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Income Tax Act 2007 (c. 3)

(The document as of February, 2008)

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

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

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

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

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

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

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

is to be withdrawn, the reference in subsection (2)(b) to any time in period A is to be read as a reference to any time before the end of period A.

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

234 Relief subsequently found not to have been due

(1) Any EIS relief obtained by the investor which is subsequently found not to have been due must be withdrawn.

(2) EIS relief obtained by the investor in respect of the relevant shares may not be withdrawn on the ground--

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

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

unless the requirements of subsection (3) are met.

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

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

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

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



Chapter 7 Withdrawal or reduction of EIS relief: procedure

Assessments and appeals

235 Assessments for the withdrawal or reduction of EIS relief

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

236 Appeals against section 234(3)(b) notices

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

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

237 Time limits for assessments

(1) An officer of Revenue and Customs may not--

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

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

more than 6 years after the end of the relevant tax year.

(2) In subsection (1) "the relevant tax year" means--

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

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

whichever is the later.

(3) Subsection (1) is without prejudice to section 36 of TMA 1970 (fraudulent or negligent conduct).

238 Cases where assessment not to be made

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

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

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

(b) are shares--

(i) to which EIS relief is attributable, or

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

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



Interest

239 Date from which interest is chargeable

(1) In its application to an assessment made by virtue of section 235 in the case of relief withdrawn or reduced by virtue of a provision listed in column 1 of the following table, section 86 of TMA 1970 (interest on overdue income tax) has effect as if the relevant date were given by the corresponding entry in column 2 of the table.

Provision Relevant date
Section 163, any of sections 181 to 188 or section 224, 232 or 233The date of the event which caused the withdrawal or reduction of EIS relief
Section 164The date of the making of the loan (see subsection (2))
Section 209The date of the disposal
Section 212(1)The date of the grant of the option
Section 213The date of the receipt of value

(2) The reference in the second entry in the table to the making of a loan is to be read in accordance with section 164(3).



Information

240 Information to be provided by the investor

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

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

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

(c) the EIS relief falls to be withdrawn or reduced under--

(i) section 209 (disposal of shares),

(ii) section 211 (call options), or

(iii) section 212 (put options), or

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

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

(3) If the investor--

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

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

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

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

241 Information to be provided by the issuing company etc

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

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

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

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

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

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

(2) The provisions are--

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

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

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

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

(3) If this section applies--

(a) the issuing company, and

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

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

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

(a) within 60 days of the event, or

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

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

(6) If a person--

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

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

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

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

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

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

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

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

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

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

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

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

243 Power to require information in other cases

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

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

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

(c) section 176(4) or (5), 183(6) or 191(3), (4) or (5) (winding up, administration etc),

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

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

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

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

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

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

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

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

Provision The person concerned
Subsection (1)(a)The claimant, the company and any person controlling the company
Subsection (1)(b)The claimant
Subsection (1)(c)The claimant, the company, any other company in question and any person controlling the company or any other company in question
Subsection (1)(d)The claimant, the company and any person connected with the company
Subsection (1)(e)The company and any person controlling the company

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

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

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

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

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

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

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

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

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

244 Obligations of secrecy

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



Chapter 8 Supplementary and general

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Disposals of shares

245 Transfers between spouses or civil partners

(1) This section applies if--

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

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

(c) A was married to, or was the civil partner of, B at the time of the transfer, and

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

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

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

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

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

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

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

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

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

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

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

246 Identification of shares on a disposal

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

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

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

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

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

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

(a) first any to which neither EIS relief nor deferral relief is attributable,

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

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

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

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

(5) The following--

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

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

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

(6) In a case to which section 127 of TCGA 1992 applies (including the case where that section applies by virtue of an enactment relating to chargeable gains), shares included in the new holding are treated for the purposes of subsections (2) and (3) as acquired when the original shares were acquired.

(7) In this section--

  • "deferral relief" has the same meaning as in Schedule 5B to TCGA 1992,

  • "new holding" and "original shares" have the same meaning as in section 127 of TCGA 1992 (or, as the case may be, that section as applied by the enactment concerned).



Acquisition of issuing company

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

(1) This section applies if--

(a) a company ("the new company") in which the only issued shares are subscriber shares acquires all the shares ("old shares) in another company ("the old company"),

(b) the consideration for the old shares consists wholly of the issue of shares ("new shares") in the new company,

(c) the consideration for the new shares of each description consists wholly of old shares of the corresponding description,

(d) new shares of each description are issued to the holders of old shares of the corresponding description in respect of and in proportion to their holdings,

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

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

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

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

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

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

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

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

(3) For the purposes of this Part--

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

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

(4) Nothing in section 185 (the control and independence requirement) applies in relation to such an exchange of shares, or shares and securities, as is mentioned in subsection (1), or arrangements with a view to such an exchange.

(5) For the purposes of this section old shares and new shares are of a corresponding description if, on the assumption that they were shares in the same company, they would be of the same class and carry the same rights.

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

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

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

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

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

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

(c) sections 241 to 244 (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 234(3)(b) may be prosecuted by the new company as if it had been brought by that company.

249 Substitution of new shares for old shares

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

(2) This Part 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 EIS 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 EIS relief becomes so attributable under section 247, the old shares for which they were exchanged were transferred to the individual as mentioned in section 245.

(4) This Part 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 EIS 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.



Nominees etc

250 Nominees and bare trustees

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

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

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

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

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

251 Approved investment fund as nominee

(1) Subsection (2) applies if an individual claims EIS relief in respect of shares in a company at a time when--

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

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

(c) the amounts which the managers have, as nominee for the individual, subscribed for shares issued within 6 months after the closing of the fund represent at least 90% of the individual's investment in the fund.

In this section "the managers of an approved fund" means the person or persons having the management of an investment fund approved for the purposes of this section by the Commissioners for Her Majesty's Revenue and Customs.

(2) In any case where this subsection applies, section 158 (form and amount of EIS relief) and section 201 (attribution of EIS relief to shares) have effect as if--

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

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

(3) Section 157(2) (minimum subscription) does not apply if the amount is subscribed as nominee for an individual by the managers of an approved fund.

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

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

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

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

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

(b) it is in such form as the Commissioners for Her Majesty's Revenue and Customs may authorise.

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

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



Interpretation

252 Meaning of a company being "in administration" or "in receivership"

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

(2) A company is "in administration" if--

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

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

(3) A company is "in receivership" if there is in force in relation to it--

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

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

253 Meaning of "associate"

(1) In this Part "associate", in relation to a person, means--

(a) any relative or partner of that person,

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

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

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

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

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

254 Meaning of "disposal of shares"

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