UK Laws - Legal Portal
 
Navigation
News

Income Tax Act 2007 (c. 3)

(The document as of February, 2008)

-- Back--

Page 12

Pages: P.1 | P.2 | P.3 | P.4 | P.5 | P.6 | P.7 | P.8 | P.9 | P.10 | P.11 | P.12 | P.13 | P.14 | P.15 | P.16 | P.17 | P.18 | P.19 | P.20 | P.21 | P.22 | P.23 | P.24 | P.25 | P.26 | P.27 | P.28 | P.29 | P.30 | P.31 | P.32 | P.33 | P.34 | P.35 | P.36 | P.37 | P.38 | P.39 | P.40 | P.41 | P.42 | P.43 | P.44 | P.45 | P.46 | P.47 | P.48 | P.49 | P.50 | P.51 | P.52 | P.53 | P.54 | P.55 | P.56 | P.57 | P.58 | P.59 | P.60 | P.61 | P.62 | P.63 | P.64 | P.65 | P.66 | P.67 | P.68 | P.69 | P.70

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

195 Excluded activities: receipt of royalties and licence fees

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

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

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

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

(a) by the company carrying on the trade, or

(b) by a company which at all times during which it created the intangible asset was--

(i) the holding company of the company carrying on the trade, or

(ii) a qualifying subsidiary of that holding company.

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

(6) In this section--

  • "holding company" means a company that--

    (a)

    has one or more 51% subsidiaries, but

    (b)

    is not itself a 51% subsidiary of another company,

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

  • "intellectual property" means--

    (a)

    any patent, trade mark, registered design, copyright, design right, performer's right or plant breeder's right, or

    (b)

    any rights under the law of a country or territory outside the United Kingdom which correspond or are similar to those falling within paragraph (a).

196 Excluded activities: property development

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

(2) "Property development" means the development of land--

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

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

(3) For this purpose "interest in land" means, subject to subsection (4)--

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

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

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

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

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

197 Excluded activities: hotels and comparable establishments

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

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

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

198 Excluded activities: nursing homes and residential care homes

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

(2) "Nursing home" means any establishment which exists wholly or mainly for the provision of nursing care--

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

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

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

(a) old age,

(b) mental or physical disability,

(c) past or present dependence on alcohol or drugs,

(d) any past illnesses, or

(e) past or present mental disorder.

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

199 Excluded activities: provision of services or facilities for another business

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

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

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

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

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

(a) A controls the company,

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

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

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

(c) at least half the business could, in accordance with section 344(2) of ICTA (persons to whom company's trade may be treated as belonging), be regarded as belonging to A for the purposes of section 343 of that Act (company reconstructions without a change of ownership).

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

(5) For the purposes of this section--

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

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



Supplementary

200 Power to amend by Treasury order

The Treasury may by order make such amendments of sections 181, 182, 184 to 189 and 192 to 199 as they consider appropriate.



Chapter 5 Attribution of and claims for EIS relief

Attribution

201 Attribution of EIS relief to shares

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

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

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

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

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

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

(ii) is attributed to those issues accordingly.

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

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

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

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

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

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

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

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

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



Claims: general

202 Time for making claims for EIS relief

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

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

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

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

203 Entitlement to claim

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

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

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



Claims: supporting documents

204 Compliance certificates

(1) A "compliance certificate" is a certificate which--

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

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

(c) is in such form as the Commissioners for Her Majesty's Revenue and Customs may direct.

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

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

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

(5) If an officer of Revenue and Customs--

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

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

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

205 Compliance statements

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

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

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

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

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

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

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

(c) such other declarations as the Commissioners may reasonably require.

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

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

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

206 Appeal against refusal to authorise compliance certificate

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

207 Penalties for fraudulent certificate or statement etc

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

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

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



Chapter 6 Withdrawal or reduction of EIS relief

<<<< >>>>

Introduction

208 Overview of Chapter

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

(a) section 209 (disposal of shares),

(b) section 211 (call options),

(c) section 212 (put options),

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

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

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

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

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



Disposals

209 Disposal of shares

(1) This section applies if--

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

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

(c) EIS relief is attributable to the shares.

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

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

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

(b) in any other case, be withdrawn.

The formula is--

RВ Г—В S

where--

  • R is the amount or value of the consideration received by the investor for the shares, and

  • S is the savings rate for the tax year for which the EIS relief was obtained.

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

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

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

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

210 Cases where maximum EIS relief not obtained

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

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

(b) the amount ("B") which is equal to tax at the savings rate for that year on the amount on which the investor claims EIS relief in respect of the shares,

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

---

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

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

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

211 Call options

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

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

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

212 Put options

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

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

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

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

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

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



Value received by investor

213 Value received by the investor

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

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

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

(b) in any other case, be withdrawn.

The formula is--

RВ Г—В S

where--

  • R is the amount of the value received by the investor, and

  • S is the savings rate for the tax year for which the EIS relief was obtained.

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

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

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

(c) section 219 (value received where part of share issue treated as made in previous tax year),

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

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

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

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

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

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

214 Value received: receipts of insignificant value

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

This is subject to subsection (2).

(2) If--

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

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

(i) during that period, but

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

(c) the total amount of the value of the receipts within paragraph (a) and (b) is not an amount of insignificant value,

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

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

215 Meaning of "receipts of insignificant value"

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

(2) "A receipt of insignificant value" means a receipt of an amount of insignificant value, that is, an amount of value which--

(a) is not more than £1,000, or

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

This is subject to subsection (3).

(3) If at any time in the period--

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

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

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

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

(5) For the purposes of this section--

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

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

216 When value is received

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Pages: P.1 | P.2 | P.3 | P.4 | P.5 | P.6 | P.7 | P.8 | P.9 | P.10 | P.11 | P.12 | P.13 | P.14 | P.15 | P.16 | P.17 | P.18 | P.19 | P.20 | P.21 | P.22 | P.23 | P.24 | P.25 | P.26 | P.27 | P.28 | P.29 | P.30 | P.31 | P.32 | P.33 | P.34 | P.35 | P.36 | P.37 | P.38 | P.39 | P.40 | P.41 | P.42 | P.43 | P.44 | P.45 | P.46 | P.47 | P.48 | P.49 | P.50 | P.51 | P.52 | P.53 | P.54 | P.55 | P.56 | P.57 | P.58 | P.59 | P.60 | P.61 | P.62 | P.63 | P.64 | P.65 | P.66 | P.67 | P.68 | P.69 | P.70

-- Back--

<<<< >>>>

Stat




Search
Popular article
Advert