Finance Act 2012

Provision	The amount of value received
Section 257FH(2)(a), (b) or (c)	The amount received by the investor or, if greater, the market value of the shares, securities or debt
Section 257FH(2)(d)	The amount of the liability
Section 257FH(2)(e)	The amount of the loan or advance, less the amount of any repayment made before the issue of the relevant shares
Section 257FH(2)(f)	The cost to the issuing company of providing the benefit or facility, less any consideration given for it by the investor
Section 257FH(2)(g)	The difference between the market value of the asset and the consideration (if any) given for it
Section 257FH(2)(h)	The amount of the payment
Section 257FH(7)	The amount of the payment or the market value of the asset
Section 257FH(8)	The amount received by the investor or, if greater, the market value of the shares or securities

(257FJ) (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 SEIS 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 257FE(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— $$A B$where—A is the amount on which the investor obtains SEIS relief in respect of the shares included in the issue in question, andB is the sum of that amount and the corresponding amount or amounts in respect of the other issue or issues.$ (3) For the purposes of subsection (1) “the applicable period” for an issue of shares is period A in relation to those shares. (257FK) (1) This section applies if— (a) section 257FE(2) applies to an issue of shares, and (b) section 257AB(1) and (2) (form and amount of SEIS 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 257FE(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—$A B$where—A is the amount on which the investor obtains SEIS 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 257FL if appropriate but do not apply section 257FJ. - Step 3 Add amounts X1 and X2 together. The result is the required amount. (257FL) (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 SEIS rate on the amount on which the investor claims SEIS relief in respect of the shares, section 257FE(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— $A B$ (2) If the amount of SEIS relief attributable to any of the relevant shares has been reduced before the SEIS 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 SEIS relief by virtue of section 257E(4) (attribution of SEIS relief where there is a corresponding issue of bonus shares). (257FM) In sections 257FE, 257FF and 257FH to 257FJ— (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). (257FN) (1) If— (a) any SEIS relief attributable to the relevant shares would, in the absence of this section, be reduced or withdrawn under section 257FE because of a receipt of value within section 257FH(2), (7) or (8) (“the original value”), (b) the original supplier receives value (“replacement value”) from the original recipient and the receipt is a qualifying receipt, and (c) the amount of the replacement value is at least the amount of the original value, section 257FE does not, because of the receipt of value, have effect to reduce or withdraw the SEIS relief. This is subject to section 257FO(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 257FJ, treated as reduced for the purposes of section 257FE(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 257FH(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 257FH(8), 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 A 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 A relating to the relevant shares, is an associate of that recipient (whether or not the person is such an associate at the material time), (c) any payment for the acquisition of an asset which does not exceed its market value, (d) any payment, as rent for any property occupied by— (i) the original recipient, or (ii) any person who, at any time in period A 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 (c) in a case within subsection (4)(c), the amount or value of the consideration received by the original supplier. Section 257FI applies for the purpose of determining 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 257FH(13). (257FO) (1) The receipt of the replacement value by the original supplier is ignored for the purposes of section 257FN(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 SEIS relief under section 257FE. (2) The receipt of the replacement value by the original supplier (“the event”) is ignored for the purposes of section 257FN if— (a) the event occurs before period A 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 SEIS 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 257FN 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 257FN(1), (b) in consequence of the receipt, any receipts of value are ignored for the purposes of section 257FE as that section applies in relation to the shares in question or any other shares subscribed for by the investor, and (c) the event which gives rise to the receipt is (or includes) a subscription for shares by— (i) the investor, or (ii) any person who at any time in period A 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 subsection (3) applies, the person who subscribes for the shares is not to be eligible for any SEIS 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 257FN. (257FP) (1) Any SEIS 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 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) controls or, at any time in period A, has controlled the company, and (b) at any such time, controlled another company which previously carried on the trade. (4) For the purposes of subsection (2)— (a) for the purposes 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 this section “trade” includes any business or profession, and references to a trade previously carried on include references to part of such a trade. (257FQ) (1) Any SEIS 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) controls or, at any time in period A, has controlled the company, and (b) at any such time, controlled the other company. (257FR) (1) Any SEIS relief obtained by the investor which is subsequently found not to have been due must be withdrawn. (2) SEIS relief obtained by the investor in respect of the relevant shares may not be withdrawn on the ground— (a) that the requirements of sections 257CB and 257CC (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 257GF (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 SEIS 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. (257G) If any SEIS 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. (257GA) 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 257FR(3)(b) is taken to be a decision disallowing a claim by the issuing company. (257GB) (1) An officer of Revenue and Customs may— (a) make an assessment for withdrawing or reducing the SEIS relief attributable to any of the relevant shares, or (b) give a notice under section 257FR(3), 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 period B ends, or (b) the tax year in which the event which causes the SEIS 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). (257GC) (1) No assessment for withdrawing or reducing SEIS 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 257FA(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 SEIS relief is attributable, or (ii) in relation to which period A has not come to an end. (3) No assessment for withdrawing or reducing SEIS relief in respect of those shares may be made because of any subsequent event unless the event occurs at a time when the individual— (a) has a substantial interest in the company within the meaning of section 257BB, (b) is an employee of the issuing company, or (c) is a director of the issuing company. (257GD) (1) In its application to an assessment made by virtue of section 257G 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 in which the assessment is made. (2) The provisions are— (a) section 257BB (no substantial interest in the issuing company), (b) section 257BD (no linked loan requirement), (c) sections 257DA to 257DN (Chapter 4 requirements), (d) section 257FA (disposal of shares), (e) section 257FD (put options), (f) section 257FE (receipt of value by the investor), (g) section 257FP (acquisition of a trade or trading asset), (h) section 257FQ (acquisition of share capital). (257GE) (1) This section applies if the investor has obtained SEIS 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 SEIS relief falls to be withdrawn or reduced by virtue of section 257BD (no linked loans requirement), (c) the SEIS relief falls to be withdrawn or reduced under— (i) section 257FA (disposal of shares), (ii) section 257FC (call options), or (iii) section 257FD (put options), or (d) the SEIS relief falls to be withdrawn or reduced under section 257FE (receipt of value by the investor), or would fall to be so withdrawn or reduced but for section 257FN (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 257FE, or would be within that section but for section 257FN, 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 257FN. (257GF) (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— (a) the requirement of section 257CC (spending of the money raised) is not met in respect of any of the shares included in the issue, or would not be met if SEIS 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 SEIS relief had been obtained in respect of the shares in question, or (c) any of the provisions of Chapter 6 mentioned in subsection (2) has effect to cause any SEIS relief attributable to any of the shares included in the issue to be withdrawn or reduced, or— (i) would have such an effect if SEIS relief had been obtained in respect of the shares in question, or (ii) in the case of section 257FE, would have such an effect but for section 257FN (receipt of replacement value). (2) The provision are— (a) section 257FE (value received by the investor), (b) section 257FP (acquisition of a trade or trading asset), and (c) section 257FQ (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 257FH(2) from a person connected with the company (see section 257FM), 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 257FE, or would be within that section but for section 257FN, 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 257FN. (257GG) (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 257GE or 257GF in respect of any event, or (b) has given or received value within the meaning of section 257FH(2) or (8) 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. (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 257FG(2). (257GH) (1) Subsection (2) applies if SEIS 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 arrangements or scheme as is mentioned in— (a) section 257BC (no related investment arrangements), (b) section 257BE or 257DB(2) or (4) (no tax avoidance), (c) section 257CD(1) (no pre-arranged exits), (d) section 257CF (no disqualifying arrangements), (e) section 257DB(4) (winding up, administration etc), or (f) section 257DG(1) or (2) (conditions ceasing to be met). (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 and any person connected with the company
Subsection (1)(d)	The claimant, the company, any person controlling the company and any person who an officer of Revenue and Customs has reason to believe may be a party to the arrangements in question
Subsection (1)(e)	The claimant, the company, any other company in question and any person controlling the company or any other company in question
Subsection (1)(f)	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 257H (spouses or civil partners) of any of the shares in question.

(5) If SEIS 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 257FE, 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 SEIS 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. (257GI) No obligation of secrecy imposed by statute or otherwise prevents an officer of Revenue and Customs from disclosing to a company that SEIS relief has been obtained or claimed in respect of a particular number or proportion of its shares. (257H) (1) This section applies if— (a) shares to which an amount of SEIS relief is attributable were issued to an individual (“A”), (b) A transferred the shares to another individual (“B”) during their lives, (c) A was married to, or was the civil partner of, B at the time of the transfer, and (d) section 257FA (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 SEIS relief had continued to be attributable to the shares despite the transfer. (3) If the amount of SEIS 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 SEIS relief attributable to the shares transferred to B had been correspondingly reduced before the relief was obtained by B, and (b) sections 257FB(3) and 257FL(2) 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 SEIS relief is to be made, the assessment is to be made on B. (257HA) (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 257FA (disposal of shares), or (b) section 257H (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 SEIS relief is attributable, (b) next any to which SEIS relief (but not SEIS re-investment relief) is attributable, and (c) next any to which SEIS relief and SEIS re-investment relief are attributable. (4) Any shares to which SEIS relief is attributable and which were transferred to an individual as mentioned in section 257H are treated for the purposes of subsections (2) and (3) as acquired by the individual on the day on which they were issued. (5) 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. (6) In this section— - “new holding” and “original shares” have the same meaning as in section 127 of TCGA 1992 (or, as the case may be, that section as applied by the enactment concerned); - “SEIS re-investment relief” means relief under Schedule 5BB to TCGA 1992. (257HB) (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 257CA(2), and (ii) a compliance certificate in respect of those shares was issued by that company for the purposes of subsection (1) of section 257EB and in accordance with section 257EC, 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 257CA(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 SEIS relief which is attributable to any old shares is attributable instead to the new shares for which they are exchanged. (4) Nothing in section 257DG (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 257HC and 257HD to “old shares”, “new shares”, “the old company” and “the new company” are to be read in accordance with this section. (257HC) (1) This section applies if, under section 257HB, any SEIS 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 257EB(1) (entitlement to claim), (b) section 257FR(3) (relief subsequently found not to be due), or (c) sections 257GF to 257GH (information to be provided), 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 257FR(3)(b) may be prosecuted by the new company as if it had been brought by that company. (257HD) (1) Subsection (2) applies if, in the case of any new shares held by an individual to which SEIS relief becomes attributable under section 257HB, the old shares for which they were exchanged were subscribed for by and issued to the individual. (2) This Part 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, (c) the claim for SEIS relief made in respect of the old shares had been made in respect of the new shares, and (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 SEIS relief becomes so attributable under section 257HB, the old shares for which they were exchanged were transferred to the individual as mentioned in section 257H. (4) This Part 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, (c) the claim for SEIS relief made in respect of the old shares had been made in respect of the new shares, and (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. (257HE) (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) “shares” means shares which meet the requirements of section 257CA(2). (257HF) (1) For the purposes of this Part a qualifying trade carried on by the issuing company or a qualifying 90% subsidiary of that company (“the relevant company”) is a “new qualifying trade” if (and only if)— (a) the trade does not begin to be carried on (whether by the relevant company or any other person) before the two year pre-investment period, and (b) at no time before the relevant company begins to carry on the trade was any other trade being carried on by the issuing company or by any company that was a 51% subsidiary of the issuing company at the time in question. (2) In this section— - “qualifying trade” has the same meaning as in Part 5 (see sections 189 and 192 to 200); - “two year pre-investment period” means the period of 2 years ending immediately before the day on which the relevant shares are issued. (257HG) (1) In this Part “qualifying business activity”, in relation to the issuing company, means— (a) activity A, or (b) activity B, if it is carried on by the company or a qualifying 90% subsidiary of the company. This is subject to subsection (3). (2) Activity A is— (a) the carrying on of a new qualifying trade which, on the date the relevant shares are issued, the company or a qualifying 90% subsidiary of the company is carrying on, or (b) the activity of preparing to carry on (or preparing to carry on and then carrying on) a new qualifying trade— (i) which, on that date, is intended to be carried on by the company or such a subsidiary, and (ii) which is begun to be carried on by the company or such a subsidiary. (3) Activity B is the carrying on of research and development— (a) which, on the date the relevant shares are issued, the company or a qualifying 90% subsidiary of the company is carrying on, or which the company or such a subsidiary begins to carry on immediately afterwards, and (b) from which, on that date, it is intended— (i) that a new qualifying trade which the company or such a subsidiary will carry on will be derived, or (ii) that a new qualifying trade which the company or such a subsidiary is carrying on, or will carry on, will benefit. (4) For the purposes of subsection (3)(a), when research and development is begun to be carried on by a qualifying 90% subsidiary of the issuing company, any carrying on of the research and development by it before it became such a subsidiary is ignored. (5) References in subsection (2)(b)(i) or (3)(b) to a qualifying 90% subsidiary of the issuing company include references to any existing or future company which will be such a subsidiary at any future time. (257HH) (1) In this Part references to a disposal of shares include a reference 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. (257HI) (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 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 in one capacity on the same day. (2) Subsection (1)(b) has effect subject to sections 257E(6), 257EA(2), 257FB(2) and 257FK(1). (257HJ) (1) In this Part— - “arrangements” includes any scheme, agreement, understanding, transaction or series of transactions (whether or not legally enforceable); - “associate” has the same meaning as in Part 5 (see section 253); - “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; - “EIS relief” means relief under Part 5; - “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; - “permanent establishment” has the same meaning as in Part 5 (see section 191A); - “qualifying subsidiary” has the same meaning as in Part 5 (see section 191); - “qualifying 90% subsidiary” has the same meaning as in Part 5 (see section 190); - “research and development” has the meaning given by section 1006. (2) Section 252 (meaning of a company being “in administration” or “in receivership”) applies for the purposes of this Part. (3) Section 995 (control) does not apply for the purposes of the following provisions— (a) section 257DG(1)(a), (b) section 257FP, (c) section 257FQ, (d) section 257GH(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 SEIS 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 SEIS relief, and (b) references to the withdrawal of SEIS relief in respect of any shares are— (i) to the withdrawal of the SEIS relief attributable to those shares, or (ii) if no relief has yet been obtained, to ceasing to be eligible for SEIS 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 SEIS relief obtained by an individual in respect of any shares include a reference to SEIS 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 SEIS relief obtained by an individual in respect of any shares include a reference to the withdrawal or reduction of SEIS relief obtained by the individual in respect of those shares at any 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 2 — Relief for capital gains

Introductory

2

TCGA 1992 is amended as follows.

Disposal of shares to which SEIS relief is attributable

3

Before section 151 insert—

(150E) (1) For the purpose of determining the gain or loss on any disposal of shares by an individual where— (a) an amount of SEIS relief is attributable to the shares, and (b) apart from this subsection there would be a loss, the consideration given by the individual for the shares is to be treated as reduced by the amount of the relief. (2) Where— (a) shares are disposed of by an individual after the end of the period referred to in section 257AC(2) of ITA 2007, (b) an amount of SEIS relief is attributable to the shares, and (c) (apart from this subsection) there would be a gain, the gain is not a chargeable gain. (3) Despite section 16(2), subsection (2) does not apply to a disposal on which a loss accrues. (4) Subsection (5) applies where— (a) an individual's liability to income tax has been reduced (or treated by virtue of section 257H of ITA 2007 (spouses and civil partners) as reduced) for any tax year under section 257AB of that Act in respect of an issue of shares, (b) the amount of the reduction (“R”) is less than the amount (“T”) which is equal to tax at the SEIS rate on the amount subscribed for the issue, and (c) R is not within paragraph (b) solely by virtue of section 29(2) and (3) of ITA 2007. (5) If there is a disposal of the shares on which there is a gain, subsection (2) applies only to so much of the gain as is found by multiplying it by the fraction— $R T$ (6) Any question as to— (a) which of any shares that— (i) are acquired by an individual at different times, and (ii) are shares to which SEIS relief is attributable, a disposal relates to, or (b) whether a disposal relates to shares to which SEIS relief is attributable, is to be determined for the purposes of capital gains tax as for the purposes of section 257HA of ITA 2007. Chapter 1 of this Part has effect subject to this subsection. (7) Sections 104, 105 and 106A do not apply to shares to which SEIS relief is attributable. (8) Where— (a) an individual holds shares (“the existing holding”) which form part of the ordinary share capital of a company, (b) there is, by virtue of any such allotment for payment as is mentioned in section 126(2)(a), a reorganisation affecting the existing holding, and (c) immediately following the reorganisation, SEIS relief is attributable to the existing holding or the allotted shares, sections 127 to 130 do not apply in relation to the existing holding. (9) Sections 135 and 136 do not apply in respect of shares to which SEIS relief is attributable. (10) Subsection (9) does not have effect to disapply section 135 or 136 where— (a) the new holding consists of new ordinary shares carrying no present or future preferential right to dividends or to a company's assets on its winding up and no present or future right to be redeemed, (b) the new shares are issued after the end of the relevant period, and (c) the condition in subsection (11) is satisfied. (11) The condition is that at some time before the issue of the new shares— (a) the company issuing them issued eligible shares, and (b) a certificate in relation to those eligible shares was issued by the company for the purposes of section 257EB(1) of ITA 2007 and in accordance with sections 257EC and 257ED of that Act. (12) All such adjustments of capital gains tax are to be made, whether by way of assessment or by way of discharge or repayment of tax, as may be required in consequence of the SEIS relief being given or withdrawn. (13) Where shares to which SEIS relief is attributable are exchanged for other shares in circumstances such that section 257HB of ITA 2007 (acquisition of share capital by new company) applies— (a) subsection (9) above does not have effect to disapply section 135, and (b) sections 257HB(3)(b), 257HC(2)(a) and 257HD of ITA 2007 apply for the purposes of this section as they apply for the purposes of Part 5A of that Act. (14) For the purposes of this section— - “eligible shares” means shares that meet the requirements of section 257CA(2); - “new holding” is to be construed in accordance with sections 126, 127, 135 and 136; - “ordinary share capital” has the meaning given in section 989 of ITA 2007; - “ordinary shares”, in relation to a company, means shares forming part of its ordinary share capital; - “relevant period” means the period found by applying section 257AC(2) of ITA 2007 by reference to the company issuing the shares referred to in subsection (9) and by reference to those shares; - “the SEIS rate” has the meaning given by section 257AB(3) of ITA 2007; - “SEIS relief” means relief under Part 5A of ITA 2007 (seed enterprise investment scheme); and that Part applies to determine whether SEIS relief is attributable to any shares and, if so, the amount of SEIS relief so attributable. (150F) (1) This section has effect where— (a) section 150E(2) applies on a disposal of shares, and (b) before the disposal, value is received in circumstances where SEIS relief attributable to the shares is reduced by an amount under section 257FE(2)(a) of ITA 2007. (2) If section 150E(2) applies on the disposal but section 150E(5) does not, section 150E(2) applies only to so much of the gain as remains after deducting so much of it as is found by multiplying it by the fraction— $$A B$where—A is the amount by which the SEIS relief attributable to the shares is reduced as mentioned in subsection (1), andB is the amount of the relief attributable to the shares.$ (3) If section 150E(2) and (5) apply on the disposal, section 150E(2) applies only to so much of the gain as is found by— (a) taking the part of the gain found under section 150E(5), and (b) deducting from that part so much of it as is found by multiplying it by the fraction mentioned in subsection (2) above. (4) Where the SEIS relief attributable to the shares is reduced as mentioned in subsection (1) by more than one amount, “A” in subsection (2) is to be taken to be equal to the aggregate of the amounts. (5) The amount which is “B” in subsection (2) is to be found without regard to any reduction mentioned in subsection (1). (6) For the purposes of this section, Part 5A of ITA 2007 (seed enterprise investment scheme) applies to determine whether SEIS relief is attributable to any shares and, if so, the amount of SEIS relief so attributable.

Seed enterprise investment scheme: re-investment relief

4

After section 150F (inserted by paragraph 3 of this Schedule) insert—

(150G) Schedule 5BB to this Act (which provides relief in respect of re-investment under the seed enterprise investment scheme in the tax year 2012-13) has effect.

5

After Schedule 5B insert—

SCHEDULE 5BB (1) is to be set against a corresponding amount of the original gain. (1) Sub-paragraph (5) applies where conditions A to C are met in relation to an individual (“the investor”). (2) Condition A is that— (a) there would (ignoring sub-paragraphs (5) and (6)) be a chargeable gain (“the original gain”) accruing to the investor at any time in the tax year 2012-13, and (b) the original gain is one accruing on the disposal of an asset by the investor at any time (“the disposal time”) in that year. (3) Condition B is that— (a) the investor is eligible for SEIS relief for the tax year 2012-13 in respect of an amount subscribed for an issue of shares in a company made to the investor in that year, (b) the investor makes a claim for and obtains SEIS relief for that year in respect of all or some of those shares (“the relevant SEIS shares”), and (c) if the relevant SEIS shares, or any corresponding bonus shares in relation to those shares, were issued before the disposal time, they are still held by the investor at the disposal time. (4) Condition C is that— (a) the investor has made a claim under this paragraph for relief in relation to the original gain, and (b) the claim is in respect of the amount on which SEIS relief is claimed by the investor in respect of the relevant SEIS shares (“the SEIS expenditure”) or part of that amount. (5) So much of the SEIS expenditure as— (a) is specified in the claim, (b) is unused, and (c) does not exceed so much of the original gain as is unmatched, (6) Where an amount of the SEIS expenditure is set against the whole or part of the original gain under sub-paragraph (5), so much of that gain as is equal to that amount is to be treated as not being a chargeable gain. (7) For the purposes of this paragraph— (a) the SEIS expenditure is unused to the extent that it has not already been set under sub-paragraph (5) or paragraph 2(1) of Schedule 5B against the whole or any part of a chargeable gain, and (b) the original gain is unmatched, in relation to the SEIS expenditure, to the extent that it has not had any other expenditure set against it under sub-paragraph (5) or paragraph 2(1) of Schedule 5B. (2) (1) Sub-paragraph (2) applies if the investor's tax reduction under section 257AB of ITA 2007 for the tax year 2012-13 is limited by subsection (2)(b) of that section (calculation of tax reduction where claim made for amounts subscribed for shares which exceed £100,000). (2) Paragraph 1(5) to (7) has effect as if references to the SEIS expenditure were references to so much of that expenditure as is given by the formula— $$SA TSA × £ 100,000$where—SA means the SEIS expenditure (ignoring this paragraph);TSA means the total of the amounts subscribed for shares issued in the tax year 2012-13 in respect of which the investor is eligible for and claims SEIS relief for that tax year.$ (3) Sub-paragraph (4) applies if the amount of SEIS relief attributable to any of the relevant SEIS shares has been reduced under Chapter 6 of Part 5A of ITA 2007 before the SEIS relief was obtained (otherwise than by virtue of corresponding bonus shares being issued in respect of those shares). (4) Paragraph 1(5) to (7) has effect as if the SEIS expenditure were the amount found by multiplying that expenditure by the fraction— $$R 1 R 2$where—“R1” means the amount of SEIS relief attributable to the relevant SEIS shares when the relief is obtained;“R2” means the amount of SEIS relief which would have been so attributable in the absence of the reduction.$ (5) In a case where sub-paragraphs (2) and (4) both apply, sub-paragraph (2) is to be applied before sub-paragraph (4). (3) (1) Section 257EA of ITA 2007 (time for making claims for SEIS relief) applies in relation to a claim made by the investor for the purposes of paragraph 1 in relation to the SEIS expenditure as it applies in relation to a claim for SEIS relief in respect of that expenditure. (2) Nothing in paragraph 1(3) prevents a claim being made by the investor under paragraph 1 before SEIS relief has actually been obtained by the investor in relation to the SEIS relief. (4) (1) References in this Schedule to the SEIS re-investment relief attributable to any shares are to be read as references to the total amount attributed to those shares in accordance with this paragraph. (2) Sub-paragraph (3) applies where the whole or part of the SEIS expenditure is set off against a chargeable gain under paragraph 1(5). (3) A proportionate part of the expenditure which is so set off is attributed to each of the relevant SEIS shares. (4) Sub-paragraph (5) applies if corresponding bonus shares are issued in respect of all or some of the relevant SEIS shares (“the original shares”) to which relief is attributed under this paragraph. (5) A proportionate part of the total amount attributed to the original shares immediately before those bonus shares are issued is attributed to each of the shares in the holding comprising the original shares and those bonus shares. (5) (1) This paragraph applies where in respect of shares issued to an individual— (a) SEIS relief is attributable to the shares, (b) SEIS re-investment relief is also attributable to the shares, and (c) the SEIS relief which is attributable to the shares is withdrawn or reduced under Chapters 6 and 7 of Part 5A of ITA 2007. (2) A chargeable gain accrues to the individual in the tax year 2012-13 on a disposal made in that tax year. (3) The amount of that gain is— (a) in a case where the SEIS relief is withdrawn, the amount of SEIS re-investment relief which is attributable to the shares immediately before the withdrawal, and (b) in a case where the SEIS relief is reduced, the appropriate fraction of that amount. (4) In a case where the SEIS re-investment relief is withdrawn, the SEIS re-investment relief ceases to be attributable to the shares. (5) In a case where the SEIS relief is reduced, the appropriate fraction of the SEIS re-investment relief ceases to be attributable to the shares. (6) “The appropriate fraction” is— $$R 1 − R 2 R 1$where—“R1” is the total amount of the SEIS relief attributable to those shares immediately before the reduction, and“R2” is the total amount of the SEIS relief attributable to those shares immediately after the reduction.$ (6) (1) This paragraph applies if— (a) shares to which an amount of SEIS relief is attributable were issued to an individual (“A”), (b) A transferred the shares to another individual (“B”) during their lives, (c) A was married to, or was the civil partner of, B at the time of the transfer, and (d) subsection (4) of section 257FA of ITA 2007 (provision about disposals of shares disapplied where disposal between spouses or civil partners) prevented that section applying to the transfer. (2) Any chargeable gain which accrues by virtue of paragraph 5(2), as a result of SEIS relief attributable to the shares being withdrawn or reduced after the shares are transferred, is to accrue to B (instead of to A). (7) (1) All such adjustments of capital gains tax are to be made, whether by way of assessment or by way of discharge or repayment of tax, as may be required in consequence of relief being obtained, or a gain accruing, under this Schedule. (2) In its application to an assessment made by virtue of this paragraph, section 86 of TMA 1970 (interest on overdue capital gains tax) has effect as if the relevant date were 31 January next following the tax year in which the assessment is made. (8) (1) In this Schedule— - “bonus shares” means shares which are issued otherwise than for payment (whether in cash or otherwise); - “corresponding bonus shares”, in relation to any shares (“the original shares”), means bonus shares which are in the same company, of the same class, and carry the same rights as the original shares; - “SEIS relief” has the same meaning as in Part 5A of ITA 2007. (2) In this Schedule, 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 in one capacity and on the same day. This is subject to sub-paragraph (3). (3) If section 257AB(1) and (2) of ITA 2007 applies, in the case of any issue of shares made to an individual, as if part of the issue had been issued in a previous tax year, this Schedule 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). (4) Part 5A of ITA 2007 applies, for the purposes of this Schedule, to determine whether SEIS relief is attributable to any shares and, if so, the amount of relief so attributable.

PART 3 — Consequential amendments

ITA 2007

6

ITA 2007 is amended as follows.

7

In section 2 (overview of Act), after subsection (5) insert—

(5A) Part 5A is about relief under the seed enterprise investment scheme.

8

In section 26 (tax reductions), in subsection (1)(a), after the entry for Chapter 1 of Part 5, insert— “ Chapter 1 of Part 5A (SEIS relief), ”.

9

In section 27 (order of deducting tax reductions: individual), in subsection (5), after the entry for “Chapter 1 of Part 5 (EIS relief)” insert— “ Chapter 1 of Part 5A (SEIS relief), ”.

10

In section 169 (directors qualifying for relief despite connection), in subsection (4), for the words after “before” substitute

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

11

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

12

In section 173A (enterprise investment scheme: maximum amount raised annually through risk capital schemes requirement), in subsection (3)(b), after sub-paragraph (i) (and the “or” at the end of it) insert—

(ia) a compliance statement under section 257ED (seed enterprise investment scheme).

13

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

14

• (1) Section 246 (identification of shares on a disposal) is amended as follows.

• (2) In subsection (3)—

• (a) in paragraph (a) for “neither EIS relief nor deferral relief” substitute “ no EIS relief, deferral relief or SEIS relief ”, and

• (b) after that paragraph insert—

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

.

• (3) In subsection (7), at the end insert—

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

15

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

16

In section 292A (venture capital trusts: maximum amount raised annually through risk capital schemes requirement), in subsection (3)(b), after sub-paragraph (i) (and the “or” at the end of it) insert—

(ia) a compliance statement under section 257ED (seed enterprise investment scheme).

17

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

18

• (1) Schedule 4 (index of defined expressions) is amended as follows.

• (2) Insert the following entries at the appropriate places—

arrangements (in Part 5A)	section 257HJ(1)
associate (in Part 5A)	section 257HJ(1)
---	---
bonus shares (in Part 5A)	section 257HJ(1)
---	---
compliance certificate (in Part 5A)	section 257EC(1)
---	---
compliance statement (in Part 5A)	section 257ED(1)
---	---
director (in Part 5A)	section 257HJ(1)
---	---
disposal of shares (in Part 5A)	section 257HH
---	---
EIS relief (in Part 5A)	section 257HJ(1)
---	---
group (in Part 5A)	section 257HJ(1)
---	---
group company (in Part 5A)	section 257HJ(1)
---	---
issue of shares (in Part 5A)	section 257HI
---	---
market value (in Part 5A)	section 257HJ(6)
---	---
new qualifying trade (in Part 5A)	section 257HF
---	---
ordinary shares (in Part 5A)	section 257HJ(1)
---	---
parent company (in Part 5A)	section 257HJ(1)
---	---
period A, period B (in Part 5A)	section 257AC
---	---
permanent establishment (in Part 5A)	section 257HJ(1)
---	---
qualifying business activity (in Part 5A)	section 257HG
---	---
qualifying subsidiary (in Part 5A)	section 257HJ(1)
---	---
qualifying 90% subsidiary (in Part 5A)	section 257HJ(1)
---	---
research and development (in Part 5A)	section 257HJ(1)
---	---
SEIS (in Part 5A)	section 257A(2)
---	---
single company (in Part 5A)	section 257HJ(1)
---	---

• (3) In the entry for “control”, in the second column, after “257(3),” insert “ 257HJ(3), ”.

TCGA 1992

19

TCGA 1992 is amended as follows.

20

• (1) Section 150A (enterprise investment scheme) is amended as follows.

• (2) For “relief”, in each place it occurs (except subsections (6)(c) and (10)), substitute “ EIS relief ”.

• (3) In subsection (6)—

• (a) omit the “and” at the end of paragraph (b) and after that paragraph insert—

(ba) shares to which SEIS relief is attributable; and

,

• (b) in paragraph (c), for “relief is not” substitute “ neither EIS nor SEIS relief is ”, and

• (c) after “paragraph (a), (b)” insert “ , (ba) ”.

• (4) In subsection (10), for “the relief” substitute “ EIS relief ”.

• (5) In subsection (10A), at the appropriate place, insert—

“EIS relief” means relief under Chapter 3 of Part 7 of the Taxes Act or Part 5 of ITA 2007;

, and

“SEIS relief” means relief under Part 5A of ITA 2007.

21

• (1) Section 150B (enterprise investment scheme: reduction of relief) is amended as follows.

• (2) For “relief”, in each place it occurs, substitute “ EIS relief ”.

• (3) After subsection (5) insert—

(5A) In this section “EIS relief” means relief under Chapter 3 of Part 7 of the Taxes Act or Part 5 of ITA 2007.

22

In Schedule 5B (enterprise investment scheme: re-investment), in paragraph 2 (postponement of original gain)—

• (a) in sub-paragraph (3)(b), after “Schedule” insert “ or paragraph 1(5) of Schedule 5BB ”, and

• (b) in sub-paragraph (4), after “this Schedule” insert “ or paragraph 1(5) of Schedule 5BB ”.

TMA 1970

23

In section 98 of TMA 1970 (special returns, etc)—

• (a) in the first column of the Table, after the entry for “sections 242 and 243(1) and (2) of ITA 2007” insert—

sections 257GG and 257GH(1) and (2) of ITA 2007;

, and

• (b) in the second column of that Table, after the entry for “sections 240 and 241 of ITA 2007” insert—

sections 257GE and 257GF of ITA 2007;

.

PART 4 — Commencement

24

• (1) Subject to sub-paragraphs (2) and (3), the amendments made by this Schedule have effect in relation to shares issued on or after 6 April 2012.

• (2) The amendments made by paragraphs 15 to 17 have effect for the purpose of determining whether shares or securities issued on or after 6 April 2012 are to be regarded as comprised in a company's qualifying holdings.

• (3) Sub-paragraph (1) does not apply to the amendments made by paragraphs 4, 5 and 22.

SCHEDULE 7

PART 1 — Enterprise investment scheme

Introduction

1

Part 5 of ITA 2007 (enterprise investment scheme) is amended as follows.

Minimum subscription

2

In section 157 (eligibility for EIS relief), omit subsections (2) and (3).

Increase in amount of relief

3

• (1) In section 158 (form and amount of EIS relief), in subsection (2)(b) for “£500,000” substitute “ £1 million ”.

• (2) Accordingly, section 31 of FA 2008 is repealed.

Loan capital

4

In section 170 (person interested in capital etc of company)—

• (a) in subsection (1)(b), omit “loan capital and”, and

• (b) omit subsections (8) and (10).

Overview of Chapter 3

5

In section 172 (overview of Chapter 3), omit the “and” at the end of paragraph (e) and after paragraph (f) insert

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

Relaxation of the shares requirement

6

• (1) Section 173 (the shares requirement) is amended as follows.

• (2) In subsection (2), for paragraph (a) (but not the “or” after it) substitute—

(a) any present or future preferential right to dividends that is within subsection (2A), (aa) any present or future preferential right to a company's assets on its winding up,

• (3) After that subsection insert—

(2A) A preferential right to dividends carried by a share in a company is within this subsection if— (a) the amount of any dividends payable pursuant to the right, or the date or dates on which they are payable, depend to any extent on a decision of the company, the holder of the share or any other person, or (b) the amount of any dividends that become payable at any time pursuant to the right includes any amount that became payable at any earlier time pursuant to the right, but has not been paid.

Increase in the maximum amount permitted to be raised annually

7

• (1) Section 173A (the maximum amount raised annually through risk capital schemes requirement) is amended as follows.

• (2) In subsection (1) for “£2 million” substitute “ £5 million ”.

• (3) In subsection (3)—

• (a) in paragraph (b), omit sub-paragraph (ii), and

• (b) after that paragraph insert

, or (c) any other investment is made in the company which is aid received by it pursuant to a measure approved by the European Commission as compatible with Article 107 of the Treaty on the Functioning of the European Union in accordance with the principles laid down in the Community Guidelines on Risk Capital Investments in Small and Medium-sized Enterprises (as those guidelines may be amended or replaced from time to time).

Acquisition of shares or stock

8

In section 175 (the use of the money raised requirement), after subsection (1) insert—

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

No disqualifying arrangements requirement

9

After section 178 insert—

(178A) (1) The relevant shares must not be issued, nor any money raised by the issue employed, in consequence or anticipation of, or otherwise in connection with, disqualifying arrangements. (2) Arrangements are “disqualifying arrangements” if— (a) the main purpose, or one of the main purposes, of the arrangements is to secure— (i) that a qualifying business activity is or will be carried on by the issuing company or a qualifying 90% subsidiary of that company, and (ii) that one or more persons (whether or not including any party to the arrangements) may obtain relevant tax relief in respect of shares issued by the issuing company which raise money for the purposes of that activity or that such shares may comprise part of the qualifying holdings of a VCT, (b) that activity is the relevant qualifying business activity, and (c) one or both of conditions A and B are met. (3) Condition A is that, as a (direct or indirect) result of the money raised by the issue of the relevant shares being employed as required by section 175, an amount representing the whole or the majority of the amount raised is, in the course of the arrangements, paid to or for the benefit of a relevant person or relevant persons. (4) Condition B is that, in the absence of the arrangements, it would have been reasonable to expect that the whole or greater part of the component activities of the relevant qualifying business activity would have been carried on as part of another business by a relevant person or relevant persons. (5) For the purposes of this section it is immaterial whether the issuing company is a party to the arrangements. (6) In this section— - “component activities” means— 1. if the relevant qualifying business activity is activity A (see section 179(2)), the carrying on of a qualifying trade or preparing to carry on such a trade, which constitutes that activity, and 2. if the relevant qualifying business activity is activity B (see section 179(4)), the carrying on of research and development which constitutes that activity; - “qualifying holdings”, in relation to the issuing company, is to be construed in accordance with section 286 (VCTs: qualifying holdings); - “relevant person” means a person who is a party to the arrangements or a person connected with such a party; - “relevant qualifying business activity” means the activity for the purposes of which the issue of the relevant shares raised money; - “relevant tax relief”, in respect of shares, means one or more of the following— 1. EIS relief in respect of the shares; 2. SEIS relief under Part 5A in respect of the shares; 3. relief under Chapter 6 of Part 4 (losses on disposal of shares) in respect of the shares; 4. relief under section 150A or 150E of TCGA 1992 (enterprise investment scheme) in respect of the shares; 5. relief under Schedule 5B to that Act (enterprise investment scheme: reinvestment) in consequence of which deferral relief is attributable to the shares (see paragraph 19(2) of that Schedule); 6. relief under Schedule 5BB to that Act (seed enterprise investment scheme: re-investment) in consequence of which SEIS re-investment relief is attributable to the shares (see paragraph 4 of that Schedule).

Meaning of “qualifying business activity”

10

In section 179 (meaning of “qualifying business activity”), in subsection (1) omit “This is subject to subsections (3) and (5).”

Increase in the gross assets limits

11

In section 186 (the gross assets requirement)—

• (a) in subsections (1)(a) and (2)(a), for “£7 million” substitute “ £15 million ”, and

• (b) in subsections (1)(b) and (2)(b), for “£8 million” substitute “ £16 million ”.

Relaxation of restriction on number of employees

12

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

Subsidised generation or export of electricity

13

• (1) Section 192 (meaning of “excluded activities”) is amended as follows.

• (2) In subsection (1), omit “and” at the end of paragraph (k) and after that paragraph insert—

(ka) the subsidised generation or export of electricity, and

.

• (3) In subsection (2), omit the “and” at the end of paragraph (e) and after paragraph (f) insert

, and (g) section 198A (subsidised generation or export of electricity).

14

After section 198 insert—

(198A) (1) This section supplements section 192(1)(ka). (2) Electricity is exported if it is exported onto a distribution system or transmission system (within the meaning of section 4 of the Electricity Act 1989). (3) The generation of electricity is “subsidised” if a person receives a FIT subsidy in respect of the electricity generated. (4) The export of electricity is “subsidised” if a person receives a FIT subsidy in respect of the electricity exported. (5) But the generation or export of electricity is not to be taken to fall within section 192(1)(ka) if Condition A, B or C is met. (6) Condition A is that the generation or export is carried on by— (a) a community interest company, (b) a co-operative society, (c) a community benefit society, or (d) a NI industrial and provident society. (7) Condition B is that the plant used for the generation of the electricity relies wholly or mainly on anaerobic digestion. (8) Condition C is that the electricity is hydroelectric power. (9) For the purposes of this section— - “anaerobic digestion” means the bacterial fermentation of organic material in the absence of free oxygen (excluding anaerobic digestion of sewage or material in a landfill); - “community benefit society” means— 1. a society registered under the Co-operative and Community Benefit Societies and Credit Unions Act 1965 as a community benefit society, or 2. a pre-2010 Act society (as defined at section 4A(1) of that Act) which meets the condition in section 1(3) of that Act; - “co-operative society” means— 1. a society registered under the Co-operative and Community Benefit Societies and Credit Unions Act 1965 as a co-operative society, or 2. a pre-2010 Act society (as defined at section 4A(1) of that Act) which meets the condition in section 1(2) of that Act; - “FIT subsidy” means— 1. a financial incentive under a scheme established by virtue of section 41 of the Energy Act 2008 (powers to amend licence conditions etc: feed-in tariffs) to encourage small-scale low-carbon generation of electricity, or 2. a financial incentive under a similar scheme established in a territory outside the United Kingdom to encourage small-scale low-carbon generation of electricity; - “NI industrial and provident society” means a society registered under the Industrial and Provident Societies Act (Northern Ireland) 1969 (c. 24 (N.I.)); - “small-scale low-carbon generation” has the meaning given by section 41(4) of the Energy Act 2008.

15

In section 199 (excluded activities: provision of services or facilities for another business), in subsection (1)(a), for “(k)” substitute “ (ka) ”.

Powers to amend

16

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

Disposal of shares

17

In section 209 (disposal of shares), after subsection (5) insert—

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

Date from which interest is chargeable

18

In section 239 (date from which interest is chargeable), in subsection (2) for “sections 181 to 188” substitute “ sections 180A to 188 ”.

Information

19

In section 243 (power to require information in other cases)—

• (a) in subsection (1), omit the “or” at the end of paragraph (d) and after that paragraph insert—

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

• (b) in subsection (4), at the appropriate place in the table, insert—

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

Approved investment fund as nominee

20

In section 251 (approved investment fund as nominee), omit subsection (3).

Interpretation

21

In section 257 (minor definitions etc), in subsection (1), for the definition of “arrangements” substitute—

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

.

Commencement and transitional provision

22

• (1) The amendments made by paragraphs 2 to 6, 7(1) and (3), 8, 9, 10 and 19 have effect in relation to shares issued on or after 6 April 2012.

• (2) But—

• (a) for the purposes of paragraphs 5, 9 and 19 it does not matter whether the disqualifying arrangements were entered into before or on or after 6 April 2012, and

• (b) nothing in sub-paragraph (1) prevents shares issued before that date constituting a “relevant investment” (by virtue of the amendment made by paragraph 7(3)(b) of this Schedule) for the purposes of determining whether the requirement of section 173A(1) of ITA 2007 is met in relation to shares issued on or after that date.

23

• (1) The amendments made by paragraphs 7(2), 11 and 12 come into force on such day as the Treasury may by order appoint.

• (2) Those amendments have effect in relation to shares issued on or after 6 April 2012.

24

• (1) Subject to sub-paragraph (2), the amendments made by paragraphs 13 to 15 have effect in relation to shares issued on or after 23 March 2011.

• (2) Those amendments do not have effect in relation to shares issued before 6 April 2012 if the issuing company, or a qualifying 90% subsidiary of that company, first began to carry on activities of the kind mentioned in section 192(1)(ka) of ITA 2007 before that day.

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

25

• (1) The amendment made by paragraphs 18 and 21 are to be treated as having come into force on 6 April 2012.

PART 2 — Enterprise investment scheme: chargeable gains

Introduction

26

TCGA 1992 is amended as follows.

Disposal of shares to which EIS relief is attributable

27

In section 150A (disposal of shares to which EIS relief is attributable)—

• (a) in subsection (3), in paragraph (b) for “basic rate” substitute “ EIS original rate ”, and

• (b) after that subsection insert—

(3A) In subsection (3) “EIS original rate” has the meaning given by section 256A of ITA 2007, except that where the year mentioned in subsection (3)(b) is the tax year 2007-08 or an earlier year, it means 20%.

28

Accordingly, in Schedule 1 to FA 2008, paragraph 48 is repealed.

Maximum annual investment

29

In paragraph 1 of Schedule 5B to the TCGA 1992 (EIS re-investment relief: application of Schedule), in sub-paragraph (2)(da), for “£2 million” substitute “ £5 million ”.

No disqualifying arrangements

30

After paragraph 11 insert—

(11A) (1) Where an individual subscribes for eligible shares (“the shares”) in a company (“the company”), the shares are to be treated as not being eligible shares for the purposes of this Schedule if the shares are issued, nor any money raised by the issue employed, in consequence or anticipation of, or otherwise in connection with, disqualifying arrangements. (2) Arrangements are “disqualifying arrangements” if— (a) the main purpose, or one of the main purposes, of the arrangements is to secure— (i) that a qualifying business activity is or will be carried on by the company or a qualifying 90% subsidiary of the company, and (ii) that one or more persons (whether or not including any party to the arrangements) may obtain relevant tax relief in respect of shares issued by the company which raise money for the purposes of that activity or that such shares may comprise part of the qualifying holdings of a venture capital trust, (aa) that activity is the relevant qualifying business activity, and (b) one or both of conditions A and B are met. (3) Condition A is that, as a (direct or indirect) result of the money raised by the issue of the shares being employed as required by paragraph 1(2)(g), an amount representing the whole or the majority of the amount raised is, in the course of the arrangements, paid to or for the benefit of a relevant person or relevant persons. (4) Condition B is that, in the absence of the arrangements, it would have been reasonable to expect that the whole or greater part of the component activities of the relevant qualifying business activity would have been carried on as part of another business by a relevant person or relevant persons. (5) For the purposes of this paragraph, it is immaterial whether the company is a party to the arrangements. (6) In this paragraph— - “component activities” means— 1. if the relevant qualifying business activity is activity A (see section 179(2) of ITA 2007), the carrying on of a qualifying trade, or preparing to carry on such a trade, which constitutes that activity, and 2. if the relevant qualifying business activity is activity B (see section 179(4) of that Act), the carrying on of research and development which constitutes that activity; - “qualifying holdings”, in relation to the issuing company, is to be construed in accordance with section 286 of ITA 2007 (VCTs: qualifying holdings); - “qualifying 90% subsidiary” has the meaning given by section 190 of ITA 2007; - “relevant person” means a person who is a party to the arrangements or a person connected with such a party; - “relevant qualifying business activity” means the activity for the purposes of which the issue of the shares raised money; - “relevant tax relief”, in respect of shares, means one or more of the following— 1. relief under this Schedule in consequence of which deferral relief is attributable to the shares; 2. relief under section 150A or 150E (enterprise investment scheme or seed enterprise investment scheme) in respect of the shares; 3. relief under Schedule 5BB (seed enterprise investment scheme: re-investment) in consequence of which SEIS re-investment relief is attributable to the shares (see paragraph 4 of that Schedule); 4. relief under Chapter 6 of Part 4 of ITA 2007 (losses on disposal of shares) in respect of the shares; 5. EIS relief (within the meaning of Part 5 of that Act) in respect of the shares; 6. SEIS relief (within the meaning of Part 5A of that Act) in respect of the shares.

Information

31

In paragraph 16 (information)—

• (a) in sub-paragraph (6), for “or 11(1)” substitute “ , 11(1) or 11A ”,

• (b) in sub-paragraph (7), omit the “and” at the end of paragraph (b) and after that paragraph insert—

(ba) in relation to paragraph 11A, 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; and

, and

• (c) in that sub-paragraph, for “and (b)” substitute “ , (b) and (ba) ”.

Meaning of “arrangements”

32

In paragraph 19 (interpretation), in sub-paragraph (1) for the definition of “arrangements” substitute—

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

.

Commencement

33

• (1) The amendment made by paragraph 29 comes into force on such day as the Treasury may by order appoint.

• (2) That amendment has effect in relation to shares issued on or after 6 April 2012.

34

• (1) The amendments made by paragraphs 27, 28, 30 and 31 have effect in relation to shares issued on or after 6 April 2012.

• (2) For the purposes of those paragraphs it does not matter whether the disqualifying arrangements were entered into before or on or after that date.

35

The amendment made by paragraph 32 is treated as having come into force on 6 April 2012.

SCHEDULE 8

Introduction

1

Part 6 of ITA 2007 (venture capital trusts) is amended in accordance with paragraphs 2 to 13.

VCT approvals

2

• (1) Section 274 (requirements for the giving of approval) is amended as follows.

• (2) In subsection (2), in the list of conditions, at the end insert—

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

• (3) In subsection (3), omit the “and” at the end of paragraph (d), and after paragraph (e) insert

, and (f) the investment limits condition by section 280B.

3

After section 280A insert—

(280B) (1) This section applies for the purposes of the investment limits condition. (2) Where a company (“the investor”) makes an investment (“the current investment”) in another company (“the relevant company”), that investment breaches the permitted investment limits if the total annual investment in the relevant company exceeds the amount for the time being specified in section 292A(1). (3) The total annual investment in the relevant company is the sum of— (a) the amount of the current investment, and (b) the total amount of other relevant investments made in the relevant company (whether or not by the investor) in the year ending with the day on which the current investment is made. (4) A “relevant investment” is made in a company if— (a) an investment (of any kind) in the company is made by a VCT, (b) the company issues shares (money having been subscribed for them), and (at any time) the company provides— (i) a compliance statement under section 205 (enterprise investment scheme), or (ii) a compliance statement under section 257ED (seed enterprise investment scheme), in respect of the shares, or (c) any other investment is made in the company which is aid received by it pursuant to a measure approved by the European Commission as compatible with Article 107 of the Treaty on the Functioning of the European Union in accordance with the principles laid down in the Community Guidelines on Risk Capital Investments in Small and Medium-sized Enterprises (as those guidelines may be amended or replaced from time to time). (5) For the purposes of subsections (2) and (3), an investment within subsection (4)(b) is regarded as made when the shares are issued.

Qualifying holdings: introduction

4

In section 286 (qualifying holdings: introduction), in subsection (3), omit the “and” at the end of paragraph (k) and after paragraph (l) insert

, and (m) no disqualifying arrangements (see section 299A).

Relaxation of maximum qualifying investment requirement

5

• (1) Section 287 (maximum qualifying investment requirement) is amended as follows.

• (2) In subsection (1), after “that” insert “ , if the condition in subsection (1A) is met, ”.

• (3) After that subsection insert—

(1A) The condition is that— (a) at the time of the issue of the relevant holding the relevant company or any of its qualifying subsidiaries was a member of a partnership or a party to a joint venture, (b) the trade which meets the requirement of section 291 was at that time being carried on, or to be carried on, by those partners in partnership or by the parties to the joint venture, and (c) the other partners or parties to the joint venture include at least one other company.

• (4) In subsection (2)—

• (a) for “Subject to subsection (7), the” substitute “ The ”, and

• (b) after “exceeds” insert “ the relevant fraction of ”.

• (5) After that subsection insert—

(2A) The relevant fraction is— $$1 N$where “N” is the number of companies (including the relevant company) which, at the time when the relevant holding was issued were members of the partnership or, as the case may be, parties to the joint venture.$

• (6) Omit subsections (6) and (7).

Increase in the maximum amount permitted to be raised annually

6

• (1) Section 292A (the maximum amount raised annually through risk capital schemes requirement) is amended as follows.

• (2) In subsection (1) for “£2 million” substitute “ £5 million ”.

• (3) In subsection (3)—

• (a) in paragraph (b), omit sub-paragraph (ii), and

• (b) after that paragraph insert

, or (c) any other investment is made in the company which is aid received by it pursuant to a measure approved by the European Commission as compatible with Article 107 of the Treaty on the Functioning of the European Union in accordance with the principles laid down in the Community Guidelines on Risk Capital Investments in Small and Medium-sized Enterprises (as those guidelines may be amended or replaced from time to time).

• (4) In subsection (5) omit “or paragraph 42 of Schedule 15 to FA 2000”.

Acquisition of shares

7

In section 293 (the use of the money raised requirement), after subsection (5) insert—

(5A) Employing money on the acquisition of shares in a company does not of itself amount to employing the money for the purposes of a relevant qualifying activity.

Increase in the gross assets limits

8

In section 297 (the gross assets requirement)—

• (a) in subsections (1)(a) and (2)(a), for “£7 million” substitute “ £15 million ”, and

• (b) in subsections (1)(b) and (2)(b), for “£8 million” substitute “ £16 million ”.

Relaxation of restriction on number of employees

9

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

No disqualifying arrangements requirement

10

After section 299 insert—