as deductions in calculating the amount of the loss if—

(a) the qualifying shares were to be treated as acquired by a single transaction, and

(b) the other shares were not to be so treated.

(5) Subsection (6) applies if—

(a) an individual disposes of any qualifying shares,

(b) the qualifying shares (taken as a single asset), and other shares in the same company that are not capable of being qualifying shares (taken as a single asset), are for the purposes of TCGA 1992 to be treated as the same asset by virtue of section 127 of that Act (reorganisation etc treated as not involving disposal), and

References in this subsection and subsection (6) to other shares in the same company include debentures of the same company.

(6) The amount of share loss relief on the disposal is not to exceed the sums that would be allowed as deductions in calculating the amount of the loss if the qualifying shares and the other shares in the same company were not to be treated as the same asset.

(7) In this section—

“section 104 holding” has the meaning given by section 104(3) of TCGA 1992 and “old section 104 holding” is a holding that was a section 104 holding within the meaning of that provision as it applied in relation to disposals before 6 April 2008, and

“1982 holding” has the meaning given by section 109(1) of that Act as it applied in relation to disposals before 6 April 2008.

(8) For the purposes of this section and section 148, shares to which EIS relief is not attributable are not capable of being qualifying shares at any time if—

(a) the individual acquired the shares otherwise than by subscription, or

(b) condition C in section 134(4) was not met in relation to the issue of the shares, ...

(9) For the purposes of subsection (5), shares to which EIS relief is not attributable are not capable of being qualifying shares at any time if they are shares of a different class from the shares mentioned in paragraph (a) of that subsection.

Disposal of shares forming part of mixed holding

148

(1) This section applies if an individual disposes of shares forming part of a mixed holding of shares, that is, a holding of shares in a company which includes—

(a) shares that are not capable of being qualifying shares, and

(b) other shares.

(2) Any question—

(a) whether a disposal by the individual of shares forming part of the mixed holding is of qualifying shares, or

(b) as to which of any qualifying shares acquired by the individual at different times such a disposal relates to,

is to be determined as provided by the following provisions of this section.

(3) Any such question as is mentioned in subsection (2) is to be determined—

(a) except in a case falling within paragraph (b)—

(i) in accordance with subsection (4), and

(ii) in the case of shares which under that subsection are identified with the whole or any part of a section 104 holding ..., in accordance with subsection (5),

(b) in the case of a mixed holding which includes any of the following—

(ai) shares to which SEIS relief is attributable (as determined in accordance with Part 5A),

(i) shares issued before 1 January 1994 in respect of which relief has been given under Chapter 3 of Part 7 of ICTA (business expansion scheme) and has not been withdrawn,

(ii) shares to which EIS relief is attributable, and

(iii) shares to which deferral relief (within the meaning of Schedule 5B to TCGA 1992) is attributable,

in accordance with subsection (6).

(4) For the purposes of subsection (3)(a)(i), the question is to be determined by identifying the shares disposed of in accordance with sections 105 to 105B and 106A of TCGA 1992.

(5) For the purposes of subsection (3)(a)(ii), the question is to be determined by treating the disposal and any previous disposal by the individual out of the section 104 ... holding as relating to shares acquired later rather than earlier.

(6) For the purposes of subsection (3)(b), the question is to be determined—

(a) in relation to shares issued before 1 January 1994, as provided by subsections (3) to (4C) of section 299 of ICTA (as that section has effect in relation to shares so issued),

(b) in relation to shares issued on or after that date and before 6 April 2007, as provided by subsections (6) to (6D) of that section (as that section has effect in relation to shares so issued), and

(7) Any such question as is mentioned in subsection (2) which cannot be determined as provided by subsections (3) to (6) is to be determined on a just and reasonable basis.

(8) In this section “holding” means any number of shares of the same class held by one individual in the same capacity, growing or diminishing as shares of that class are acquired or disposed of.

For this purpose—

(a) shares are not to be treated as being of the same class unless they are so treated by the practice of a recognised stock exchange or would be so treated if dealt in on such an exchange, and

(b) subsection (4) of section 104 of TCGA 1992 applies as it applies for the purposes of subsection (1) of that section.

(9) In this section “section 104 holding” has the same meaning as in section 147.

Section 148: supplementary

149

(1) In the case of a disposal of shares within section 148(3)(b)(ii) or (iii) to which section 105A of TCGA 1992 (election for alternative treatment: approved-scheme shares) applies—

(a) section 299 of ICTA (identification of shares) has effect for the purposes of section 148(6)(b), and

(b) section 246 of this Act has effect for the purposes of section 148(6)(c),

with the same modifications as those with which they have effect for the purposes of section 150A(4) of TCGA 1992 (enterprise investment schemes).

(2) In a case to which section 127 of TCGA 1992 (reorganisation etc treated as not involving disposal) applies (including a case where that section applies by virtue of an enactment relating to chargeable gains), shares included in the new holding are treated for the purposes of section 148 as acquired when the original shares were acquired.

(3) Any shares held or disposed of by a nominee or bare trustee for an individual are treated for the purposes of section 148 as held or disposed of by that individual.

(4) In this section “new holding” and “original shares” have the same meaning as in section 127 of TCGA 1992 (or, as the case may be, that section as applied by the enactment concerned).

Miscellaneous and supplementary

Deemed time of issue for certain shares

150

(1) In this section “the relevant provisions” means—

section 142(1)(a) and (2)(a),

section 143(1), and

section 146(2)(b).

(2) If—

(a) any shares were issued to an individual (“A”) or are treated under subsection (3) or this subsection as having been issued to A at a particular time,

(b) the shares are transferred by A to another individual (“B”) during their lives, and

the shares are treated for the purposes of the relevant provisions as having been issued to B at the time they were issued to A or are treated as having been so issued.

(3) If—

(a) any shares (“the original shares”) have been issued to an individual, or are treated under subsection (2) or this subsection as having been issued to an individual at a particular time, and

(b) any corresponding bonus shares are subsequently issued to the individual,

the bonus shares are treated for the purposes of the relevant provisions as having been issued at the time the original shares were issued to the individual or are treated as having been so issued.

Interpretation of Chapter

151

(1) In this Chapter (subject to subsections (2) to (8))—

“bonus shares” means shares which are issued otherwise than for payment (whether in cash or otherwise),

“civil partner” refers to one of two civil partners who are living together,

“corresponding bonus shares”, in relation to any shares, means bonus shares which—are issued in respect of those shares, andare in the same company, are of the same class, and carry the same rights, as those shares,

“EIS relief” means—EIS income tax relief under Part 5 of this Act, andin relation to shares issued after 31 December 1993 and before 6 April 2007, relief under Chapter 3 of Part 7 of ICTA (enterprise investment scheme),

“excluded company” means a company which—has a trade which consists wholly or mainly of dealing in land, in commodities or futures or in shares, securities or other financial instruments,has a trade which is not carried on on a commercial basis and in such a way that profits in the trade can reasonably be expected to be realised,is a holding company of a group other than a trading group, oris a building society or a registered society,

“group” (except in sections 137 and 142) means a company which has one or more 51% subsidiaries together with that or those subsidiaries,

“holding company” means a company whose business consists wholly or mainly in the holding of shares or securities of companies which are its 51% subsidiaries,

“investment company” means a company— whose business consists wholly or mainly in the making of investments, andwhich derives the principal part of its income from the making of investments,but does not include the holding company of a trading group,

“qualifying shares” has the meaning given by section 131(2),

“registered society” means—a registered society within the meaning of the Co-operative and Community Benefit Societies Act 2014, a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969, or an SCE formed in accordance with Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society,

“shares”—includes stock, butdoes not include shares or stock not forming part of a company's ordinary share capital,

“share loss relief” has the meaning given by section 131(1),

“spouse” refers to one of two spouses who are living together,

“trading company” means a company other than an excluded company which is—a company whose business consists wholly or mainly of the carrying on of a trade or trades, orthe holding company of a trading group,

“trading group” means a group the business of whose members, when taken together, consists wholly or mainly in the carrying on of a trade or trades, and

“the year of the loss” has the meaning given by section 131(1).

(2) For the purposes of the definition of “corresponding bonus shares” in subsection (1), shares are not treated as being of the same class unless they would be so treated if dealt in on a recognised stock exchange.

(3) In section 148(3)(b) and (6) “shares” does not include stock.

(4) Except as provided by subsection (5), paragraph (b) of the definition of shares in subsection (1) does not apply in the definition of “excluded company” in subsection (1) or in sections 145(1) to (4) and 147(3) to (6), (8) and (9).

(5) Paragraph (b) of that definition applies in relation to the expression “shares to which EIS relief is not attributable” in section 145(1).

(6) The definition of “shares” in subsection (1) does not apply in sections 137(5)(a), 142(3) and 143(1)(c) and (2).

(7) For the purposes of the definition of “trading group” in subsection (1), any trade carried on by a subsidiary which is an excluded company is treated as not constituting a trade.

(8) For the purposes of this Chapter a disposal of shares which results in an allowable loss for capital gains tax purposes is treated as made at the time when the disposal is made or treated as made for the purposes of TCGA 1992.

Chapter 7 — Losses from miscellaneous transactions

Loss relief against miscellaneous income

Losses from miscellaneous transactions

152

(1) If in a tax year (“the loss-making year”) a person makes a loss in a relevant transaction, the person may make a claim for loss relief against relevant miscellaneous income.

(2) A transaction is a relevant one if, assuming there were profits or other income arising from it—

(a) those profits or that other income would be income on which income tax is charged under, or by virtue of, a relevant section 1016 provision (“the relevant provision”), and

(b) the person would be liable for income tax charged on those profits or that other income.

(2A) A relevant section 1016 provision” means a provision to which section 1016 applies, other than—

(a) regulation 17 of the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001) (treatment of participants in non-reporting funds: charge to tax on disposal of asset), or

(b) Chapter 9 of Part 4 of ITTOIA 2005 (gains from contracts for life insurance etc).

(3) The claim is for the loss to be deducted in calculating the person's net income for the loss-making year and subsequent tax years (see Step 2 of the calculation in section 23).

(4) But a deduction for that purpose is to be made only from the person's relevant miscellaneous income.

(5) The person's “relevant miscellaneous income is so much of the person's total income as is—

(a) income or gains arising from transactions, and

(b) income on which income tax is charged under, or by virtue of, the relevant provision.

This is subject to subsection (6).

(6) If the loss was made by the person as a partner in a partnership, the transactions covered by subsection (5)(a) are limited to transactions entered into by the partnership.

(7) In calculating a person's net income for a tax year, deductions under this section from the person's relevant miscellaneous income are to be made before deductions of any other reliefs from that relevant miscellaneous income.

(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9) This section needs to be read with—

(a) section 153 (how relief works),

(b) section 154 (transactions in deposit rights),...

(ba) section 154A (anti-avoidance), and

How relief works

153

This section explains how the deductions are to be made. The amount of the loss to be deducted at any step is limited in accordance with section 25(4) and (5).

Deposit rights

Transactions in deposit rights

154

(1) This section applies if—

(a) a person makes a loss from the disposal or exercise of a right to receive an amount,

(b) the disposal or exercise is a transaction in a deposit under Chapter 11 of Part 4 of ITTOIA 2005 (see subsection (2)), and

(2) The disposal or exercise is a transaction in a deposit under Chapter 11 of Part 4 of ITTOIA 2005 if, assuming there were a profit or gain from it, the profit or gain would be charged to tax under that Chapter.

(3) For the purposes of the giving of loss relief against relevant miscellaneous income for the loss mentioned in subsection (1)(a), the interest mentioned in subsection (1)(c) is treated as relevant miscellaneous income, for the tax year, in relation to the loss.

Supplementary

Time limit for claiming relief

155

(1) So far as a claim for loss relief against relevant miscellaneous income concerns the amount of the loss for a tax year, it must be made not more than 4 years after the end of the tax year.

(2) But—

(a) the question whether, and

(b) if so, how much,

loss relief against relevant miscellaneous income should be given for a tax year may be the subject of a separate claim made not more than 4 years after the end of the tax year.

Part 5 — Enterprise investment scheme

Chapter 1 — Introduction

EIS relief

Meaning of “EIS relief” and commencement

156

(1) This Part provides for EIS income tax relief (“EIS relief”), that is, entitlement to tax reductions in respect of amounts subscribed by individuals for shares.

(2) In this Part “EIS” stands for the enterprise investment scheme.

(3) In accordance with section 1034(3), this Part has effect only in relation to shares issued on or after 6 April 2007.

This is subject to Schedule 2 (transitional provisions and savings).

Eligibility for EIS relief

157

(1) An individual (“the investor”) is eligible for EIS relief in respect of an amount subscribed by the investor on the investor's own behalf for an issue of shares in a company (“the issuing company”) if—

(za) the risk-to-capital condition is met (see section 157A),

(a) the shares (“the relevant shares”) are issued to the investor,

(aa) the shares are issued before 6 April 2035,

(b) the investor is a qualifying investor in relation to the relevant shares (see Chapter 2),

(c) the general requirements (including requirements as to the purpose of the issue of shares and the use of money raised) are met in respect of the relevant shares (see Chapter 3), and

(d) the issuing company is a qualifying company in relation to the relevant shares (see Chapter 4).

(1A) The Treasury may, by regulations, amend subsection (1)(aa) to substitute a different date for the date for the time being specified there.

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Form and amount of EIS relief

158

(1) If an individual—

(a) is eligible for EIS relief in respect of any amount subscribed for shares, and

(b) makes a claim in respect of all or some of the shares included in the issue,

the individual is entitled to a tax reduction for the tax year in which the shares were issued (“the current year”).

This is subject to the provisions of this Part.

(2) The amount of the tax reduction to which the individual is entitled is the amount equal to tax at the EIS rate for the current year on—

(a) the amount or, as the case may be, the sum of the amounts subscribed for shares issued in that year in respect of which the individual is eligible for and claims EIS relief (qualifying shares), or

(b) if less, the allowable amount.

(2ZA) The allowable amount is—

(a) if the qualifying shares do not include any KIC shares: £1 million;

(b) if the amount, or the sum of the amounts, subscribed for qualifying shares that are KIC shares is £1 million or more: £2 million;

(c) if neither paragraph (a) nor paragraph (b) applies: £1 million plus the amount, or the sum of the amounts, subscribed for qualifying shares that are KIC shares.

(2ZB) In subsection (2ZA) “KIC shares” means shares in a company which, or in companies each of which, is a knowledge-intensive company at the time the shares are issued (see section 252A and subsection (6)).

(2A) In this Part “the EIS rate” means 30%.

(3) The tax reduction is given effect at Step 6 of the calculation in section 23.

(4) ... if in the case of any issue of shares—

(a) which are issued ... in the current year, and

(b) in respect of the amount subscribed for which the individual is eligible for EIS relief,

the individual so claims, subsections (1) to (2ZB) apply as if, in respect of such part of that issue as may be specified in the claim, the shares had been issued in the preceding tax year; and the individual's liability to tax for both tax years is determined accordingly.

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) If the issuing company began to carry on a trade less than three years before the date the relevant shares are issued, section 252A as it applies for the purposes of this section has effect with the substitution of the following subsections for subsections (2) to (4A)—

(2) The first operating costs condition is that in at least one of the relevant three succeeding years at least 15% of the relevant operating costs constitute expenditure on research and development or innovation. (3) The second operating costs condition is that in each of the relevant three succeeding years at least 10% of the relevant operating costs constitute such expenditure. (4) In subsections (2) and (3)— - “relevant operating costs” means— 1. if the issuing company is a single company at the time the relevant shares are issued, the operating costs of that company, and 2. if the issuing company is a parent company at the time the relevant shares are issued, the sum of— 1. the operating costs of the issuing company, and 2. the operating costs of each company which is a qualifying subsidiary of the issuing company at that time, excluding a company's operating costs for any of the relevant three succeeding years during any part of which the company is not a qualifying subsidiary of the issuing company; - “the relevant three succeeding years” means the three consecutive years the first of which begins with the date the relevant shares are issued.

(7) In subsection (6) “trade” includes—

(a) any business or profession,

(b) so far as not within paragraph (a), the carrying on of research and development activities from which it is intended a trade will be derived or will benefit,

Miscellaneous

Periods A, B and C

159

(1) This section applies for the purposes of this Part in relation to any shares issued by a company.

(2) “Period A” means the period—

(a) beginning—

(i) with the incorporation of the company, or

(ii) if the company was incorporated more than two years before the date on which the shares were issued, two years before that date, and

(b) ending immediately before the termination date relating to the shares (see section 256).

(3) “Period B” means the period—

(a) beginning with the issue of the shares, and

(b) ending immediately before the termination date relating to the shares.

(4) “Period C” means the period—

(a) beginning 12 months before the issue of the shares, and

(b) ending immediately before the termination date relating to the shares.

Overview of other Chapters of Part

160

In this Part—

(a) Chapter 5 provides for the attribution of EIS relief to shares and the making of claims for such relief,

(b) Chapter 6 provides for EIS relief to be withdrawn or reduced in the circumstances mentioned in that Chapter,

(d) Chapter 8 contains supplementary and general provisions.

Other tax reliefs relating to EIS

161

(1) Chapter 6 of Part 4 (losses on disposal of shares) provides for relief against the income of an individual who incurs an allowable loss for capital gains tax purposes on a disposal of shares to which EIS relief is attributable.

(2) Subsection (3) of section 392 (loan to buy interest in close company) provides that subsection (2)(a) of that section does not apply if at any time—

(a) the individual by whom the shares are acquired, or

(b) that individual's spouse or civil partner,

makes a claim for EIS relief in respect of the shares.

(3) Section 150A of TCGA 1992 makes provision about gains or losses on the disposal of shares to which EIS relief is attributable.

(4) Schedule 5B to TCGA 1992 provides relief in respect of the re-investment under EIS of the proceeds of assets disposed of in circumstances where there would otherwise be a chargeable gain.

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 2 — The investor

Introduction

Overview of Chapter

162

The investor is a qualifying investor in relation to the relevant shares if the requirements of this Chapter are met as to—

(a) no connection with the issuing company (see section 163),

(b) no linked loans (see section 164), ...

(ba) existing shareholdings (see section 164A), and

The requirements

The no connection with the issuing company requirement

163

(1) The investor must not be connected with the issuing company (whether before or after its incorporation) at any time during the period—

(a) beginning two years before the issue of the shares, and

(b) ending immediately before the termination date relating to the shares.

(2) This is subject to section 169(1).

The no linked loans requirement

164

(1) No linked loan is to be made by any person, at any time in period A, to the investor or an associate of the investor.

(2) In this section “linked loan” means any loan which—

(a) would not have been made, or

(b) would not have been made on the same terms,

if the investor had not subscribed for the relevant shares, or had not been proposing to do so.

(3) References in this section to the making by any person of a loan to the investor or an associate of the investor include references—

(a) to the giving by that person of any credit to the investor or any associate of the investor, and

(b) to the assignment to that person of a debt due from the investor or any associate of the investor.

The no tax avoidance requirement

165

The relevant shares must be subscribed for by the investor for genuine commercial reasons, and not as part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.

Meaning of connection with issuing company

Connection with issuing company

166

(1) For the purposes of this Chapter (except section 168(4)), an individual is connected with the issuing company if the individual or an associate of the individual is connected with that company under—

(a) section 167 (employees, directors and partners),

(b) section 170 (persons interested in capital etc of company), or

(1A) But see section 252A(12) for provision which disapplies section 168.

(2) See too section 257(2).

Employees, directors and partners

167

(1) An individual is connected with the issuing company if the individual—

(a) is an employee of—

(i) the issuing company,

(ii) any subsidiary of the issuing company, or

(iii) a partner of the issuing company or any of its subsidiaries,

(b) is a partner of—

(i) the issuing company, or

(ii) any subsidiary of the issuing company, or

(i) the issuing company,

(ii) any subsidiary of the issuing company, or

(iii) a company which is a partner of the issuing company or any of its subsidiaries.

(2) In subsection (1) “subsidiary”, in relation to the issuing company, means a company which at any time in period A is a 51% subsidiary of the issuing company, whether or not it is such a subsidiary while the individual or associate concerned is such an employee, partner or director as is mentioned in that subsection.

(3) For the purposes of this section and sections 168 and 169, in the case of an individual (“A”) who is both a director and an employee of a company—

(a) references (however expressed) to A in A's capacity as a director of the company include A in A's capacity as an employee of the company, but

(b) (apart from that) A is to be treated as a director, and not as an employee, of the company.

Directors excluded from connection

168

(1) An individual is not connected with the issuing company under section 167 merely because the individual, or an associate of the individual, is a director of that or another company unless the individual or associate (or a partnership of which the individual or associate is a member)—

(a) receives a payment from the issuing company or a related person during the period mentioned in section 163, or

(b) is entitled to receive such a payment in respect of that period or any part of it.

(2) For the purposes of subsection (1) the following are ignored—

(a) any payment or reimbursement of travelling or other expenses wholly, exclusively and necessarily incurred by the individual or an associate of the individual in the performance of the individual's or associate's duties as a director,

(b) any interest which represents no more than a reasonable commercial return on money lent to the issuing company or a related person,

(d) any payment for the supply of goods which does not exceed their market value,

(e) any payment of rent for any property occupied by the issuing company or a related person which does not exceed a reasonable and commercial rent for the property, and

(f) any necessary and reasonable remuneration which meets the conditions in subsection (3).

(3) The conditions are that the remuneration—

(a) is paid for services rendered to the issuing company or related person in the course of a trade or profession carried on wholly or partly in the United Kingdom (not being secretarial or managerial services or services of a kind provided by the person to whom they are rendered), and

(b) is taken into account in calculating for tax purposes the profits of that trade or profession.

(4) In this section—

(a) “related person”, in relation to the issuing company, means—

(i) any company of which the individual or an associate of the individual is a director and which is a subsidiary or partner of the issuing company, or a partner of a subsidiary of the issuing company, and

(ii) any person connected with the issuing company or with a company falling within sub-paragraph (i), and

(b) any reference to a payment to an individual includes a payment made to the individual indirectly or to the individual's order or for the individual's benefit.

(5) In this section and section 169 “subsidiary”, in relation to the issuing company, means a company which at any time in period A is a 51% subsidiary of the issuing company.

Directors qualifying for relief despite connection

169

(1) Section 163(1) does not prevent the investor from being a qualifying investor despite the investor's connection with the issuing company at any time in period A relating to the relevant shares if—

(a) the investor is connected with that company merely because of the investor, or the investor's associate—

(i) being a director of, or of a company which is a partner of, the issuing company or a subsidiary of the issuing company, and

(ii) being in receipt of, or entitled to receive, remuneration as such, and

(b) conditions A and B and (where applicable) condition C are met.

(2) Condition A is that, in relation to the director (“D”), whether D is the investor or an associate of the investor—

(a) D's remuneration, or

(b) the remuneration to which D is entitled,

consists only of remuneration which is reasonable remuneration for services rendered to the company of which D is a director in D's capacity as such.

(3) Condition B is that the investor was issued with the relevant shares, or a previous issue of shares in the issuing company which meet the requirements of section 173(2), at a time when the investor had never been—

(a) connected with the issuing company, or

(b) involved in carrying on (whether on the investor's own account or as a partner, director or employee) the whole or any part of the trade, business or profession carried on by the issuing company or a subsidiary of that company.

(4) Condition C is that, if the issue of the relevant shares did not meet condition B, they were issued before —

(a) the termination date relating to the latest issue of shares which met that condition, or

(b) if that issue is an issue in respect of which the investor is eligible for SEIS relief (within the meaning of Part 5A), before the date specified in section 257AC(4) in relation to the shares.

(5) For the purposes of condition A any necessary and reasonable remuneration falling within section 168(2)(f) is to be left out of account.

(6) In this section “remuneration” includes any benefit or facility.

Persons interested in capital etc of company

170

(1) An individual is connected with the issuing company if the individual directly or indirectly possesses or is entitled to acquire more than 30% of—

(a) the ordinary share capital of the company or any subsidiary of the company,

(b) the ... issued share capital of the company or any such subsidiary, or

(2) An individual is connected with the issuing company if the individual directly or indirectly possesses or is entitled to acquire such rights as would—

(a) in the event of the winding up of the company or any subsidiary of the company, or

(b) in any other circumstances,

entitle the individual to receive more than 30% of the assets of the company or subsidiary (“the company in question”) which would then be available for distribution to equity holders of the company in question.

(3) For the purposes of subsection (2)—

(a) the persons who are equity holders of the company in question, and

(b) the percentage of the assets of the company in question to which the individual would be entitled,

are determined in accordance with Chapter 6 of Part 5 of CTA 2010.

(4) In making that determination—

(a) references in section 166 of that Act to company A are to be read as references to an equity holder, and

(b) references in that section to a winding up are to be read as including references to any other circumstances in which assets of the company in question are available for distribution to its equity holders.

(5) An individual is not connected with a company merely because one or more shares in the company are held by the individual or by an associate of the individual, at a time when the company—

(a) has not issued any shares other than subscriber shares, and

(b) has not begun to carry on, or make preparations for carrying on, any trade or business.

(6) An individual is connected with the issuing company if the individual has control of the issuing company or of any subsidiary of that company.

(7) In this section “subsidiary”, in relation to the issuing company, means a company which at any time in period A is a 51% subsidiary of the issuing company, whether or not it is such a subsidiary while the individual concerned has, or is entitled to acquire, such capital, voting power, rights or control as are mentioned in this section.

(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9) For the purposes of this section—

(a) an individual is treated as entitled to acquire anything which the individual is entitled to acquire at a future date or will at a future date be entitled to acquire, and

(b) there is attributed to any individual any rights or powers of any other person who is an associate of the individual.

(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Persons subscribing for shares under certain arrangements

171

(1) This section applies if an individual (“A”) subscribes for shares in a company (“the company”) with which A is not connected under section 167 or 170.

(2) If—

(a) A subscribes for the shares as part of an arrangement, and

(b) the arrangement provides for another person to subscribe for shares in another company with which (assuming it to be the issuing company) A, or any other individual who is a party to the arrangement, is connected,

A is connected with the company under this section.

Chapter 3 — General requirements

Introduction

Overview of Chapter

172

The general requirements are met in respect of the relevant shares if the requirements of this Chapter are met as to—

(a) the shares (see section 173),

(aa) the maximum amount raised annually through risk finance investments (see section 173A),

(aaa) the maximum risk finance investments at the issue date (see section 173AA),

(aab) the maximum risk finance investments at times during period B (see section 173AB),

(ab) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) the purpose of the issue (see section 174),

(ca) the permitted maximum age (see section 175A),

(d) the minimum period (see section 176),

(e) no pre-arranged exits (see section 177), and

(f) no tax avoidance (see section 178), and

(g) no disqualifying arrangements (see section 178A).

The requirements

The shares requirement

173

(1) The relevant shares must meet—

(a) the requirements of subsection (2), and

(b) unless they are bonus shares, the requirements of subsection (3).

(2) Shares meet the requirements of this subsection if they are ordinary shares which do not, at any time during period B, carry—

(a) any present or future preferential right to dividends that is within subsection (2A),

(aa) any present or future preferential right to a company's assets on its winding up, or

(b) any present or future right to be redeemed.

(2A) A preferential right to dividends carried by a share in a company is within this subsection if—

(a) the amount of any dividends payable pursuant to the right, or the date or dates on which they are payable, depend to any extent on a decision of the company, the holder of the share or any other person, or

(b) the amount of any dividends that become payable at any time pursuant to the right includes any amount that became payable at any earlier time pursuant to the right, but has not been paid.

(3) Shares meet the requirements of this subsection if they—

(a) are subscribed for wholly in cash, and

(b) are fully paid up at the time they are issued.

(4) Shares are not fully paid up for the purposes of subsection (3)(b) if there is any undertaking to pay cash to any person at a future date in respect of the acquisition of the shares.

The purpose of the issue requirement

174

(1) The relevant shares (other than any of them which are bonus shares) must be issued in order to raise money for the purpose of a qualifying business activity so as to promote business growth and development.

(2) For this purpose “business growth and development” means the growth and development of—

(a) if the issuing company is a single company, the business of that company, and

(b) if the issuing company is a parent company, what would be the business of the group if the activities of the group companies taken together were regarded as one business.

The use of the money raised requirement

175

(1) The requirement of this section is that all of the money raised by the issue of the relevant shares (other than any of them which are bonus shares) is, no later than the time mentioned in subsection (3), employed wholly for the purpose of the qualifying business activity for which it was raised.

(1ZA) Employing money raised by the issue of the relevant shares (whether on its own or together with other money) on the acquisition, directly or indirectly, of—

(a) an interest in another company such that a company becomes a 51% subsidiary of the issuing company,

(b) a further interest in a company which is a 51% subsidiary of the issuing company,

(d) intangible assets employed for the purposes of a trade, or

(e) goodwill employed for the purposes of a trade,

does not amount to employing that money for the purposes of a qualifying business activity.

(1ZB) The Treasury may by regulations provide that subsection (1ZA) does not apply in relation to acquisitions of intangible assets which are of a description specified, or which occur in circumstances specified, in the regulations.

(1ZC) For the purposes of subsections (1ZA) and (1ZB)—

“goodwill” has the same meaning as in Part 8 of CTA 2009 (see section 715(3));

“intangible assets” means any asset which falls to be treated as an intangible asset in accordance with generally accepted accountancy practice;

and section 173A(6) and (7) (meaning of “trade” etc) applies as it applies for the purposes of section 173A.

(1A) Also, otherwise employing money on the acquisition of shares or stock in a company does not of itself amount to employing the money for the purposes of a qualifying business activity.

(2) The requirement in subsection (1) does not fail to be met merely because an amount of money which is not significant is employed for another purpose.

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Income Tax Act 2007

Supplementary

124

Post-cessation property relief

Post-cessation property relief

125

Treating excess post-cessation property relief as CGT loss

126

...

UK furnished holiday lettings business treated as trade

127

Chapter 5 — Losses in an employment or office

Employment loss relief against general income

128

How relief works

129

Treating loss in employment or office as CGT loss

130

Chapter 6 — Losses on disposal of shares

Share loss relief against general income

Share loss relief

131

Entitlement to claim

132

How relief works

133

Shares to which EIS relief is not attributable

Qualifying trading companies

134

Subscriptions for shares

135

Disposals of new shares

136

Qualifying trading companies: the requirements

The trading requirement

137

Ceasing to meet trading requirement because of administration or receivership

138

The control and independence requirement

139

The qualifying subsidiaries requirement

140

The property managing subsidiaries requirement

141

The gross assets requirement

142

The unquoted status requirement

143

Power to amend requirements by Treasury order

144

Qualifying trading companies: supplementary

Relief after an exchange of shares for shares in another company

145

Substitution of new shares for old shares

146

Limits on share loss relief and mixed holdings

Limits on share loss relief

147

Disposal of shares forming part of mixed holding

148

Section 148: supplementary

149

Miscellaneous and supplementary

Deemed time of issue for certain shares

150

Interpretation of Chapter

151

Chapter 7 — Losses from miscellaneous transactions

Loss relief against miscellaneous income

Losses from miscellaneous transactions

152

How relief works

153

Deposit rights

Transactions in deposit rights

154

Supplementary

Time limit for claiming relief

155

Part 5 — Enterprise investment scheme