Finance Act 2012

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—

(299A) (1) The relevant holding must not have been 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 activity is or will be carried on by the relevant company or a qualifying 90% subsidiary of that company, and (ii) that shares or securities issued by the relevant company may be comprised in any company's qualifying holdings or that one or more persons may obtain relevant tax relief in respect of such shares which raise money for the purposes of that qualifying activity, (b) that qualifying activity is the relevant qualifying activity by reference to which the requirement in section 293(1)(b) (money raised to be employed within two years for relevant qualifying activity) is met in relation to the relevant holding, 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 holding being employed as required by section 293(1)(b), 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 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 relevant company is a party to the arrangements. (6) In this section— - “component activities” means— 1. if the relevant qualifying activity is within section 291(2), the carrying on of a qualifying trade which constitutes that activity, and 2. if the relevant qualifying activity is within section 291(3), the preparations to carry on a qualifying trade which constitute that activity; - “arrangements” includes any scheme, agreement, understanding, transaction or series of transactions (whether or not legally enforceable); - “relevant person” means a person who is a party to the arrangements or a person connected with such a party; - “qualifying activity” has the same meaning as in section 291; - “relevant tax relief”, in respect of shares, means one or more of the following— 1. relief under Chapter 6 of Part 4 (losses on disposal of shares) in respect of the shares; 2. EIS relief (within the meaning of Part 5) in respect of the shares; 3. SEIS relief (within the meaning of Part 5A) in respect of the shares; 4. relief under section 150A or 150E of TCGA 1992 (enterprise investment scheme and seed enterprise investment scheme) in respect of the shares; 5. relief under Schedule 5B to that Act in consequence of which deferral relief is attributable to the shares; 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).

Subsidised generation or export of electricity

11

• (1) Section 303 (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 309A (subsidised generation or export of electricity).

12

After section 309 insert—

(309A) (1) This section supplements section 303(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 303(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 to generate 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.

13

In section 310 (excluded activities: provision of services or facilities for another business), in subsection (1)(a), for “(k)” substitute “ (ka) ”.

Powers to amend

14

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

Information

15

After section 312 insert—

(312A) (1) Subsection (2) applies if an officer of Revenue and Customs has reason to believe that the relevant company has issued the relevant holding to the investing company in consequence of or, or otherwise in connection with, disqualifying arrangements (within the meaning of section 299A(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, such arrangements exist or have existed, and (b) such other information as the officer may reasonably require for the purposes of section 299A 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) A “person concerned” means— (a) the relevant company, (b) the investing company, (c) any person connected with either of those companies, and (d) any person whom the officer has reason to believe is or was a party to the arrangements in question.

16

In section 313 (interpretation of Chapter 4), in subsection (5), after “Chapter” insert “ (other than section 312A) ”.

Consequential amendment

17

In section 98 of TMA 1970 (special returns, etc), in the first column of the Table, before the entry for “regulations under Chapter 5 of Part 6 of ITA 2007” insert—

section 312A of ITA 2007;

.

Commencement and transitional provision

18

• (1) The amendments made by paragraphs 2 and 3 have effect in relation to investments made on or after the day on which this Act is passed.

• (2) But nothing in sub-paragraph (1) prevents investments made before that day constituting a “relevant investment” for the purposes of section 280B of ITA 2007 (as inserted by paragraph 3) for the purposes of determining whether the investment limits condition in section 274 of that Act is breached by an investment made on or after that day.

19

• (1) The amendments made by paragraphs 4, 5, 6(1) and (3), 10, 15 and 16 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.

• (2) But for the purposes of paragraphs 4, 10, 15 and 16 it does not matter whether the disqualifying arrangements were entered into before or on or after 6 April 2012.

20

• (1) The amendments made by paragraphs 6(2), 8 and 9 come into force on such day as the Treasury may by order appoint.

• (2) Those amendments 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.

21

• (1) Paragraph 7 is to be treated as having come into force on 6 April 2012.

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

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

22

• (1) Subject to sub-paragraph (2), the amendments made by paragraphs 11 to 13 have effect in relation to a relevant holding issued on or after 23 March 2011.

• (2) Those amendments do not have effect in relation to any relevant holding issued before 6 April 2012 if the relevant company, or a qualifying 90% subsidiary of that company, first began to carry on activities of the kind mentioned in section 303(1)(ka) of ITA 2007 before that day.

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

SCHEDULE 9

Transactions to obtain allowances

1

For section 215 of CAA 2001 substitute—

(215) (1) Allowances under this Part are restricted under the applicable sections if B enters into a relevant transaction with S that either— (a) has an avoidance purpose, or (b) is part of, or occurs as a result of, a scheme or arrangement that has an avoidance purpose. (2) Subsection (1)(b) may be satisfied— (a) whether the scheme or arrangement was made before or after the relevant transaction was entered into, and (b) whether or not the scheme or arrangement is legally enforceable. (3) A transaction, scheme or arrangement has an “avoidance purpose” if the main purpose, or one of the main purposes, of a party in entering into the transaction, scheme or arrangement is to enable a person to obtain a tax advantage under this Part that would not otherwise be obtained. (4) The reference in subsection (3) to obtaining a tax advantage that would not otherwise be obtained includes obtaining an allowance that is in any way more favourable to a person than the one that would otherwise be obtained. (5) If the tax advantage is of a kind described in subsection (7), “the applicable sections” are sections 217 and 218ZA(5). (6) Otherwise, “the applicable sections” are sections 217 and 218ZA(1) or, as the case may be, 218ZA(3). (7) The kinds of tax advantage are— (a) that an allowance to which B is entitled for a chargeable period is calculated using a percentage rate that is higher than the one that would otherwise be used, or (b) that B is entitled to an allowance in respect of an amount of capital expenditure sooner than B would otherwise be entitled to it. (8) If a transaction, scheme or arrangement involves— (a) a tax advantage of a kind described in subsection (7), and (b) a tax advantage not of such a kind, subsections (5) and (6) have effect separately in relation to each tax advantage.

Restrictions on writing-down allowances

2

In section 57(3) of CAA 2001 (available qualifying expenditure), after “section 218(1),” insert “ 218ZA(1) or (3), ”.

3

In section 214 of that Act (connected persons), after “218” insert “ (or, as the case may be, 218ZA(3)) ”.

4

In section 216 of that Act (sale and leaseback, etc), in subsection (1), after “218” insert “ (or, as the case may be, 218ZA(3)) ”.

5

• (1) Section 218 of that Act (restriction on B's qualifying expenditure) is amended as follows.

• (2) In subsection (1), for “section 214, 215 or 216” substitute “ section 214 or 216 ”.

• (3) At the end insert—

(5) This section is subject to section 218ZA(3).

• (4) Accordingly, in the heading of that section, insert at the end “ : section 214 or 216 ”.

6

After section 218 of that Act insert—

(218ZA) (1) If this subsection applies as a result of section 215, all or part of B's expenditure under the relevant transaction is to be left out of account in determining B's available qualifying expenditure. (2) The amount of expenditure to be left out of account is— (a) such amount as would or would in effect cancel out the tax advantage mentioned in section 215 (whether that advantage is obtained by B or another person and whether it relates to the relevant transaction or something else), or (b) if the amount found under paragraph (a) exceeds the whole of B's expenditure under the relevant transaction, the whole of that expenditure. (3) But if subsection (1) applies as a result of section 215 and— (a) section 218 also applies as a result of section 214 or 216, or (b) section 228 also applies by virtue of an election under section 70I(11) or 227, the amount of expenditure to be left out of account is the greater of X and Y. (4) For the purposes of subsection (3)— - “X” is the amount found under subsection (2), and - “Y” is the amount by which B's expenditure under the relevant transaction exceeds D (as defined in section 218 or, as the case may be, section 228). (5) If this subsection applies as a result of section 215— (a) the allowance mentioned in subsection (7)(a) of that section is to be calculated using the rate that would be used without the tax advantage, or (as the case may be) (b) the entitlement mentioned in subsection (7)(b) of that section is to be available as and when it would be available without the tax advantage. (6) Subsection (5) applies whether or not section 218 also applies as a result of section 214 or 216, or section 228 also applies by virtue of an election under section 70I(11) or 227.

Restriction of exception for manufacturers and suppliers

7

• (1) Section 230 of CAA 2001 (exception for manufacturers and suppliers), as amended by section 41 of this Act, is amended as follows.

• (2) For subsection (1) substitute—

(1) The restrictions in sections 217 and 218 do not apply in relation to any plant or machinery if— (a) the relevant transaction is within section 213(1)(a) or (b), (b) the case does not fall within section 215, and (c) the conditions in subsection (3) are met.

• (3) Omit subsection (2).

Relevant transactions

8

After section 268D of CAA 2001 insert—

(268E) (1) For the purposes of this Part— (a) a person (“A”) is taken to assign the benefit of a contract, or rights under a contract, to another person (“B”) whenever B becomes entitled, and A ceases to be entitled, to the benefit or rights (whether by assignment, novation, variation or replacement of the contract, by operation of law or otherwise), and (b) references to an assignment are to be read accordingly. (2) Any reference in this Part to the benefit of a contract or to rights under a contract includes a reference to part of the benefit of a contract or to part of the rights under a contract.

Commencement

9

• (1) The amendments made by paragraphs 1 to 7 of this Schedule have effect in relation to expenditure of B's that is incurred on or after the start date (regardless of when the relevant transaction was entered into).

• (2) The amendment made by paragraph 8 of this Schedule has effect in relation to expenditure that is incurred on or after the start date.

• (3) The start date is—

• (a) 1 April 2012, for corporation tax purposes, and

• (b) 6 April 2012, for income tax purposes.

SCHEDULE 10

Introductory

1

CAA 2001 is amended as follows.

Changes in ownership

2

After section 187 insert—

(187A) (1) This section applies if— (a) a person (“the current owner”) is treated as the owner of a fixture as a result of incurring capital expenditure (“new expenditure”) on its provision for the purposes of a qualifying activity carried on by the current owner, (b) the plant or machinery is treated as having been owned at a relevant earlier time by a person as a result of incurring other capital expenditure (“historic expenditure”) on its provision for the purposes of a qualifying activity carried on by that person, (c) the plant or machinery is within paragraph (b) otherwise than as a result of section 538 (contribution allowances for plant and machinery), and (d) a person mentioned in paragraph (b) was entitled to claim an allowance under this Part in respect of the historic expenditure. (2) In this section— - “the past owner” means— 1. the person mentioned in paragraph (d) of subsection (1), or 2. if there is more than one amount of historic expenditure in respect of which a person was entitled to claim as mentioned in that paragraph, the person by whom expenditure was incurred most recently; - “relevant earlier time” has the meaning given by section 187B(4) and (5). (3) In determining the current owner's qualifying expenditure, the new expenditure is to be treated as nil if— (a) the pooling requirement is not satisfied, (b) the fixed value requirement applies but is not satisfied, or (c) the disposal value statement requirement applies but is not satisfied, in relation to the past owner. (4) The pooling requirement is that— (a) the historic expenditure has been allocated to a pool in a chargeable period beginning on or before the day on which the past owner ceases to be treated as the owner of the fixture, or (b) a first-year allowance has been claimed in respect of that expenditure (or any part of it). (5) The fixed value requirement applies if the past owner is or has been required (as a result of having made a claim in respect of the historic expenditure) to bring the disposal value of the plant or machinery into account in accordance with item 1, 5 or 9 of the Table in section 196. (6) The fixed value requirement is that either— (a) a relevant apportionment of the apportionable sum has been made, or (b) the current owner has obtained the statements mentioned in subsection (8), or copies of them, (directly or indirectly) from the persons who made them and the case is one where the purchaser from the past owner or, as the case may be, lessee was not entitled to claim an allowance under this Part in respect of capital expenditure incurred on the fixture. (7) For the purposes of subsection (6)(a) a relevant apportionment of the apportionable sum is made if— (a) the tribunal determines the part of the apportionable sum that constitutes the disposal value, on an application made by one of the affected parties before the end of the relevant 2 year period, or (b) an election is made, in respect of the apportionable sum, by the affected parties jointly— (i) before the end of the relevant 2 year period, or (ii) if an application is made as mentioned in paragraph (a) and not determined or withdrawn by the end of that period, before that application is determined or withdrawn. (8) The statements referred to in subsection (6)(b) are— (a) a written statement made by the purchaser from the past owner or, as the case may be, lessee, that the requirement of subsection (6)(a) has not been met and is no longer capable of being met, and (b) a written statement made by the past owner of the amount of the disposal value that the past owner has in fact brought into account. (9) In subsections (6) to (8)— (a) in a case falling within item 1 or 9 of the Table in section 196— - “affected parties” means the past owner and the purchaser from the past owner; - “apportionable sum” means the sale price; - “election” means an election under section 198; - “relevant 2 year period” means the period of 2 years beginning with the date when the purchaser from the past owner acquires the qualifying interest; (b) in a case falling within item 5 of that Table— - “affected parties” means the past owner and the lessee; - “apportionable sum” means the capital sum given by the lessee for the lease; - “election” means an election under section 199; - “relevant 2 year period” means the period of 2 years beginning with the date when the lessee is granted the lease. (10) The disposal value statement requirement applies if the past owner is or has been required (as a result of having made a claim in respect of the historic expenditure) to bring the disposal value of the plant or machinery into account in accordance with item 2 or 3 of the Table in section 196 or in accordance with item 7 of the Table in section 61. (11) The disposal value statement requirement is— (a) that the past owner has, no later than 2 years after the date when the past owner ceased to own the plant or machinery, made a written statement of the amount of the disposal value that the past owner is or has been required to bring into account, and (b) the current owner has obtained that statement or a copy of it (directly or indirectly) from the past owner. (187B) (1) It is for the current owner to show— (a) whether the fixed value requirement applies and, if so, is satisfied, and (b) whether the disposal value statement requirement applies and, if so, is satisfied, and, for this purpose, to provide an officer of Revenue and Customs, on request, with a copy of any tribunal decision, election or statement by reason of which a requirement mentioned in paragraph (a) or (b) is satisfied. (2) Where— (a) the fixed value requirement applies and is met by reason of section 187A(6)(b) being satisfied, or (b) the disposal value requirement applies, subsections (2) and (4) of section 200 apply in relation to the making of a statement within section 187A(8)(b) or (11)(a) and an amount specified in such a statement, as they apply in relation to an election and an amount specified in an election. (3) For the purposes of section 187A, the current owner and the past owner may be the same person. (4) In that section “relevant earlier time” means (subject to subsection (5)) any time which falls before the earliest time when the current owner is treated as owning the plant or machinery as a result of incurring the new expenditure. (5) If, before the earliest time when the current owner is treated as owning the plant or machinery as a result of incurring the new expenditure— (a) any person has ceased to own the plant or machinery as a result of a sale, (b) the sale was not a sale of the plant or machinery as a fixture, and (c) the buyer and seller were not connected persons at the time of the sale, the relevant earlier time does not include any time before the seller ceased to own the plant or machinery. (6) Nothing in section 187A(3) affects the disposal value (if any) which falls to be brought into account by the past owner (as a result of having made a claim in respect of the historic expenditure). (7) Expressions used in this section have the same meaning as in section 187A.

3

In section 198 (election to apportion sale price on sale of qualifying interest)—

• (a) in subsection (1), after “item 1” insert “ or 9 ”, and

• (b) in subsection (2)(a), after “item 1” insert “ or (as the case may be) 9 ”.

4

• (1) Section 201 (elections under sections 198 and 199: procedure) is amended as follows.

• (2) In subsection (1), at the end insert—