Finance (No. 4) Bill

Session 2010 - 12
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Other Bills before Parliament

Finance (No. 4) Bill

Finance (No. 4) Bill
Schedule 6 — Seed enterprise investment scheme
Part 1 — The scheme
229

(a)
is paid for services rendered to the issuing company or a
person connected with that company in the course of a trade
or profession (not being secretarial or managerial services or
services of a kind provided by the person to whom they are
rendered), and
5
(b)
is taken into account in calculating for tax purposes the
profits of that trade or profession.
(5)
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
10
discharged.
(6)
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
15
(b)
the amount of any debt due from the investor to a third party
which has been assigned to the issuing company.
(7)
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
20
with a dissolution of the company, and
(b)
the winding up or dissolution falls within section 257DB(4)
(no tax avoidance).
(8)
The investor also receives value from the issuing company if a
person within subsection (9)—
25
(a)
purchases any of its share capital or securities which belong
to the investor, or
(b)
makes any payment to the investor for giving up any right in
relation to any of the company’s share capital or securities.
(9)
Those persons are—
30
(a)
any person who has a substantial interest in the company
within the meaning of section 257BB;
(b)
any employee of the issuing company;
(c)
any director of the issuing company.
(10)
If because of the investor’s disposal of shares in a company any SEIS
35
relief attributable to those shares is withdrawn or reduced under
section 257FA, the investor is not to be treated as receiving value
from the company in respect of the disposal.
(11)
The investor is not to be treated as receiving value from the issuing
company merely because of the payment to the investor, or any
40
associate of the investor, of any remuneration for services rendered
to that company as a director if the remuneration is reasonable
remuneration.
(12)
For the purposes of subsection (11)—
(a)
the reference in that subsection to the payment of
45
remuneration includes a reference to the provision of any
benefit or facility, and

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Part 1 — The scheme
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(b)
in the case of an individual who is both a director and an
employee of a company, the reference in that subsection to
services rendered to that company as a director includes a
reference to services rendered to that company as an
employee.
5
(13)
In this section—
(a)
“ordinary trade debt” means any debt for goods or services
supplied in the ordinary course of a trade or business if any
credit given—
(i)
is for not more than 6 months, and
10
(ii)
is not longer than that normally given to customers of
the person carrying on the trade or business, and
(b)
any reference to a payment to an individual includes a
payment made to the individual indirectly or to the
individual’s order or for the individual’s benefit.
15
257FI
The amount of value received

In a case falling within a provision listed in column 1 of the following
table, the amount of value received for the purposes of sections
257FE and 257FJ is given by the corresponding entry in column 2 of
the table.
20

Provision
The amount of value received

Section 257FH(2)(a),
The amount received by the investor

(b) or (c)
or, if greater, the market value of the

shares, securities or debt

Section 257FH(2)(d)
The amount of the liability

25

Section 257FH(2)(e)
The amount of the loan or advance,

less the amount of any repayment

made before the issue of the relevant

shares

Section 257FH(2)(f)
The cost to the issuing company of

30

providing the benefit or facility, less

any consideration given for it by the

investor

Section 257FH(2)(g)
The difference between the market

value of the asset and the

35

consideration (if any) given for it

Section 257FH(2)(h)
The amount of the payment

Section 257FH(7)
The amount of the payment or the

market value of the asset

Section 257FH(8)
The amount received by the investor

40

or, if greater, the market value of the

shares or securities

Finance (No. 4) Bill
Schedule 6 — Seed enterprise investment scheme
Part 1 — The scheme
231

257FJ
Value received where there is more than one issue
(1)
This section applies if—
(a)
two or more issues of shares in the issuing company have
been made to the investor which include shares in respect of
which the investor obtains SEIS relief, and
5
(b)
value is received by the investor at any time in the applicable
periods for two or more of those issues.
(2)
Section 257FE(2) has effect in relation to the shares included in each
of the issues referred to in subsection (1)(b) as if the amount of value
referred to as “R” were reduced by multiplying it by the fraction—
10

where—

A is the amount on which the investor obtains SEIS relief in
respect of the shares included in the issue in question, and

B is the sum of that amount and the corresponding amount or
amounts in respect of the other issue or issues.
15
(3)
For the purposes of subsection (1) “the applicable period” for an
issue of shares is period A in relation to those shares.
257FK
Value received where part of issue treated as made in previous tax
year
(1)
This section applies if—
20
(a)
section 257FE(2) applies to an issue of shares, and
(b)
section 257AB(1) and (2) (form and amount of SEIS relief)
applies in the case of that issue as if part of the issue had been
issued in a previous tax year.
(2)
This subsection explains how the calculation under section 257FE(2)
25
is to be made.

Step 1

Apportion the amount referred to as “R” between the tax year in
which the shares were issued and the previous tax year by
multiplying that amount by the fraction—
30

where—

A is the amount on which the investor obtains SEIS
relief in respect of the shares treated as issued in the
tax year in question, and

B is the sum of that amount and the corresponding
35
amount in respect of the shares treated as issued in
the other tax year.

Step 2

In relation to each of the amounts (“R1” and “R2”) so apportioned to
the two tax years, calculate the amounts (“X1” and “X2”) that would
40
be given by the formula if there were separate issues of shares in
those tax years.

In calculating amounts X1 and X2, apply section 257FL if appropriate
but do not apply section 257FJ.

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Step 3

Add amounts X1 and X2 together.

The result is the required amount.
257FL
Cases where maximum SEIS relief not obtained
(1)
If the investor’s liability to income tax is reduced for any tax year in
5
respect of any issue of shares and—
(a)
the amount of the reduction (“A”), is less than
(b)
the amount (“B”) which is equal to income tax at the SEIS rate
on the amount on which the investor claims SEIS relief in
respect of the shares,
10

section 257FE(2) has effect in relation to any value received as if the
amount referred to as “R” were reduced by multiplying it by the
fraction—
(2)
If the amount of SEIS relief attributable to any of the relevant shares
has been reduced before the SEIS relief was obtained, the amount
15
referred to in subsection (1) as A is to be treated for the purposes of
that subsection as the amount that it would have been without that
reduction.
(3)
Subsection (2) does not apply to a reduction of SEIS relief by virtue
of section 257E(4) (attribution of SEIS relief where there is a
20
corresponding issue of bonus shares).
257FM
Receipts of value by and from connected persons etc

In sections 257FE, 257FF and 257FH to 257FJ—
(a)
any reference to a payment or transfer to the investor
includes a reference to a payment or transfer made to the
25
investor indirectly or to the investor’s order or for the
investor’s benefit,
(b)
any reference to the investor includes a reference to an
associate of the investor, and
(c)
any reference to the issuing company includes a reference to
30
a person who at any time in period A relating to the relevant
shares is connected with that company (whether or not that
person is so connected at the material time).
257FN
Receipt of replacement value
(1)
If—
35
(a)
any SEIS relief attributable to the relevant shares would, in
the absence of this section, be reduced or withdrawn under
section 257FE because of a receipt of value within section
257FH(2), (7) or (8) (“the original value”),
(b)
the original supplier receives value (“replacement value”)
40
from the original recipient and the receipt is a qualifying
receipt, and
(c)
the amount of the replacement value is at least the amount of
the original value,

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Part 1 — The scheme
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section 257FE does not, because of the receipt of value, have effect to
reduce or withdraw the SEIS relief.

This is subject to section 257FO(1) and (2).
(2)
For the purposes of this section—
“the original recipient” means the person who receives the
5
original value;
“the original supplier” means the person from whom that value
was received.
(3)
If the amount of the original value is, by virtue of section 257FJ,
treated as reduced for the purposes of section 257FE(2) as it applies
10
in relation to the relevant shares in question, the reference in
subsection (1)(c) to the amount of the original value is to be read as a
reference to the amount of that value ignoring the reduction.
(4)
A receipt of the replacement value is a qualifying receipt for the
purposes of subsection (1) if it arises—
15
(a)
because of the original recipient doing one or more of the
following—
(i)
making a payment to the original supplier, other than
a payment within paragraph (c) or a payment to
which subsection (5) applies,
20
(ii)
acquiring any asset from the original supplier for a
consideration the amount or value of which is more
than the market value of the asset,
(iii)
disposing of any asset to the original supplier for no
consideration or for a consideration the amount or
25
value of which is less than the market value of the
asset,
(b)
if the receipt of the original value was within section
257FH(2)(d), because of an event the effect of which is to
reverse the event which constituted the receipt of the original
30
value, or
(c)
if the receipt of the original value was within section
257FH(8), because of the original recipient repurchasing the
share capital or securities in question, or (as the case may be)
re-acquiring the right in question, for a consideration the
35
amount or value of which is at least the amount of the
original value.
(5)
This subsection applies to—
(a)
any payment for any goods, services or facilities, provided
(whether in the course of trade or otherwise) by—
40
(i)
the original supplier, or
(ii)
any other person who, at any time in period A
relating to the relevant shares, is an associate of, or is
connected with, that supplier (whether or not the
other person is such an associate, or is so connected,
45
at the material time),

which is reasonable in relation to the market value of those
goods, services or facilities,
(b)
any payment of any interest which represents no more than a
reasonable commercial return on any money lent to—
50

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Part 1 — The scheme
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(i)
the original recipient, or
(ii)
any person who, at any time in period A relating to
the relevant shares, is an associate of that recipient
(whether or not the person is such an associate at the
material time),
5
(c)
any payment for the acquisition of an asset which does not
exceed its market value,
(d)
any payment, as rent for any property occupied by—
(i)
the original recipient, or
(ii)
any person who, at any time in period A relating to
10
the relevant shares, is an associate of that recipient
(whether or not the person is such an associate at the
material time),

of an amount not exceeding a reasonable and commercial
rent for the property,
15
(e)
any payment in discharge of an ordinary trade debt, and
(f)
any payment for shares in or securities of any company in
circumstances that do not fall within subsection (4)(a)(ii).
(6)
For the purposes of this section, the amount of the replacement value
is—
20
(a)
in a case within paragraph (a) of subsection (4), the sum of—
(i)
the amount of any payment within sub-paragraph (i)
of that paragraph, and
(ii)
the difference between the market value of any asset
to which sub-paragraph (ii) or (iii) of that paragraph
25
applies and the amount or value of the consideration
(if any) received for it,
(b)
in a case within subsection (4)(b), the same as the amount of
the original value, and
(c)
in a case within subsection (4)(c), the amount or value of the
30
consideration received by the original supplier.

Section 257FI applies for the purpose of determining the original
value.
(7)
In this section—
(a)
any reference to a payment to a person (however expressed)
35
includes a reference to a payment made to the person
indirectly or to the person’s order or for the person’s benefit,
and
(b)
“ordinary trade debt” has the meaning given by section
257FH(13).
40
257FO
Section 257FN: supplementary
(1)
The receipt of the replacement value by the original supplier is
ignored for the purposes of section 257FN(1) to the extent to which it
has previously been set (under that section) against a receipt of value
to prevent any reduction or withdrawal of SEIS relief under section
45
257FE.
(2)
The receipt of the replacement value by the original supplier (“the
event”) is ignored for the purposes of section 257FN if—

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Part 1 — The scheme
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(a)
the event occurs before period A relating to the relevant
shares,
(b)
if the event occurs after the time the original recipient
receives the original value, it does not occur as soon after that
time as is reasonably practicable in the circumstances, or
5
(c)
if an appeal has been brought by the investor against an
assessment to withdraw or reduce any SEIS relief attributable
to the relevant shares because of the receipt of the original
value, the event occurs more than 60 days after the day on
which the amount of relief which falls to be withdrawn has
10
been finally determined.

But nothing in section 257FN or this section requires the replacement
value to be received after the original value.
(3)
This subsection applies if—
(a)
the receipt of the replacement value by the original supplier
15
is a qualifying receipt for the purposes of section 257FN(1),
(b)
in consequence of the receipt, any receipts of value are
ignored for the purposes of section 257FE as that section
applies in relation to the shares in question or any other
shares subscribed for by the investor, and
20
(c)
the event which gives rise to the receipt is (or includes) a
subscription for shares by—
(i)
the investor, or
(ii)
any person who at any time in period A relating to the
relevant shares is an associate of the investor
25
(whether or not the person is such an associate at the
material time).
(4)
If subsection (3) applies, the person who subscribes for the shares is
not to be eligible for any SEIS relief in relation to those shares or any
other shares in the same issue.
30
(5)
In this section “the original recipient”, “the original supplier” and
“replacement value” have the same meaning as in section 257FN.
Miscellaneous
257FP
Acquisition of trade or trading assets
(1)
Any SEIS relief attributable to any shares in a company held by an
35
individual is withdrawn if—
(a)
at any time in period A, the company or any qualifying
subsidiary—
(i)
begins to carry on as its trade, or as part of its trade, a
trade which was previously carried on at any time in
40
that period otherwise than by the company or any
qualifying subsidiary, or
(ii)
acquires the whole, or the greater part, of the assets
used for the purposes of a trade previously so carried
on, and
45
(b)
the individual is a person, or one of a group of persons, to
whom subsection (2) or (3) applies.
(2)
This subsection applies to any person or group of persons—