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

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Reform history JSON API

(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of the original value, the event occurs more than 60 days after the day on which the amount of relief which falls to be withdrawn has been finally determined.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 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 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.

(6) The managers of an approved knowledge-intensive fund may be required by a notice given to them by an officer of Revenue and Customs to deliver to the officer, within the time limited by the notice, a return of the holdings of shares shown on certificates issued by them in accordance with subsection (5) in the tax year to which the return relates.

(7) Section 207 (penalties for fraudulent certificate or statement etc) does not apply in relation to any certificate issued by the managers of an approved knowledge-intensive fund for the purposes of subsection (4).

(8) In this section “HMRC Commissioners” means the Commissioners for Her Majesty’s Revenue and Customs.

Interpretation

Meaning of a company being “in administration” or “in receivership”

252

(1) References in this Part to a company being “in administration” or “in receivership” are to be read as follows.

(2) A company is “in administration” if—

(a) it is in administration within the meaning of Schedule B1 to the Insolvency Act 1986 (c. 45) or Schedule B1 to the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), or

(b) there is in force in relation to it under the law of a country or territory outside the United Kingdom any appointment corresponding to an appointment of an administrator under either of those Schedules.

(3) A company is “in receivership” if there is in force in relation to it—

(a) an order for the appointment of an administrative receiver, a receiver and manager or a receiver under Chapter 1 or 2 of Part 3 of the Insolvency Act 1986 or Part 4 of the Insolvency (Northern Ireland) Order 1989, or

(b) any corresponding order under the law of a country or territory outside the United Kingdom.

Meaning of “associate”

253

(1) In this Part “associate”, in relation to a person, means—

(a) any relative or partner of that person,

(b) the trustee or trustees of any settlement in relation to which that person, or any relative of that person (living or dead), is or was a settlor, and

(c) if that person has an interest in any shares or obligations of a company which are subject to any trust or are part of the estate of a deceased person—

(i) the trustee or trustees of the settlement concerned or, as the case may be, the personal representatives of the deceased, and

(ii) if that person is a company, any other company which has an interest in those shares or obligations.

(2) In subsection (1)(a) and (b) “relative” means spouse or civil partner, ancestor or lineal descendant.

Meaning of “disposal of shares”

254

(1) In this Part references to a disposal of shares include references to a disposal of an interest or right in or over shares.

(2) An individual is to be treated, for the purposes of this Part, as disposing of any shares which the individual is treated by virtue of section 136 of TCGA 1992 as exchanging for other shares.

Meaning of “issue of shares”

255

(1) In this Part—

(a) references (however expressed) to an issue of shares in any company are to such of the shares in the company as are of the same class and are issued on the same day, and

(b) references (however expressed) to an issue of shares in any company to an individual are to such of the shares in the company as are of the same class and are issued to the individual on the same day.

(2) Subsection (1)(b) has effect subject to sections 201(6), 202(2), 210(2), 219(1) and 228(1).

Meaning of “the termination date”

256

(1) In this Part “the termination date”, in relation to any shares issued by a company, means—

(a) the third anniversary of the issue date, or

(b) if—

(i) the money raised by the issue was raised wholly or mainly for the purpose of a qualifying business activity within section 179(2) (the issuing company or a qualifying 90% subsidiary of that company carrying on or preparing to carry on a qualifying trade), and

(ii) neither the issuing company nor any of its qualifying 90% subsidiaries had begun to carry on the trade in question on the issue date,

the third anniversary of the date on which the issuing company or any qualifying 90% subsidiary of that company begins to carry on that trade.

(2) In determining for the purposes of subsection (1) when a qualifying trade is begun to be carried on by a qualifying 90% subsidiary of a company, any carrying on of the trade by it before it became such a subsidiary is to be ignored.

Minor definitions etc

257

(1) In this Part—

“arrangements” includes any scheme, agreement, understanding, transaction or series of transactions (whether or not legally enforceable);

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

“director” is read in accordance with section 452 of CTA 2010,

“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,

“ordinary shares” means shares forming part of a company's ordinary share capital,

“parent company” means a company that has one or more qualifying subsidiaries and “single company” means a company that does not,

“period A”, “period B” and “period C” have the meaning given by section 159, and

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

(2) Section 993 (connected persons) does not apply for the purposes of Chapter 2 (other than section 168(4)).

(3) Section 995 (control) does not apply for the purposes of the following provisions—

section 185(1)(a),

section 199(3)(a) and (b)(ii),

section 232(3),

section 233(2), and

section 243(4),

and in those provisions “control” is to be read in accordance with sections 450 and 451 of CTA 2010.

(4) In this Part—

(a) references in any provision to the reduction of any EIS relief attributable to any shares include a reference—

(i) to the reduction of the relief to nil, and

(ii) if no relief has yet been obtained, to the reduction of the amount which apart from that provision would be the EIS relief, and

(b) references to the withdrawal of EIS relief in respect of any shares are—

(i) to the withdrawal of the EIS relief attributable to those shares, or

(ii) if no relief has yet been obtained, to ceasing to be eligible for EIS relief in respect of those shares.

(5) For the purposes of this Part shares in a company are not treated as being of the same class unless they would be so treated if dealt in on a recognised stock exchange.

(6) For the purposes of this Part the market value at any time of any asset is the price which it might reasonably be expected to fetch on a sale at that time in the open market free from any interest or right which exists by way of security in or over it.

(7) In this Part—

(a) references to EIS relief obtained by an individual in respect of any shares include references to EIS relief obtained by the individual in respect of those shares at any time after the individual has disposed of them, and

(b) references to the withdrawal or reduction of EIS relief obtained by an individual in respect of any shares include references to the withdrawal or reduction of EIS relief obtained by the individual in respect of those shares at any such time.

(8) In the case of requirements that cannot be met until a future date, references in this Part to requirements being met for the time being are to nothing having occurred to prevent their being met.

Part 6 — Venture capital trusts

Chapter 1 — Introduction

Overview of Part

258

In this Part—

(a) Chapter 2 provides for VCT income tax relief (“VCT relief”), that is, entitlement to tax reductions in respect of amounts subscribed by individuals for shares issued to them by venture capital trusts,

(b) Chapter 3 provides for VCT approvals,

(d) Chapter 5 confers power for regulations to make provision in relation to the winding up and merger of venture capital trusts, and

(e) Chapter 6 makes supplementary and general provision.

Venture capital trusts and VCT approvals

259

(1) In this Part “venture capital trust” means a company which—

(a) is not a close company, and

(b) is for the time being approved for the purposes of this Part by the Commissioners for Her Majesty's Revenue and Customs (see Chapter 3),

and “VCT” means a venture capital trust.

(2) In this Part “VCT approval” means an approval of a company for the purposes of this Part.

Other tax reliefs relating to VCTs

260

(1) Chapter 5 of Part 6 of ITTOIA 2005 (venture capital trust dividends) provides that, if conditions are met, no liability to income tax arises in respect of dividends paid in respect of shares in a VCT.

(2) Section 100 of TCGA 1992 (exemption for venture capital trusts etc) provides that gains accruing to a VCT are not to be chargeable gains.

(3) Section 151A of TCGA 1992 (venture capital trusts: reliefs) provides that a gain or loss accruing to an individual on a qualifying disposal of any ordinary shares in a company which—

(a) was a VCT at the time when the individual acquired the shares, and

(b) is still a VCT at the time of the disposal,

is not to be a chargeable gain or, as the case may be, an allowable loss.

(4) Schedule 5C to TCGA 1992 (venture capital trusts: deferred charge on re-investment, but only in relation to shares issued before 6 April 2004) provides that, if conditions are met, an individual's unused qualifying expenditure on shares in a VCT may be set against what would otherwise be chargeable gains.

Chapter 2 — VCT relief

Entitlement to relief

Eligibility for relief

261

(1) An individual (“A”) is eligible for VCT relief for a tax year if—

(a) a VCT issues eligible shares to A in that year,

(b) the VCT issues the shares for raising money, and

(2) The amount in respect of which A is eligible for VCT relief for the tax year by reference to any shares is the amount subscribed by A for the shares.

(3) A is eligible for VCT relief by reference to any shares only if—

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

(a) the shares are both subscribed for and issued—

(i) for genuine commercial reasons, and

(ii) not as part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax, and

(b) A is at least 18 years old when the shares are issued.

(4) A is not eligible for VCT relief by reference to any shares if they are treated as issued to A by virtue of section 195(8) of FA 2003 (tax treatment of disposal by company of its own shares).

See section 271(4) for provision requiring the giving of notices about the effect of this subsection.

(5) The Treasury may, by regulations, amend subsection (3)(za) to substitute a different date for the date for the time being specified there.

Entitlement to claim relief

262

(1) An individual (“A”) who is eligible for VCT relief by reference to shares issued in a tax year is entitled to claim VCT relief for that year.

(2) A is entitled to claim VCT relief in respect of the amount on which A is eligible for VCT relief by reference to all or some of the shares.

This is subject to subsection (3).

(3) A is not entitled to claim VCT relief for any tax year on an amount of more than £200,000.

Form and amount of relief

263

(1) An individual who—

(a) is entitled to claim VCT relief for a tax year, and

(b) claims such relief for the year on any amount,

is entitled to a tax reduction for the year.

(2) The tax reduction is equal to 30% of the amount in respect of which the claim is made.

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

No entitlement to relief if there is a linked loan

264

(1) An individual is not entitled to VCT relief by reference to any shares (“the relevant shares”) if a linked loan is made by any person, at any time in the relevant period, to the individual or an associate of the individual.

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

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

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

(3) In this section—

“linked loan” means a loan which—would not have been made, orwould not have been made on the same terms,if the individual had not subscribed for the relevant shares or had not been proposing to do so,

“the relevant period”, in relation to VCT relief in respect of any shares in a company which is a VCT, means the period—beginning with—the incorporation of the company, orif later, the date two years before the issue of the shares, andending immediately before the fifth anniversary of that issue.

No entitlement to relief which would have been lost if it had already been obtained

265

An individual is not entitled to VCT relief by reference to any shares if circumstances have arisen which would have resulted in the withdrawal or reduction of the relief, if that relief had already been obtained.

Loss of relief

Loss of relief if shares disposed of within 5 years

266

(1) This section applies, subject to section 267 (spouses or civil partners), if an individual—

(a) obtains VCT relief in respect of eligible shares in a VCT, and

(b) makes a disposal of those shares within 5 years of their issue to the individual.

(2) In the case of a disposal that is made otherwise than by way of a bargain made at arm's length, any VCT relief obtained by reference to the shares which are disposed of is to be withdrawn.

(3) In the case of a disposal that is made by way of a bargain made at arm's length, any VCT relief obtained by reference to the shares disposed of must—

(a) if it is greater than A, be reduced by A, and

(b) in any other case, be withdrawn.

(4) A is 30% of the amount or value of the consideration which the individual receives for the shares.

(5) The rules in subsections (6) and (7) are for determining which eligible shares of any class are treated as disposed of for the purposes of—

(a) this section, and

(b) section 267,

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

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

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

(a) shares by reference to which VCT relief has not been obtained, and

(b) shares by reference to which VCT relief has been obtained.

Transfers of shares between spouses or civil partners

267

(1) Section 266 does not apply in the case of any disposal of shares made by an individual to the individual's spouse or civil partner, if it is made at a time when they are living together.

(2) Subsection (3) applies if any eligible shares which—

(a) have been issued to any individual (“the transferor”), and

(b) are shares by reference to which any VCT relief has been obtained,

are transferred to the transferor's spouse or civil partner (“the transferee”) by a disposal such as is mentioned in subsection (1).

(3) If this subsection applies, section 266 and subsection (2) have effect, in relation to any subsequent disposal or other event, as if—

(a) the transferee were the person who had subscribed for the shares,

(b) the shares had been issued to the transferee at the time when they were issued to the transferor,

(c) there had been, in relation to the transferred shares, such a reduction by way of VCT relief in the transferee's liability to income tax as is equal to the actual reduction in respect of those shares of the transferor's liability, and

(d) that deemed reduction were (despite the transfer) to be treated for the purposes of section 266 as an amount of VCT relief obtained by reference to the shares transferred.

(4) Any assessment for withdrawing or reducing VCT relief because of a disposal or other event falling within subsection (3) is to be made on the transferee.

Loss of relief if VCT approval withdrawn

268

(1) This section applies if—

(a) the approval of any company as a VCT is withdrawn, and

(b) the withdrawal of the approval is not one to which section 281(3) (VCT approval treated as never having been given) applies.

(2) Any person who, at the time when the withdrawal takes effect, is holding any shares issued by the company by reference to which VCT relief has been obtained is treated for the purposes of section 266 as having disposed of those shares—

(a) immediately before that time, and

(b) otherwise than by way of a bargain made at arm's length.

Loss of relief which is subsequently found not to have been due

269

Any VCT relief obtained which is subsequently found not to have been due is to be withdrawn.

Assessment on withdrawal or reduction of relief

270

(1) An assessment for withdrawing or reducing VCT relief under any of sections 266 to 269 must be made for the tax year for which the relief was obtained, and may be made at any time not more than 6 years after the end of that tax year.

(2) No assessment for withdrawing or reducing VCT relief obtained by reference to shares issued to any individual may be made because of any event occurring after the individual's death.

Supplementary

Provision of information

271

(1) If an event occurs that results in any VCT relief falling to be withdrawn or reduced, the individual by whom the relief was obtained must, within 60 days of coming to know of the event, give notice to an officer of Revenue and Customs containing particulars of the event.

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

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

(4) If a company which is a VCT issues to any individual eligible shares to which section 261(4) applies, it must—

(a) at the time of the issue of those shares, give the individual a notice stating that the individual is not eligible for VCT relief by reference to those shares, and

(b) not later than 3 months after the issue of those shares, give a copy of that notice to an officer of Revenue and Customs.

(5) No obligation as to secrecy imposed by statute or otherwise prevents an officer of Revenue and Customs from disclosing to a VCT that VCT relief has been obtained by reference to a particular number or proportion of its shares.

Regulations as to procedure etc

272

(1) This section applies to VCT relief and relief for which the following provide—

(a) section 151A of TCGA 1992 (VCTs: reliefs),

(b) Schedule 5C to TCGA 1992 (VCTs: deferred charge on re-investment),

(d) regulations under Chapter 5 of this Part.

(2) The Treasury may by regulations make such provision as they consider appropriate for—

(a) giving effect to relief to which this section applies, and

(b) preventing such relief from being given unless a claim is made in accordance with the regulations and such other requirements as may be imposed by the regulations have been met.

(3) Regulations under this section may make provision as to the manner in which, and the persons by whom, relief to which this section applies is to be claimed.

Interpretation of Chapter

273

(1) In this Chapter “eligible shares”, in relation to a company which is a VCT, means ordinary shares in the VCT which, throughout the period of 5 years beginning on the date on which they are issued, carry—

(a) no present or future preferential right to dividends or to a company's assets on its winding up, and

(b) no present or future right to be redeemed.

(2) In this Chapter references to a disposal of shares include references to a disposal of an interest or right in or over shares.

Chapter 3 — VCT approvals

Giving of approval

Requirements for the giving of approval

274

(1) Subject to section 275, the Commissioners for Her Majesty's Revenue and Customs must not approve a company for the purposes of this Part unless it is shown to their satisfaction that the conditions mentioned in subsection (2)—

(a) are met in relation to the most recent complete accounting period of the company, and

(b) will be met in relation to the accounting period of the company which is current when the application for approval is made.

(2) The conditions applied by subsection (1) (which are also applied by section 275(1) and other provisions of this Chapter) are set out in column 2 of the following table together with, in column 1 of the table, the descriptions by which they are referred to. In each of those conditions “the relevant period” means the accounting period that is relevant for the purposes of the particular provision by which the condition is applied.

Description	Condition
The listing condition	The shares making up the company's ordinary share capital (or, if there are such shares of more than one class, those of each class) have been or will be admitted to trading on a regulated market throughout the relevant period
The nature of income condition	The company's income in the relevant period has been or will be derived wholly or mainly from shares or securities
The income retention condition	The company has not retained or will not retain an amount which is greater than 15% of the income it derived or will derive in the relevant period from shares or securities
The 15% holding limit condition	No holding in any company, other than a VCT or a company that would qualify as a VCT but for the listing condition, has represented or will represent at any time during the relevant period more than 15% by value of the company's investments
The 80% qualifying holdings condition	At least 70% by value of the company's investments has been or will be represented throughout the relevant period by shares or securities included in qualifying holdings of the company
The 70% eligible shares condition	At least 70% by value of the company's qualifying holdings has been or will be represented throughout the relevant period by holdings of eligible shares
The non-qualifying investments condition	The company has not made and will not make, in the relevant period, an investment which is neither of the following— (a) an investment that on the date it is made is included in the company's qualifying holdings; (b) an investment falling within subsection (3A)
The investment limits condition	The company has not made and will not make an investment, in the relevant period, in a company which breaches the permitted investment limits
The minimum investment on further issue condition	The company has not breached and will not breach, in the relevant period, the minimum investment on further issue condition
The permitted maximum age condition	The company has not made and will not make an investment, in the relevant period, in a company which breaches the permitted maximum age limit.
The no business acquisition condition	The company has not made and will not make an investment, in the relevant period, in a company which breaches the prohibition on business acquisitions.

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