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
243

(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
5
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
Identification of shares on a disposal
10
(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
15
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—
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(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.
25
(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
30
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—
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“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.
40
Acquisition of issuing company
257HB
Continuity of SEIS relief where issuing company is acquired by new
company
(1)
This section applies if—

Finance (No. 4) Bill
Schedule 6 — Seed enterprise investment scheme
Part 1 — The scheme
244

(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,
5
(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
10
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
15
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
20
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
25
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
30
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
35
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
40
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
45
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.
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Finance (No. 4) Bill
Schedule 6 — Seed enterprise investment scheme
Part 1 — The scheme
245

257HC
Carry over of obligations etc where SEIS relief attributed to new
shares
(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.
5
(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
10
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.
15
257HD
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 SEIS relief becomes attributable under section
257HB, the old shares for which they were exchanged were
subscribed for by and issued to the individual.
20
(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
25
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
30
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
35
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
40
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
45
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

Finance (No. 4) Bill
Schedule 6 — Seed enterprise investment scheme
Part 1 — The scheme
246

which the liability of the individual who subscribed for the
old shares was so reduced in respect of those shares.
Nominees etc
257HE
Nominees and bare trustees
(1)
Shares subscribed for, issued to, held by or disposed of for an
5
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—
10
(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.
15
(3)
In subsection (2) “shares” means shares which meet the requirements
of section 257CA(2).
Interpretation
257HF
Meaning of “new qualifying trade”
(1)
For the purposes of this Part a qualifying trade carried on by the
20
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
25
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.
30
(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
35
shares are issued.
257HG
Meaning of “qualifying business activity”
(1)
In this Part “qualifying business activity”, in relation to the issuing
company, means—
(a)
activity A, or
40
(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).

Finance (No. 4) Bill
Schedule 6 — Seed enterprise investment scheme
Part 1 — The scheme
247

(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
5
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.
10
(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
15
(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
20
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.
25
(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
Meaning of “disposal of shares”
30
(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.
35
257HI
Meaning of “issue of shares”
(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
40
(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),
45
257FB(2) and 257FK(1).