Legalize / United Kingdom / Public General Act

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

articles Not indexed

Reform history JSON API

(i) for taking, throughout the period of the charter, management decisions in relation to the ship, other than those of a kind generally regarded by persons engaged in trade of the kind in question as matters of husbandry, and

(ii) for defraying all expenses in connection with the ship throughout that period, or substantially all such expenses, other than those directly incidental to a particular voyage or to the employment of the ship during that period, and

(e) no arrangements exist by virtue of which a person other than the company may be appointed to be responsible for the matters mentioned in paragraph (d) on behalf of the company.

(6) If in the case of the company carrying on the trade (“the letting company”) the charterer is also a company and—

(a) the charterer is a qualifying subsidiary of the letting company, or

(b) the letting company is a qualifying subsidiary of the charterer, or

subsection (5) has effect with the omission of paragraph (c).

(7) If any of the requirements of subsection (4) is not met in relation to any lettings of ships, the trade is not, as a result, to be treated as consisting in the carrying on of excluded activities if—

(a) those lettings, and

(b) any other excluded activities

do not, taken together, amount to a substantial part of the trade.

(8) In this section “pleasure craft” means any ship of a kind primarily used for sport or recreation.

Excluded activities: receipt of royalties and licence fees

195

(1) This section supplements section 192(1)(e) (receipt of royalties and licence fees).

(2) If the requirement of subsection (3) is met, a trade is not to be regarded as consisting in the carrying on of excluded activities within section 192(1)(e) as a result only of its consisting to a substantial extent in the receiving of royalties or licence fees.

(3) The requirement of this subsection is that the royalties or licence fees (or all but for a part that is not a substantial part in terms of value) are attributable to the exploitation of relevant intangible assets.

(4) For this purpose an intangible asset is a “relevant intangible asset” if the whole or greater part (in terms of value) of it has been created—

(a) by the issuing company, or

(b) by a company which was a qualifying subsidiary of the issuing company throughout a period during which it created the whole or greater part (in terms of value) of the intangible asset.

(5) In the case of an intangible asset that is intellectual property, references to the creation of an asset by a company are to its creation in circumstances in which the right to exploit it vests in the company (whether alone or jointly with others).

(6) In this section—

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

“intellectual property” means—any patent, trade mark, registered design, copyright, design right, performer's right or plant breeder's right, orany rights under the law of a country or territory outside the United Kingdom which correspond or are similar to those falling within paragraph (a).

(7) If—

(a) the issuing company acquired all the shares (“old shares”) in another company (“the old company”) at a time when the only shares issued in the issuing company were subscriber shares, and

(b) the consideration for the old shares consisted wholly of the issue of shares in the issuing company,

references in subsection (4) to the issuing company include the old company.

Excluded activities: property development

196

(1) This section supplements section 192(1)(g).

(2) “Property development” means the development of land—

(a) by a company which has, or at any time has had, an interest in the land, and

(b) with the sole or main object of realising a gain from the disposal of an interest in the land when it is developed.

(3) For this purpose “interest in land” means, subject to subsection (4)—

(a) any estate, interest or right in or over land, including any right affecting the use or disposition of land, or

(b) any right to obtain such an estate, interest or right from another which is conditional on the other's ability to grant it.

(4) References in this section to an interest in land do not include—

(a) the interest of a creditor (other than a creditor in respect of a rentcharge) whose debt is secured by way of mortgage, an agreement for a mortgage or a charge of any kind over land, or

(b) in the case of land in Scotland, the interest of a creditor in a charge or security of any kind over land.

Excluded activities: hotels and comparable establishments

197

(1) This section supplements section 192(1)(j).

(2) The reference to a comparable establishment is to a guest house, hostel or other establishment the main purpose of maintaining which is the provision of facilities for overnight accommodation (with or without catering services).

(3) The activities of a person are not to be taken to fall within section 192(1)(j) unless that person has an estate or interest in, or is in occupation of, the hotel or comparable establishment in question.

Excluded activities: nursing homes and residential care homes

198

(1) This section supplements section 192(1)(k).

(2) “Nursing home” means any establishment which exists wholly or mainly for the provision of nursing care—

(a) for persons suffering from sickness, injury or infirmity, or

(b) for women who are pregnant or have given birth.

(3) “Residential care home” means any establishment which exists wholly or mainly for the provision of residential accommodation, together with board and personal care, for persons in need of personal care because of—

(a) old age,

(b) mental or physical disability,

(d) any past illnesses, or

(e) past or present mental disorder.

(4) The activities of a person are not to be taken to fall within section 192(1)(k) unless that person has an estate or interest in, or is in occupation of, the nursing home or residential care home in question.

Excluded activities: provision of services or facilities for another business

199

(1) Providing services or facilities for a business carried on by another person (other than a company of which the provider of the services or facilities is a qualifying subsidiary) is an excluded activity if—

(a) the business consists wholly or as to a substantial part of activities falling within any of paragraphs (a) to (ka) of section 192(1), and

(b) a controlling interest in the business is held by a person who also has a controlling interest in the business carried on by the provider of the services or facilities.

(2) Subsections (3) to (5) explain what is meant by a controlling interest in a business for the purposes of subsection (1)(b).

(3) In the case of a business carried on by a company, a person (“A”) has a controlling interest in the business if—

(a) A controls the company,

(b) the company is a close company and A or an associate of A is a director of the company and is either—

(i) the beneficial owner of more than 30% of the ordinary share capital of the company, or

(ii) able, directly or through the medium of other companies or by any other indirect means, to control more than 30% of that share capital, or

(c) at least half the business could, in accordance with section 942 of CTA 2010, be regarded as belonging to A for the purposes of section 941 of that Act.

(4) In any other case, a person has a controlling interest in a business if the person is entitled to at least half the assets used for, or of the income arising from, the business.

(5) For the purposes of this section—

(a) any rights or powers of a person who is an associate of another are to be attributed to that other person, and

(b) “business” includes any trade, profession or vocation.

Supplementary

Power to amend by Treasury order

200

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 5 — Attribution of and claims for EIS relief

Attribution

Attribution of EIS relief to shares

201

(1) References in this Part, in relation to any individual, to the EIS relief attributable to any shares or issue of shares are to be read as references to any reduction made in the individual's liability to income tax that is attributed to those shares or that issue in accordance with this section.

This is subject to the provisions of Chapters 6 and 7 providing for the withdrawal or reduction of EIS relief.

(2) If an individual's liability to income tax is reduced in any tax year, then—

(a) if the reduction is obtained because of one issue of shares, the amount of the reduction is attributed to that issue, and

(b) if the reduction is obtained because of two or more issues of shares, the amount of the reduction—

(i) is apportioned between those issues in the same proportions as the amounts claimed by the individual in respect of each issue, and

(ii) is attributed to those issues accordingly.

(3) If under this section an amount of any reduction of income tax is attributed to an issue of shares (“the original issue”) to an individual, a proportionate part of that amount is attributed to each share in respect of which the claim was made.

(4) If corresponding bonus shares are issued to the individual in respect of any shares (“the original shares”) to which EIS relief is attributed—

(a) a proportionate part of the total amount attributed to the original shares immediately before the bonus shares are issued is attributed to each of the shares in the holding comprising the original shares and the bonus shares, and

(b) after the issue of the bonus shares, this Part applies as if the original issue had included those shares.

(5) In subsection (4) “corresponding bonus shares” means bonus shares which are in the same company, of the same class, and carry the same rights as the original shares.

(6) If section 158(1) and (2) applies in the case of any issue of shares as if part of the issue had been issued in a previous tax year, this section has effect as if that part and the remainder were separate issues of shares (and that part had been issued on a day in the previous tax year).

(7) If, at a time when EIS relief is attributable to, or to any part of, any issue of shares, the relief falls to be withdrawn or reduced under Chapters 6 and 7—

(a) if it falls to be withdrawn, the relief attributable to each of the shares in question is reduced to nil, and

(b) if it falls to be reduced by any amount, the relief attributable to each of the shares in question is reduced by a proportionate part of that amount.

Claims: general

Time for making claims for EIS relief

202

(1) A claim for EIS relief in respect of shares issued by a company in any tax year may be made—

(a) not earlier than the time the requirement in section 176(2) or (3) (trade etc must have been carried on for 4 months) is first met, and

(b) not later than the fifth anniversary of the normal self-assessment filing date for the tax year.

(2) If section 158(1) and (2) applies in the case of any issue of shares as if part of the issue had been issued in a previous tax year, this section has effect as if that part and the remainder were separate issues of shares (and that part had been issued on a day in the previous tax year).

Entitlement to claim

203

(1) The investor is entitled to make a claim for EIS relief in respect of the amount subscribed by the investor for the relevant shares if the investor has received from the issuing company a compliance certificate in respect of those shares.

(2) For the purposes of PAYE regulations no regard is to be had to EIS relief unless a claim for it has been duly made.

(3) No application may be made under section 55(3) or (4) of TMA 1970 (application for postponement of payment of tax pending appeal) on the ground that the investor is eligible for EIS relief unless a claim for the relief has been duly made by the investor.

Claims: supporting documents

Compliance certificates

204

(1) A “compliance certificate” is a certificate which—

(a) is issued by the issuing company in respect of the relevant shares,

(b) states that, except so far as they fall to be met by or in relation to the investor, the requirements for EIS relief are for the time being met in relation to those shares, and

(2) Before issuing a compliance certificate in respect of the relevant shares, the issuing company must provide an officer of Revenue and Customs with a compliance statement in respect of the issue of shares which includes the relevant shares.

(3) The issuing company must not issue a compliance certificate without the authority of an officer of Revenue and Customs.

(4) If the issuing company, or a person connected with the issuing company, has given notice to an officer of Revenue and Customs under section 241 of this Act or paragraph 16(2) or (4) of Schedule 5B to TCGA 1992, a compliance certificate must not be issued unless the authority is given or renewed after the receipt of the notice.

(5) If an officer of Revenue and Customs—

(a) has been requested to give or renew an authority to issue a compliance certificate, and

(b) has decided whether or not to do so,

the officer must give notice of the officer's decision to the issuing company.

Compliance statements

205

(1) A “compliance statement” is a statement, in respect of an issue of shares, to the effect that, except so far as they fall to be met by or in relation to the individuals to whom shares included in that issue have been issued, the requirements for EIS relief (see section 157)—

(a) are for the time being met in relation to the shares to which the statement relates, and

(b) have been so met at all times since the shares were issued.

(2) In determining for the purposes of subsection (1) whether the requirements for EIS relief are met at any time in relation to the issue of shares, references in this Part to “the relevant shares” are read as references to the shares included in the issue.

(3) A compliance statement must be in such form as the Commissioners for Her Majesty's Revenue and Customs direct and must contain—

(a) such additional information as the Commissioners reasonably require, including in particular information relating to the persons who have requested the issue of compliance certificates,

(b) a declaration that the statement is correct to the best of the issuing company's knowledge and belief, and

(4) The issuing company may not provide an officer of Revenue and Customs with a compliance statement in respect of any shares issued by it in any tax year—

(a) before the requirement in section 176(2) or (3) (trade etc must have been carried on for 4 months) is met, or

(b) later than two years after the end of that tax year or, if that requirement is first met after the end of that tax year, later than two years after the requirement is first met.

Appeal against refusal to authorise compliance certificate

206

For the purpose of the provisions of TMA 1970 relating to appeals, the refusal of an officer of Revenue and Customs to authorise the issue of a compliance certificate is taken to be a decision disallowing a claim by the issuing company.

Penalties for fraudulent certificate or statement etc

207

The issuing company is liable to a penalty not exceeding £3,000 if—

(a) it issues a compliance certificate, or provides a compliance statement, which is made fraudulently or negligently, or

(b) it issues a compliance certificate in contravention of section 204(3) or (4).

Chapter 6 — Withdrawal or reduction of EIS relief

Introduction

Overview of Chapter

208

This Chapter provides for EIS relief to be withdrawn or reduced under—

(a) section 209 (disposal of shares),

(b) section 211 (call options),

(d) section 213 (value received by the investor),

(e) section 224 (repayments etc of share capital to other persons),

(f) section 232 (acquisition of a trade or trading assets),

(g) section 233 (acquisition of share capital), and

(h) section 234 (relief subsequently found not to have been due).

Disposals

Disposal of shares

209

(1) This section applies if—

(a) the investor disposes of any of the relevant shares,

(b) the disposal takes place before period A ends, and

(2) If the disposal is not made by way of a bargain made at arm's length, the EIS relief attributable to the shares must be withdrawn.

(3) If the disposal is made by way of a bargain made at arm's length, the EIS relief attributable to the shares must—

(a) if it is greater than the amount given by the formula set out below, be reduced by that amount, and

(b) in any other case, be withdrawn.

The formula is—

$$R×EISR$where—R is the amount or value of the consideration received by the investor for the shares, andEISR is the EIS original rate.$

(4) This section does not apply to a disposal of shares to which an amount of EIS relief is attributable if—

(a) the disposal was made by an individual (“A”) to another individual (“B”), and

(b) A and B were married to, or were civil partners of, each other and living together at the time of the disposal.

(5) Section 246 contains rules for determining which shares of any class are treated as disposed of for the purposes of this section if the investor disposes of some but not all the shares of that class which are held by the investor.

(6) Nothing in this section applies to a disposal of shares occurring as a result of the investor’s death.

Cases where maximum EIS relief not obtained

210

(1) If the investor's liability to income tax is reduced for any tax year in respect of any issue of shares and—

(a) the amount of the reduction (“A”), is less than

(b) the amount (“B”) which is equal to tax at the EIS original rate on the amount on which the investor claims EIS relief in respect of the shares,

section 209(3) has effect in relation to a disposal of any of the shares as if the amount or value referred to as “R” were reduced by multiplying it by the fraction—

$AB$

(2) If section 158(1) and (2) applies in the case of any issue of shares as if part of the issue had been issued in a previous tax year, subsection (1) has effect as if that part and the remainder were separate issues of shares (and that part had been issued on a day in the previous tax year).

(3) If the amount of EIS relief attributable to any of the relevant shares has been reduced before the EIS relief was obtained, the amount referred to in subsection (1) as A is to be treated for the purposes of that subsection as the amount that it would have been without that reduction.

(4) Subsection (3) does not apply to a reduction of EIS relief by virtue of section 201(4) (attribution of EIS relief if there is a corresponding issue of bonus shares).

Call options

211

(1) This section applies if the investor grants an option which, if exercised, would bind the investor to sell any of the relevant shares.

(2) The grant of the option is treated for the purposes of section 209 as a disposal of the shares to which the option relates.

(3) Nothing in this section prejudices section 177 (no pre-arranged exits).

Put options

212

(1) This section applies if, at any time in period A, a person grants the investor an option which, if exercised, would bind the grantor to purchase any of the relevant shares.

(2) Any EIS relief attributable to the shares to which the option relates must be withdrawn.

(3) For the purposes of subsection (2) the shares to which an option relates are those which, if—

(a) the option were exercised immediately after the grant, and

(b) any shares in the issuing company acquired by the investor after the grant were disposed of immediately after being acquired,

would be treated for the purposes of section 209 as disposed of in pursuance of the option.

Value received by investor

Value received by the investor

213

(1) This section applies if the investor receives any value from the issuing company at any time in period C relating to the relevant shares.

(2) Any EIS relief attributable to the shares must—

(a) if it is greater than the amount given by the formula set out below, be reduced by that amount, and

(b) in any other case, be withdrawn.

The formula is—

$$R×EISR$ where—R is the amount of the value received by the investor, and EISR is the EIS original rate.$

(3) This section is subject to the following sections—

(a) section 214 (value received: receipts of insignificant value),

(b) section 218 (value received where there is more than one issue of shares),

(d) section 220 (cases where maximum EIS relief not obtained),

(e) section 221 (receipts of value by and from connected persons etc), and

(f) section 222 (receipt of replacement value).

Sections 218 to 220 are to be applied in the order in which they appear in this Part.

(4) Value received is to be ignored, for the purposes of this section, to the extent to which EIS relief attributable to the shares has already been withdrawn or reduced on its account.

(5) For the purposes of this section and sections 214 to 223, an individual who acquires any relevant shares on such a transfer as is mentioned in section 245 (spouses or civil partners) is treated as the investor.

Value received: receipts of insignificant value

214

(1) Section 213(2) does not apply if the receipt of value is a receipt of insignificant value.

This is subject to subsection (2).

(2) If—

(a) value is received (“the relevant receipt”) by the investor from the issuing company at any time in period C relating to the relevant shares,

(b) the investor has received from the issuing company one or more receipts of insignificant value at a time or times—

(i) during that period, but

(ii) not later than the time of the relevant receipt, and

the investor is treated for the purposes of this Chapter as if the relevant receipt had been a receipt of an amount of value equal to that total amount.

(3) A receipt does not fall within subsection (2)(b) if it has previously formed part of a total amount falling within subsection (2)(c).

Meaning of “receipts of insignificant value”

215

(1) This section applies for the purposes of section 214.

(2) “A receipt of insignificant value” means a receipt of an amount of insignificant value, that is, an amount of value which—

(a) is not more than £1,000, or

(b) if it is more than £1,000, is insignificant in relation to the amount subscribed by the investor for the relevant shares.

This is subject to subsection (3).

(3) If at any time in the period—

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

(b) ending at the end of the issue date,

repayment arrangements are in existence, no amount of value received by the investor is treated as a receipt of insignificant value.

(4) For this purpose “repayment arrangements” means arrangements which provide for the investor to receive, or to be entitled to receive, any value from the issuing company at any time in period C relating to the relevant shares.

(5) For the purposes of this section—

(a) the references to the investor include references to any person who at any time in period C relating to the relevant shares is an associate of the investor (whether or not that person is such an associate at the material time), and

(b) the reference in subsection (4) to the issuing company includes a reference to a person who at any time in period C relating to the relevant shares is connected with that company (whether or not that person is so connected at the material time).

When value is received

216

(1) This section applies for the purposes of sections 213 (value received by the investor) and 218 (value received where there is more than one issue of shares).

(2) The investor receives value from the issuing company at any time when the issuing company—

(a) repays, redeems or repurchases any of its share capital or securities which belong to the investor or makes any payment to the investor for giving up the investor's right to any of the issuing company's share capital or any security on its cancellation or extinguishment,

(b) repays, in pursuance of any arrangements for or in connection with the acquisition of the shares in respect of which EIS relief is claimed, any debt owed to the investor other than a debt which was incurred by the company—

(i) on or after the date of issue of those shares, and

(ii) otherwise than in consideration of the extinguishment of a debt incurred before that date,

(c) makes to the investor any payment for giving up on its extinguishment the investor's right to any debt, other than a debt in respect of a repayment of the kind mentioned in section 168(2)(a) or (f) (ignoring of certain expenses or remuneration) or an ordinary trade debt,

(d) releases or waives any liability of the investor to the issuing company or discharges or undertakes to discharge any liability of the investor to a third person,

(e) makes a loan or advance to the investor which has not been repaid in full before the issue of the shares in respect of which EIS relief is claimed,

(f) provides a benefit or facility for the investor,

(g) transfers an asset to the investor for no consideration or for consideration less than its market value or acquires an asset from the investor for consideration greater than its market value, or

(h) makes to the investor any other payment except—

(i) a payment of a kind mentioned in any of the provisions of section 168(2) (ignoring of certain payments), or

(ii) a payment in discharge of an ordinary trade debt.

(3) For the purposes of subsection (2)(d) the issuing company is to be treated as having released or waived a liability if the liability is not discharged within 12 months of the time when it ought to have been discharged.

(4) For the purposes of subsection (2)(e) the following is to be treated as if it were a loan made by the issuing company to the investor—

(a) the amount of any debt (other than an ordinary trade debt) incurred by the investor to the issuing company, and

(b) the amount of any debt due from the investor to a third party which has been assigned to the issuing company.

(5) The investor also receives value from the issuing company if—

(a) in respect of ordinary shares held by the investor any payment or asset is received in a winding up or in connection with a dissolution of the company, and

(b) the winding up or dissolution falls within section 182(4) (no tax avoidance).

(6) The investor also receives value from the issuing company if any person who would, for the purposes of section 163, be treated as connected with the company—

(a) purchases any of its share capital or securities which belong to the investor, or

(b) makes any payment to the investor for giving up any right in relation to any of the company's share capital or securities.

(7) If because of the investor's disposal of shares in a company any EIS relief attributable to those shares is withdrawn or reduced under section 209, the investor is not to be treated as receiving value from the company in respect of the disposal.

(8) The investor is not to be treated as receiving value from the issuing company merely because of the payment to the investor, or any associate of the investor, of any remuneration for services rendered to that company as a director if the remuneration is reasonable remuneration.

(9) Section 167(3) (director also an employee) applies for the purposes of subsection (8) as it applies for the purposes of section 167, and the reference in that subsection to the payment of remuneration includes the provision of any benefit or facility.

(10) In this section “ordinary trade debt” means any debt for goods or services supplied in the ordinary course of a trade or business if any credit given—

(a) is for not more than 6 months, and

(b) is not longer than that normally given to customers of the person carrying on the trade or business.

The amount of value received

217

In a case falling within a provision listed in column 1 of the following table, the amount of value received for the purposes of sections 213 and 218 is given by the corresponding entry in column 2 of the table.

Value received where there is more than one issue of shares

218

(1) This section applies if—

(a) two or more issues of shares in the issuing company have been made to the investor which include shares in respect of which the investor obtains EIS relief, and

(b) value is received by the investor at any time in the applicable periods for two or more of those issues.

(2) Section 213(2) has effect in relation to the shares included in each of the issues referred to in subsection (1)(b) as if the amount of value referred to as “R” were reduced by multiplying it by the fraction—

$$AB$where—A is the amount on which the investor obtains EIS relief in respect of the shares included in the issue in question, andB is the sum of that amount and the corresponding amount or amounts in respect of the other issue or issues.$

(3) For the purposes of subsection (1) “the applicable period” for an issue of shares is period C in relation to those shares.

219

(1) This section applies if—

(a) section 213(2) applies to an issue of shares, and

(b) section 158(1) and (2) (form and amount of EIS relief) applies in the case of that issue as if part of the issue had been issued in a previous tax year.

(2) This subsection explains how the calculation under section 213(2) is to be made.

Step 1

Apportion the amount referred to as “R” between the tax year in which the shares were issued and the previous tax year by multiplying that amount by the fraction—

$$AB$where—A is the amount on which the investor obtains EIS relief in respect of the shares treated as issued in the tax year in question, andB is the sum of that amount and the corresponding amount in respect of the shares treated as issued in the other tax year.$

Step 2

In relation to each of the amounts (“R1” and “R2”) so apportioned to the two tax years, calculate the amounts (“X1” and “X2”) that would be given by the formula if there were separate issues of shares in those tax years.

In calculating amounts X1 and X2, apply section 220 if appropriate but do not apply section 218.

Step 3

Add amounts X1 and X2 together.

The result is the required amount.

Cases where maximum EIS relief not obtained

220

(1) If the investor's liability to income tax is reduced for any tax year in respect of any issue of shares and—

(a) the amount of the reduction (“A”), is less than

(b) the amount (“B”) which is equal to income tax at the EIS original rate on the amount on which the investor claims EIS relief in respect of the shares,

section 213(2) has effect in relation to any value received as if the amount referred to as “R” were reduced by multiplying it by the fraction—

$AB$

(2) If the amount of EIS relief attributable to any of the relevant shares has been reduced before the EIS relief was obtained, the amount referred to in subsection (1) as “A” is to be treated for the purposes of that subsection as the amount that it would have been without that reduction.

(3) Subsection (2) does not apply to a reduction of EIS relief by virtue of section 201(4) (attribution of EIS relief where there is a corresponding issue of bonus shares).

Receipts of value by and from connected persons etc

221

In sections 213, 214 and 216 to 218—

(a) any reference to a payment or transfer to the investor includes a reference to a payment or transfer made to the investor indirectly or to the investor's order or for the investor's benefit,

(b) any reference to the investor includes a reference to an associate of the investor, and

(c) any reference to the issuing company includes a reference to a person who at any time in period A relating to the relevant shares is connected with that company (whether or not that person is so connected at the material time).

Receipt of replacement value

222

(1) If—

(a) any EIS relief attributable to the relevant shares would, in the absence of this section, be reduced or withdrawn under section 213 because of a receipt of value within section 216(2) or (6) (“the original value”),

(b) the original supplier receives value (“the replacement value”) from the original recipient and the receipt is a qualifying receipt, and

section 213 does not, because of the receipt of the original value, have effect to reduce or withdraw the EIS relief.

This is subject to section 223(1) and (2).

(2) For the purposes of this section—

“the original recipient” means the person who receives the original value,

“the original supplier” means the person from whom that value was received.

(3) If the amount of the original value is, by virtue of section 218, treated as reduced for the purposes of section 213(2) as it applies in relation to the relevant shares in question, the reference in subsection (1)(c) to the amount of the original value is to be read as a reference to the amount of that value ignoring the reduction.

(4) A receipt of the replacement value is a qualifying receipt for the purposes of subsection (1) if it arises—

(a) because of the original recipient doing one or more of the following—

(i) making a payment to the original supplier, other than a payment within paragraph (c) or a payment to which subsection (5) applies,

(ii) acquiring any asset from the original supplier for a consideration the amount or value of which is more than the market value of the asset,

(iii) disposing of any asset to the original supplier for no consideration or for a consideration the amount or value of which is less than the market value of the asset,

(b) if the receipt of the original value was within section 216(2)(d), because of an event the effect of which is to reverse the event which constituted the receipt of the original value, or

(c) if the receipt of the original value was within section 216(6), because of the original recipient repurchasing the share capital or securities in question, or (as the case may be) re-acquiring the right in question, for a consideration the amount or value of which is at least the amount of the original value.

(5) This subsection applies to—

(a) any payment for any goods, services or facilities, provided (whether in the course of trade or otherwise) by—

(i) the original supplier, or

(ii) any other person who, at any time in period C relating to the relevant shares, is an associate of, or is connected with, that supplier (whether or not the other person is such an associate, or is so connected, at the material time),

which is reasonable in relation to the market value of those goods, services or facilities,

(b) any payment of any interest which represents no more than a reasonable commercial return on any money lent to—

(i) the original recipient, or

(ii) any person who, at any time in period C relating to the relevant shares, is an associate of that recipient (whether or not the person is such an associate at the material time),

(d) any payment, as rent for any property occupied by—

(i) the original recipient, or

(ii) any person who, at any time in period C relating to the relevant shares, is an associate of that recipient (whether or not the person is such an associate at the material time),

of an amount not exceeding a reasonable and commercial rent for the property,

(e) any payment in discharge of an ordinary trade debt, and

(f) any payment for shares in or securities of any company in circumstances that do not fall within subsection (4)(a)(ii).

(6) For the purposes of this section, the amount of the replacement value is—

(a) in a case within paragraph (a) of subsection (4), the sum of—

(i) the amount of any payment within sub-paragraph (i) of that paragraph, and

(ii) the difference between the market value of any asset to which sub-paragraph (ii) or (iii) of that paragraph applies and the amount or value of the consideration (if any) received for it,

(b) in a case within subsection (4)(b), the same as the amount of the original value, and

Section 217 applies for the purpose of determining the amount of the original value.

(7) In this section—

(a) any reference to a payment to a person (however expressed) includes a reference to a payment made to the person indirectly or to the person's order or for the person's benefit, and

(b) “ordinary trade debt” has the meaning given by section 216(10).

Section 222: supplementary

223

(1) The receipt of the replacement value by the original supplier is ignored for the purposes of section 222(1) to the extent to which it has previously been set (under that section) against a receipt of value to prevent any reduction or withdrawal of EIS relief under section 213.

(2) The receipt of the replacement value by the original supplier (“the event”) is ignored for the purposes of section 222 if—

(a) the event occurs before period C relating to the relevant shares,

(b) if the event occurs after the time the original recipient receives the original value, it does not occur as soon after that time as is reasonably practicable in the circumstances, or

(c) if an appeal has been brought by the investor against an assessment to withdraw or reduce any EIS relief attributable to the relevant shares because of the receipt of the original value, the event occurs more than 60 days after the day on which the amount of relief which falls to be withdrawn has been finally determined.

But nothing in section 222 or this section requires the replacement value to be received after the original value.

(3) This subsection applies if—

(a) the receipt of the replacement value by the original supplier is a qualifying receipt for the purposes of section 222(1), and

(b) in consequence of the receipt any receipts of value are ignored for the purposes of section 213 as that section applies in relation to the shares in question or any other shares subscribed for by the investor, and

(i) the investor, or

(ii) any person who at any time in period C relating to the relevant shares is an associate of the investor (whether or not the person is such an associate at the material time).

(4) If either of the following applies—

(a) subsection (3), and

(b) paragraph 13C(3) of Schedule 5B to TCGA 1992 (which makes corresponding provision in relation to relief under that Schedule in respect of re-investment under EIS),

the person who subscribes for the shares is not to be eligible for any EIS relief in relation to those shares or any other shares in the same issue.

(5) In this section “the original recipient”, “the original supplier” and “replacement value” have the same meaning as in section 222.

224

(1) This section applies if any EIS relief is attributable to shares held by an individual and, at any time in period C, the issuing company or any subsidiary—

(a) repays, redeems or repurchases any of its share capital which belongs to any member other than—

(i) the individual, or

(ii) a person who falls within subsection (4), or

(b) makes any payment to any such member for giving up the member's right to any of the share capital of the company or subsidiary on its cancellation or extinguishment.

(2) The EIS relief must—

(a) if it is greater than the amount given by the formula set out below, be reduced by that amount, and

(b) in any other case, be withdrawn.

The formula is—

$$R×EISR$where—R is the amount received by the member, andEISR is the EIS original rate.$

(3) This section is subject to the following sections—

(a) section 225 (insignificant repayments ignored for the purposes of this section),

(b) section 226 (amount of repayments etc where there is more than one issue of shares),

(d) section 228 (single issue treated as made partly in previous tax year),

(e) section 229 (maximum relief not obtained for share issue),

(f) section 230 (repayment of authorised minimum within 12 months), and

(g) section 231 (restriction on withdrawal of relief).

Sections 226 to 229 are to be applied in the order in which they appear in this Part.

(4) A person falls within this subsection if the repayment—

(a) causes any EIS relief attributable to that person's shares in the issuing company to be withdrawn or reduced by virtue of—

(i) section 209 (disposal of shares), or

(ii) section 216(2)(a) (receipt of value by virtue of repayment of share capital etc),

(aa) causes any SEIS relief attributable to that person's shares in the issuing company to be withdrawn or reduced by virtue of—

(i) section 257FA (disposal of shares), or

(ii) section 257FH(2)(a) (receipt of value by virtue of repayment of share capital etc),

(b) causes any investment relief under Schedule 15 to FA 2000 (the corporate venturing scheme) attributable to that person's shares in the issuing company to be withdrawn or reduced by virtue of—

(i) paragraph 46 of that Schedule (disposal of shares), or

(ii) paragraph 49(1)(a) of that Schedule (receipt of value by virtue of repayment of share capital etc), or

(c) gives rise to a qualifying chargeable event within the meaning of paragraph 14(4) of Schedule 5B to TCGA 1992 (EIS: deferral relief) in respect of that person's shares in the issuing company.

(5) A repayment is treated as having the effect mentioned in subsection (4)(a), (aa), (b) or (c) if it would have that effect were it not a receipt of insignificant value for the purposes of whichever of the following is applicable—

(a) section 213,

(aa) section 257FE,

(b) paragraph 47 of Schedule 15 to FA 2000, and

(6) A repayment is to be ignored, for the purposes of this section, to the extent to which EIS relief attributable to any shares has already been withdrawn or reduced on its account.

(7) In this section and sections 225 to 231—

(a) “repayment” means a repayment, redemption, repurchase or payment mentioned in subsection (1)(a) or (b), and

(b) references to a subsidiary of a company are references to a company which, at any time in period A relating to the shares in question, is a 51% subsidiary of the company, whether or not it is such a subsidiary at the time of the repayment.

Insignificant repayments ignored for purposes of section 224

225

(1) A repayment is ignored for the purposes of section 224 (repayments etc of share capital to other persons) if both—

(a) the market value of the shares to which it relates (“the target shares”) immediately before the event occurs, and

(b) the amount received by the member in question,

are insignificant in relation to the market value of the remaining issued share capital of the issuing company (or, as the case may be, the subsidiary) immediately after the event occurs.

This is subject to subsection (3).

(2) For the purposes of subsection (1) it is assumed that the target shares are cancelled at the time the repayment is made.

(3) Subsection (1) does not apply if repayment arrangements are in existence at any time in the period—

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

(b) ending at the end of the issue date.

(4) For this purpose “repayment arrangements” means arrangements which provide—

(a) for a repayment by the issuing company or any subsidiary of that company (whether or not it is such a subsidiary at the time the arrangements are made), or

(b) for anyone to be entitled to such a repayment,

at any time in period C relating to the relevant shares.

Amount of repayments etc where there is more than one issue of shares

226

(1) This section applies if, in relation to the same repayment, section 224(2) applies to EIS relief attributable to two or more issues of shares.

(2) Section 224(2) has effect in relation to the shares included in each of those issues as if the amount referred to as “R” were reduced by multiplying it by the fraction—

$$AB$where—A is the amount on which EIS relief was obtained by the individuals in respect of shares which are included in the issue and to which EIS relief is or, but for section 224(2)(b), would be attributable, andB is the sum of that amount and the corresponding amount or amounts in respect of the other issue or issues.$

Single issue affecting more than one individual

227

(1) This section applies if, in relation to the same repayment, section 224(2) applies to EIS relief attributable to shares held by two or more individuals.

(2) Section 224(2) has effect in relation to each individual as if the amount referred to as “R” were reduced by multiplying it by the fraction—

$$AB$where—A is the amount on which the individual obtains EIS relief in respect of the shares to which EIS relief is or, but for section 224(2)(b), would be attributable, andB is the sum of that amount and the corresponding amount or amounts on which the other individual or individuals obtain EIS relief in respect of such shares.$

Single issue treated as made partly in previous tax year

228

(1) This section applies if—

(a) section 224(2) applies to EIS relief attributable to shares held by an individual, and

(b) part of the issue of shares has been treated as issued to the individual in a previous tax year for the purposes of section 158(1) and (2) (form and amount of EIS relief).

(2) This subsection explains how the calculation under section 224(2) is to be made.

Step 1

Apportion the amount referred to as “R” between the tax year in which the shares were issued and the previous tax year by multiplying that amount by the fraction—

$$AB$where—A is the amount on which the individual obtains EIS relief in respect of the shares treated as issued in the tax year in question, andB is the sum of that amount and the corresponding amount in respect of the shares treated as issued in the other tax year.$

Step 2

In calculating amounts X1 and X2, apply section 229 if appropriate but do not apply section 226 or 227.

Step 3

Add amounts X1 and X2 together.

The result is the required amount.

229

(1) This section applies if section 224(2) applies to EIS relief attributable to shares held by an individual and—

(a) the amount of the reduction (“A”) in the individual's liability to income tax for any tax year in respect of the shares, is less than

(b) the amount (“B”) which is equal to income tax at the EIS original rate on the amount on which the individual claims EIS relief in respect of the shares.

(2) Section 224(2) has effect as if the amount referred to as “R” were reduced by multiplying it by the fraction—

$AB$

(3) If the amount of EIS relief attributable to any of the relevant shares has been reduced before the EIS relief was obtained, the amount referred to in subsections (1) and (2) as “A” is to be treated for the purposes of those subsections as the amount that it would have been without that reduction.

(4) Subsection (3) does not apply to a reduction of EIS relief by virtue of section 201(4) (attribution of EIS relief where there is a corresponding issue of bonus shares).

Repayment of authorised minimum within 12 months

230

(1) This section applies if—

(a) a company issues share capital (“the original shares”) of nominal value equal to the authorised minimum (within the meaning of the Companies Act 2006) for the purposes of complying with section 761 of that Act (public company: requirement as to minimum share capital),

(b) the registrar of companies issues the company with a certificate under that section.

(2) Section 224(2) does not apply in relation to any redemption of the original shares within 12 months of the date on which they were issued.

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

Restriction on withdrawal of relief under section 224

231

(1) This section applies if, because of a repayment, any investment relief which is attributable under Schedule 15 to FA 2000 to any shares is withdrawn under paragraph 56(2) of that Schedule.

(2) For the purposes of this section “the relevant amount” is the amount determined by the formula—

$$A-5B$where—A is the amount of the repayment, andB is the total amount of investment relief withdrawn because of the repayment.$

(3) If the relevant amount does not exceed £1,000, the repayment is ignored for the purposes of section 224(1), unless repayment arrangements are in existence at any time in the period—

(a) beginning 12 months before the issue of the shares mentioned in subsection (1), and

(b) ending at the end of the issue date.

(4) For this purpose “repayment arrangements” means arrangements which provide—

(a) for a repayment by the issuing company or any subsidiary of that company, or

(b) for anyone to be entitled to such a repayment,

at any time.

(5) Subsection (4)(a) applies in relation to a subsidiary of the issuing company whether or not it is such a subsidiary when the arrangements were made.

(6) If the repayment is not ignored by virtue of subsection (3), the amount received because of the repayment is treated for the purposes of section 224(2) as an amount equal to the relevant amount.

(7) In this section—

(a) “investment relief” has the same meaning as in Schedule 15 to FA 2000 (corporate venturing scheme), and

(b) references to the withdrawal of investment relief include its reduction.

Miscellaneous

Acquisition of a trade or trading assets

232

(1) Any EIS relief attributable to any shares in a company held by an individual is withdrawn if—

(a) at any time in period A, the company or any qualifying subsidiary—

(i) begins to carry on as its trade, or as part of its trade, a trade which was previously carried on at any time in that period otherwise than by the company or any qualifying subsidiary, or

(ii) acquires the whole, or the greater part, of the assets used for the purposes of a trade previously so carried on, and

(b) the individual is a person, or one of a group of persons, to whom subsection (2) or (3) applies.

(2) This subsection applies to any person or group of persons—

(a) to whom an interest amounting in total to more than a half share in the trade (as previously carried on) belonged at any time in period A, and

(b) who is or are a person or group of persons to whom such an interest in the trade carried on by the company belongs or has, at any such time, belonged.

(3) This subsection applies to any person or group of persons who—

(a) control or, at any time in period A, have controlled the company, and

(b) is or are a person or group of persons who, at any such time, controlled another company which previously carried on the trade.

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

(a) for the purpose of determining the person to whom a trade belongs and, if a trade belongs to two or more persons, their respective shares in that trade—

(i) apply section 941(6) of CTA 2010, and

(ii) an interest in a trade belonging to a company may be treated in accordance with any of the options set out in section 942 of that Act, and

(b) any interest, rights or powers of a person who is an associate of another person are treated as those of that other person.

(5) In determining whether any EIS relief attributable to any shares in the issuing company held by an individual who—

(a) is a director of, or of a company which is a partner of, the issuing company or any qualifying subsidiary, and

(b) is in receipt of, or entitled to receive, remuneration as such a director falling within section 169(2) (reasonable remuneration for services),

is to be withdrawn, the reference in subsection (3)(b), and (so far as relating to that provision) the reference in subsection (1)(a)(i), to any time in period A are to be read as references to any time before the end of period A.

(6) Section 167(3) (director also an employee) applies for the purposes of subsection (5) as it applies for the purposes of section 168, and in subsection (5) “remuneration” includes any benefit or facility.

(7) In this section “trade” includes any business or profession, and references to a trade previously carried on include references to part of such a trade.

233

(1) Any EIS relief attributable to any shares in a company held by an individual is withdrawn if —

(a) the company comes to acquire all of the issued share capital of another company at any time in period A, and

(b) the individual is a person, or one of a group of persons, to whom subsection (2) applies.

(2) This subsection applies to any person or group of persons who—

(a) control or have, at any time in period A, controlled the company, and

(b) is or are a person or group of persons who, at any such time, controlled the other company.

(3) In determining whether any EIS relief attributable to any shares in the issuing company held by an individual who—

(a) is a director of, or of a company which is a partner of, the issuing company or any qualifying subsidiary, and

(b) is in receipt of, or entitled to receive, remuneration as such a director falling within section 169(2),

is to be withdrawn, the reference in subsection (2)(b) to any time in period A is to be read as a reference to any time before the end of period A.

(4) Section 167(3) applies for the purposes of subsection (3) as it applies for the purposes of section 168, and in subsection (3) “remuneration” includes any benefit or facility.

Relief subsequently found not to have been due

234

(1) Any EIS relief obtained by the investor which is subsequently found not to have been due must be withdrawn.

(2) EIS relief obtained by the investor in respect of the relevant shares may not be withdrawn on the ground—

(a) that the requirements of sections 174 and 175 (the purpose of the issue and use of money raised requirements) are not met in respect of the shares, or

(b) that the issuing company is not a qualifying company in relation to the shares (see Chapter 4),

unless the requirements of subsection (3) are met.

(3) The requirements of this subsection are met if either—

(a) the issuing company has given notice under section 241, or paragraph 16(2) or (4) of Schedule 5B to TCGA 1992, (information to be provided by issuing company etc) in relation to the relevant issue of shares, or

(b) an officer of Revenue and Customs has given notice to that company stating the officer's opinion that, because of the ground in question, the whole or any part of the EIS relief obtained by any individual in respect of shares included in the relevant issue of shares was not due.

(4) In this section “the relevant issue of shares” means the issue of shares in the issuing company which includes the relevant shares.

Chapter 7 — Withdrawal or reduction of EIS relief: procedure

Assessments and appeals

Assessments for the withdrawal or reduction of EIS relief

235

If any EIS relief which has been obtained falls to be withdrawn or reduced under Chapter 6, it must be withdrawn or reduced by the making of an assessment to income tax for the tax year for which the relief was obtained.

Appeals against section 234(3)(b) notices

236

(1) For the purposes of the provisions of TMA 1970 relating to appeals, the giving of notice by an officer of Revenue and Customs under section 234(3)(b) is taken to be a decision disallowing a claim by the issuing company.

(2) If any issue has been determined on an appeal brought by virtue of paragraph 1A(6) of Schedule 5B to TCGA 1992 (appeal against notice that shares never have been, or have ceased to be, eligible shares), the determination is conclusive for the purposes of any appeal brought by virtue of subsection (1) on which that issue arises.

Time limits for assessments

237

(1) An officer of Revenue and Customs may ... —

(a) make an assessment for withdrawing or reducing the EIS relief attributable to any of the relevant shares, or

(b) give a notice under section 234(3)(b),

at any time not more than 6 years after the end of the relevant tax year.

(2) In subsection (1) “the relevant tax year” means—

(a) the tax year in which the time mentioned in section 175(3) (the use of money raised requirement) falls, or

(b) the tax year in which the event which causes the EIS relief to be withdrawn or reduced occurs,

whichever is the later.

(3) Subsection (1) is without prejudice to section 36(1A) of TMA 1970 (loss of tax brought about deliberately etc).

Cases where assessment not to be made

238

(1) No assessment for withdrawing or reducing EIS relief in respect of shares issued to an individual may be made because of an event occurring after the individual's death.

(2) Subsection (3) applies if an individual has, by a disposal or disposals to which section 209(3) applies, disposed of all shares which—

(a) have been issued to the individual by the issuing company, and

(b) are shares—

(i) to which EIS relief is attributable, or

(ii) in relation to which period A has not come to an end.

(3) No assessment for withdrawing or reducing EIS relief in respect of those shares may be made because of any subsequent event unless the event occurs at a time when the individual is connected with the company within the meaning of section 166.

Interest

Date from which interest is chargeable

239

(1) In its application to an assessment made by virtue of section 235 in the case of relief withdrawn or reduced by virtue of a provision listed in subsection (2), section 86 of TMA 1970 (interest on overdue income tax) has effect as if the relevant date were 31 January next following the tax year for which the assessment is made.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) The provisions are—

section 163,

section 164,

section 173A,

any of sections 180A to 188,

section 209,

section 212(1),

section 213,

section 224,

section 232, and

section 233.

Information

Information to be provided by the investor

240

(1) This section applies if the investor has obtained EIS relief in respect of the relevant shares, and an event occurs as a result of which—

(a) the investor is not a qualifying investor in relation to the shares,

(b) the EIS relief falls to be withdrawn or reduced by virtue of section 164 (no linked loans requirement),

(i) section 209 (disposal of shares),

(ii) section 211 (call options), or

(iii) section 212 (put options), or

(d) the EIS relief falls to be withdrawn or reduced under section 213 (receipt of value by the investor), or would fall to be so withdrawn or reduced but for section 222 (receipt of replacement value).

(2) The investor must within 60 days of coming to know of the event give a notice to an officer of Revenue and Customs containing particulars of the event.

(3) If the investor—

(a) is required under this section to give notice of a receipt of value which is within section 213, or would be within that section but for section 222, and

(b) has knowledge of any replacement value received (or expected to be received) because of a qualifying receipt,

the notice must include particulars of that receipt of replacement value (or expected receipt).

(4) In subsection (3) “qualifying receipt” and “replacement value” are to be read in accordance with section 222.

Information to be provided by the issuing company etc

241

(1) This section applies if the issuing company has provided an officer of Revenue and Customs with a compliance statement in respect of an issue of shares and an event occurs as a result of which—

(za) a requirement of any of the following provisions is not met in respect of the shares included in the issue, or would not be met if EIS relief had been obtained in respect of those shares—

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

(ii) section 173AA (the maximum amount raised through risk finance investments at the issue date),

(iii) section 173AB (the maximum amount raised through finance investments during period B),

(iv) section 175A (the permitted maximum age requirement),

(a) the requirement of section 175 (the use of money raised) is not met in respect of any of the shares included in the issue, or would not be met if EIS relief had been obtained in respect of the shares in question,

(b) any provision of Chapter 4 has effect to prevent the issuing company being a qualifying company in relation to any of the shares included in the issue, or would have such an effect if EIS relief had been obtained in respect of the shares in question, or

(c) any provision of Chapter 6 which is listed in subsection (2) has effect to cause any EIS relief attributable to any of the shares included in the issue to be withdrawn or reduced, or—

(i) would have such an effect if EIS relief had been obtained in respect of the shares in question, or

(ii) in the case of section 213, would have such an effect but for section 222 (receipt of replacement value).

(2) The provisions are—

(a) section 213 (value received by the investor),

(b) section 224 (repayments etc of share capital to other persons),

(d) section 233 (acquisition of share capital).

(3) If this section applies—

(a) the issuing company, and

(b) any person connected with the issuing company who has knowledge of the matters mentioned in subsection (1),

must give a notice to an officer of Revenue and Customs containing particulars of the event.

(4) Any notice required to be given by the issuing company under subsection (3)(a) must be given—

(a) within 60 days of the event, or

(b) if the event is a receipt of value within section 216(2) from a person connected with the company (see section 221), within 60 days of the company coming to know of the event.

(5) Any notice required to be given by a person under subsection (3)(b) must be given within 60 days of the person coming to know of the event.

(6) If a person—

(a) is required under this section to give notice of a receipt of value which is within section 213, or would be within that section but for section 222, and

(b) has knowledge of any replacement value received (or expected to be received) because of a qualifying receipt,

the notice must include particulars of that receipt of replacement value (or expected receipt).

(7) In subsection (6) “qualifying receipt” and “replacement value” are to be read in accordance with section 222.

Power to require information where section 240 or 241 applies or could have applied

242

(1) This section applies if an officer of Revenue and Customs has reason to believe that a person—

(a) has not given a notice which the person is required to give under section 240 or 241 in respect of any event,

(b) has given or received value within the meaning of section 216(2) or (6) which, but for the fact that the amount given or received was an amount of insignificant value, would have triggered a requirement to give such a notice, or

(c) has made or received any repayment within the meaning given by section 224(7) which, but for the fact that it falls to be ignored for the purposes of section 224 by virtue of section 225(1), would have triggered a requirement to give a notice under section 241.

(2) The officer may by notice require the person concerned to supply the officer, within such time as the officer may specify in the notice, with such information relating to the event as the officer may reasonably require for the purposes of this Part.

(3) The period specified in a notice under subsection (2) must be at least 60 days.

(4) In subsection (1)(b) the reference to an amount of insignificant value is construed in accordance with section 215(2).

Power to require information in other cases

243

(1) Subsection (2) applies if EIS relief is claimed in respect of shares in a company, and an officer of Revenue and Customs has reason to believe that it may not be due because of any such arrangement or scheme as is mentioned in—

(a) section 165 or 182(2) or (4) (no tax avoidance),

(b) section 171 (persons subscribing for shares under certain arrangements),

(d) section 177(1) (no pre-arranged exits), ...

(da) section 178A (no disqualifying arrangements), or

(e) section 185(1) or (2), 190(1) or 191(2) (conditions ceasing to be met).

The reference in paragraph (c) to subsections (3), (4) and (5) of section 191 is to be read as including those subsections as applied by section 190(2).

(2) The officer may by notice require any person concerned to supply the officer within such time as may be specified in the notice with—

(a) a declaration in writing stating whether or not, according to the information which that person has or can reasonably obtain, any such arrangement or scheme exists or has existed, and

(b) such other information as the officer may reasonably require for the purposes of the provision in question and as that person has or can reasonably obtain.

(3) The period specified in a notice under subsection (2) must be at least 60 days.

(4) For the purposes of subsection (2), in a case falling within a provision listed in column 1 of the following table, the person concerned is given by the corresponding entry in column 2 of the table.

Provision	The person concerned
Subsection (1)(a)	The claimant, the company and any person controlling the company
Subsection (1)(b)	The claimant
Subsection (1)(c)	The claimant, the company, any other company in question and any person controlling the company or any other company in question
Subsection (1)(d)	The claimant, the company and any person connected with the company
Subsection (1)(da)	The claimant, the company, any person controlling the company and any person whom an officer of Revenue and Customs has reason to believe may be a party to the arrangements in question
Subsection (1)(e)	The company and any person controlling the company

References in this subsection to the claimant include references to any person to whom the claimant appears to have made such a transfer as is mentioned in section 245 (spouses or civil partners) of any of the shares in question.

(5) If EIS relief has been obtained in respect of shares in a company—

(a) any person who receives from the company any payment or asset which may constitute value received (by the person or another) for the purposes of section 213, and

(b) any person on whose behalf such a payment or asset is received,

must, if so required by an officer of Revenue and Customs, state whether the payment or asset so received is received on behalf of any other person and, if so, the name and address of that other person.

(6) If EIS relief has been claimed in respect of shares in a company—

(a) any person who holds or has held shares in the company, and

(b) any person on whose behalf any such shares are or were held,

must, if so required by an officer of Revenue and Customs, state whether the shares so held are or were held on behalf of any other person and, if so, the name and address of that other person.

Obligations of secrecy

244

No obligation of secrecy imposed by statute or otherwise prevents an officer of Revenue and Customs from disclosing to a company that EIS relief has been obtained or claimed in respect of a particular number or proportion of its shares.

Chapter 8 — Supplementary and general

Disposals of shares

Transfers between spouses or civil partners

245

(1) This section applies if—

(a) shares to which an amount of EIS relief is attributable were issued to an individual (“A”),

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

(d) section 209 (disposal of shares) does not apply to the transfer.

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

(a) B were the individual who had subscribed for the shares,

(b) the amount that B had subscribed for the shares were the amount that A had subscribed for them,

(c) B's liability to income tax had been reduced in respect of the shares for the same tax year as that for which A's was so reduced,

(d) the amount by which B's liability to income tax had been reduced in respect of the shares were the same as that by which A's liability to income tax had been so reduced, and

(e) that amount of EIS relief had continued to be attributable to the shares despite the transfer.

(3) If the amount of EIS relief attributable to the shares had been reduced before the relief was obtained by A—

(a) this Part has effect, in relation to any subsequent disposal or other event, as if the amount of EIS relief attributable to the shares transferred to B had been correspondingly reduced before the relief was obtained by B, and

(b) sections 210(3), 220(2) and 229(3) apply in relation to B as they would have applied in relation to A.

(4) If, because of any such disposal or other event, an assessment for reducing or withdrawing EIS relief is to be made, the assessment is to be made on B.

Identification of shares on a disposal

246

(1) The rules in subsections (2) and (3) are for determining which shares of any class are treated as disposed of for the purposes of—

(a) section 209 (disposal of shares), or

(b) section 245 (spouses or civil partners),

if the investor disposes of some but not all of the shares of that class which the investor holds in a company.

(2) Shares acquired on an earlier day are treated as disposed of before shares acquired on a later day.

(3) Shares acquired on the same day are treated as disposed of in the following order—

(a) first any to which no EIS relief, deferral relief or SEIS relief is attributable,

(aa) next any to which SEIS relief is attributable,

(b) next any to which deferral relief, but not EIS relief, is attributable,

(d) finally any to which both EIS relief and deferral relief are attributable.

(4) Any shares within paragraph (c) or (d) of subsection (3) which are treated by section 201(6) as issued on an earlier day are treated as disposed of before any other shares falling within that paragraph of subsection (3).

(5) The following—

(a) any shares to which EIS relief is attributable and which were transferred to an individual as mentioned in section 245, and

(b) any shares to which deferral relief, but not EIS relief, is attributable and which were acquired by an individual on a disposal to which section 58 of TCGA 1992 applies,

are treated for the purposes of subsections (2) and (3) as acquired by the individual on the day on which they were issued.

(6) In a case to which section 127 of TCGA 1992 applies (including the 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 subsections (2) and (3) as acquired when the original shares were acquired.

(7) In this section—

“deferral relief” has the same meaning as in Schedule 5B to TCGA 1992,

“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).

“SEIS relief” means relief under Part 5A (seed enterprise investment scheme).

Acquisition of issuing company

Continuity of EIS relief where issuing company is acquired by new company

247

(1) This section applies 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,

(e) at some time before the issue of the new shares—

(i) the old company issued shares which meet the requirements of section 173(2), and

(ii) a compliance certificate in respect of those shares was issued by that company for the purposes of subsection (1) of section 203 and in accordance with section 204, and

(f) before the issue of the new shares the Commissioners for Her Majesty's Revenue and Customs have, on the application of the new company or the old company, notified that company that they are satisfied that the exchange of shares—

(i) will be effected for genuine commercial reasons, and

(ii) will not form part of any such scheme or arrangements as are mentioned in section 137(1) of TCGA 1992 (schemes with avoidance purposes).

In this subsection references to shares, except in the expressions “subscriber shares” and “shares which meet the requirements of section 173(2)”, include securities.

(2) Subsection (2) of section 138 of TCGA 1992 (procedure for advance clearance) applies for the purposes of subsection (1)(f) as it applies for the purposes of subsection (1) of that section.

(3) For the purposes of this Part—

(a) the exchange of shares is not regarded as involving any disposal of the old shares or any acquisition of the new shares, and

(b) any EIS relief which is attributable to any old shares is attributable instead to the new shares for which they are exchanged.

(3A) In section 173AB(2)(a) and in the definition of “the total relevant turnover amount” in section 175A(8), references to a company becoming a 51% subsidiary of the issuing company after the issue date do not include a company becoming such a subsidiary as a result of an exchange of shares as mentioned in subsection (1).

(4) Nothing in section 185 (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 arrangements with a view to such an exchange.

(5) 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.

(6) References in sections 248 and 249 to “old shares”, “new shares”, “the old company” and “the new company” are to be read in accordance with this section.

Carry over of obligations etc where EIS relief attributed to new shares

248

(1) This section applies if, under section 247, any EIS relief which is attributable to any old shares becomes attributable instead to any new shares.

(2) This Part has effect as if anything which, under—

(a) section 203(1) (entitlement to claim),

(b) section 234(3) (relief subsequently found not to be due), or

has been done, or is required to be done, by or in relation to the old company had been done, or were required to be done, by or in relation to the new company.

(3) Any appeal brought by the old company against a notice under section 234(3)(b) may be prosecuted by the new company as if it had been brought by that company.

Substitution of new shares for old shares

249

(1) Subsection (2) applies if, in the case of any new shares held by an individual to which EIS relief becomes attributable under section 247, the old shares for which they were exchanged were subscribed for by and issued to the individual.

(2) This Part; (except section 195(7)) has effect 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 to the individual by the new company at the time when the old shares were issued to the individual by the old company,

(d) the individual's liability to income tax had been reduced in respect of the new shares for the same tax year as that for which the individual's liability was so reduced in respect of the old shares.

(3) Subsection (4) applies if, in the case of any new shares held by an individual to which EIS relief becomes so attributable under section 247, the old shares for which they were exchanged were transferred to the individual as mentioned in section 245.

(4) This Part; (except section 195(7)) 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,

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

(d) the individual's liability to income tax had been reduced in respect of the new shares for the same tax year as that for which the liability of the individual who subscribed for the old shares was so reduced in respect of those shares.

Nominees etc

Nominees and bare trustees

250

(1) Shares subscribed for, issued to, held by or disposed of for an individual by a nominee are treated for the purposes of this Part as subscribed for, issued to, held by or disposed of by the individual.

(2) If shares have been issued to a bare trust for two or more beneficiaries, this Part has effect (with the necessary modifications) as if—

(a) each beneficiary had subscribed as an individual for all of those shares, and

(b) the amount subscribed by each beneficiary was equal to the total amount subscribed on the issue of those shares divided by the number of beneficiaries.

(3) In subsection (2) and section 251 “shares” means shares which meet the requirements of section 173(2).

Approved investment fund as nominee

251

(1) This section applies if an individual claims EIS relief in respect of shares in a company at a time when—

(a) the shares have been issued to the managers of an approved knowledge-intensive fund as nominee for the individual,

(b) the fund has closed, that is to say, no further investments in the fund are to be accepted, ...

(c) the amounts which the managers have, as nominee for the individual, subscribed for shares issued within 12 months after the closing of the fund represent at least 50% of the individual's investment in the fund.

(d) the amounts which the managers have, as nominee for the individual, subscribed for shares issued within 24 months after the closing of the fund represent at least 90% of the individual’s investment in the fund,

(e) within that 24 month period at least 80% of the individual’s investment in the fund is represented by shares in companies which are knowledge-intensive companies at the time the shares are issued, and

(f) the managers have met such conditions with respect to the provision of information to HMRC Commissioners as the Commissioners consider appropriate for the purposes of this section.

...

(1A) In this section “the managers of an approved knowledge-intensive fund” means the person or persons having the management of an investment fund—

(a) which is, in the opinion of HMRC Commissioners, a fund established for the purpose of investing wholly, or substantially wholly, in shares in companies which are knowledge-intensive companies at the time the shares are issued, and

(b) which is, having met such other conditions as HMRC Commissioners consider appropriate for the purposes of this section, approved by them for those purposes.

(2) ... Section 158 (form and amount of EIS relief) and section 201 (attribution of EIS relief to shares) have effect as if—

(a) any reference to the tax year or other period in which the shares are issued were a reference to the tax year or other period in which the fund closes, and

(b) any reference to the time of the issue of the shares, or the time of the subscription for the shares, were a reference to the time of the closing of the fund.

(2A) Accordingly, in a case where section 158 has effect with the modifications in subsection (2), the reference in section 158(4) to the issue of the shares in the preceding tax year is to the issue of the shares in the tax year preceding the tax year in which the fund closes (and references elsewhere in this Part to the issue of shares in a previous tax year are to be read accordingly).

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

(4) If an individual claims EIS relief in respect of shares in a company which have been issued to the managers of an approved knowledge-intensive fund as nominee for the individual, section 203(1) (entitlement to claim) applies as if —

(a) it required the certificate referred to in that section to be issued by the company to the managers, and

(b) it provided that no claim for EIS relief may be made unless the person making the claim has received from the managers a certificate issued by the managers in accordance with subsection (5).

(5) A certificate is issued in accordance with this subsection if—

(a) it certifies that the managers hold compliance certificates issued to them by the companies concerned, for the purposes of section 203(1), in respect of the holding of shares shown on the managers' certificate, and

(b) it is in such form as HMRC Commissioners may authorise.

Reading this document does not replace reading the official text published on legislation.gov.uk. Contains public sector information licensed under the Open Government Licence v3.0. We assume no responsibility for any inaccuracies arising from the conversion of the original CLML XML to this format.

This text is published under legislation.gov.uk's own terms of reuse, not a Legalize or public-domain licence. legislation.gov.uk
Open Government Licence v3.0 (attribution required)
© Crown and database right. Derived from content available under the Open Government Licence v3.0 from legislation.gov.uk.

Income Tax Act 2007

Excluded activities: receipt of royalties and licence fees

195

Excluded activities: property development

196

Excluded activities: hotels and comparable establishments

197

Excluded activities: nursing homes and residential care homes

198

Excluded activities: provision of services or facilities for another business

199

Supplementary

Power to amend by Treasury order

200

Chapter 5 — Attribution of and claims for EIS relief

Attribution

Attribution of EIS relief to shares

201

Claims: general

Time for making claims for EIS relief

202

Entitlement to claim

203

Claims: supporting documents

Compliance certificates

204

Compliance statements

205

Appeal against refusal to authorise compliance certificate

206

Penalties for fraudulent certificate or statement etc

207

Chapter 6 — Withdrawal or reduction of EIS relief

Introduction

Overview of Chapter

208

Disposals

Disposal of shares

209

Cases where maximum EIS relief not obtained

210

Call options

211

Put options

212

Value received by investor

Value received by the investor

213

Value received: receipts of insignificant value

214

Meaning of “receipts of insignificant value”

215

When value is received

216

The amount of value received

217

Value received where there is more than one issue of shares

218

Value received where part of share issue treated as made in previous tax year

219

Cases where maximum EIS relief not obtained

220

Receipts of value by and from connected persons etc

221

Receipt of replacement value

222

Section 222: supplementary

223

Repayments etc of share capital to other persons

Repayments etc of share capital to other persons

224

Insignificant repayments ignored for purposes of section 224

225

Amount of repayments etc where there is more than one issue of shares

226

Single issue affecting more than one individual

227

Single issue treated as made partly in previous tax year

228

Maximum relief not obtained for share issue