(1) Any SEIS relief attributable to any shares in a company held by an individual is withdrawn if—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 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

(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—

(a) to whom an interest amounting in total to more than a half share in the trade (as previously carried on) belonged at any time in period A, and

(b) who is a person or group of persons to whom such an interest in the trade carried on by the company belongs or has, at any such time, belonged.

(3) This subsection applies to any person or group of persons who—

(a) controls or, at any time in period A, has controlled the company, and

(b) at any such time, controlled another company which previously carried on the trade.

(4) For the purposes of subsection (2)—

(a) for the purposes of determining the person to whom a trade belongs and, if a trade belongs to two or more persons, their respective shares in that trade—

(i) apply section 941(6) of CTA 2010, and

(ii) an interest in a trade belonging to a company may be treated in accordance with any of the options set out in section 942 of that Act, and

(b) any interest, rights or powers of a person who is an associate of another person are treated as those of that other person.

(5) In this section “trade” includes any business or profession, and references to a trade previously carried on include references to part of such a trade.

257FQ Acquisition of share capital

(1) Any SEIS relief attributable to any shares in a company held by an individual is withdrawn if—

(a) the company comes to acquire all of the issued share capital of another company at any time in period A, and

(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) controls or, at any time in period A, has controlled the company, and

(b) at any such time, controlled the other company.

257FR Relief subsequently found not to have been due

(1) Any SEIS relief obtained by the investor which is subsequently found not to have been due must be withdrawn.

(2) SEIS relief obtained by the investor in respect of the relevant shares may not be withdrawn on the ground—

(a) that the requirements of sections 257CB and 257CC (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 257GF(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 SEIS 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 SEIS relief: procedure

Assessments and appeals

257G Assessments for the withdrawal or reduction of SEIS relief

If any SEIS 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.

257GA Appeals against section 257FR(3)(b) notices

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 257FR(3)(b) is taken to be a decision disallowing a claim by the issuing company.

257GB Time limits for assessments

(1) An officer of Revenue and Customs may—

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

(b) give a notice under section 257FR(3),

at any time not 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 period B ends, or

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

whichever is the later.

(3) Subsection (1) is without prejudice to section 36(1A) of TMA 1970 (loss of tax brought about deliberately etc).

257GC Cases where assessments not to be made

(1) No assessment for withdrawing or reducing SEIS 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 257FA(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 SEIS relief is attributable, or

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

(3) No assessment for withdrawing or reducing SEIS relief in respect of those shares may be made because of any subsequent event unless the event occurs at a time when the individual—

(a) has a substantial interest in the company within the meaning of section 257BB,

(b) is an employee of the issuing company, or

(c) is a director of the issuing company.

Interest

257GD Date from which interest is chargeable

(1) In its application to an assessment made by virtue of section 257G in the case of relief withdrawn or reduced by virtue of a provision listed in subsection (2), section 86 of TMA 1970 (interest on overdue income tax) has effect as if the relevant date were 31 January next following the tax year in which the assessment is made.

(2) The provisions are—

(a) section 257BB (no substantial interest in the issuing company),

(b) section 257BD (no linked loan requirement),

(c) sections 257DA to 257DN (Chapter 4 requirements),

(d) section 257FA (disposal of shares),

(e) section 257FD (put options),

(f) section 257FE (receipt of value by the investor),

(g) section 257FP (acquisition of a trade or trading asset),

(h) section 257FQ (acquisition of share capital).

Information

257GE Information to be provided by the investor

(1) This section applies if the investor has obtained SEIS 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 SEIS relief falls to be withdrawn or reduced by virtue of section 257BD (no linked loans requirement),

(c) the SEIS relief falls to be withdrawn or reduced under—

(i) section 257FA (disposal of shares),

(ii) section 257FC (call options), or

(iii) section 257FD (put options), or

(d) the SEIS relief falls to be withdrawn or reduced under section 257FE (receipt of value by the investor), or would fall to be so withdrawn or reduced but for section 257FN (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 257FE, or would be within that section but for section 257FN, 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 257FN.

257GF 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 257CC (spending of the money raised) is not met in respect of any of the shares included in the issue, or would not be met if SEIS 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 SEIS relief had been obtained in respect of the shares in question, or

(c) any of the provisions of Chapter 6 mentioned in subsection (2) has effect to cause any SEIS relief attributable to any of the shares included in the issue to be withdrawn or reduced, or—

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

(ii) in the case of section 257FE, would have such an effect but for section 257FN (receipt of replacement value).

(2) The provision are—

(a) section 257FE (value received by the investor),

(b) section 257FP (acquisition of a trade or trading asset), and

(c) section 257FQ (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 257FH(2) from a person connected with the company (see section 257FM), 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 257FE, or would be within that section but for section 257FN, 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 257FN.

257GG Power to require information where section 257GE or 257GF 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 257GE or 257GF in respect of any event, or

(b) has given or received value within the meaning of section 257FH(2) or (8) 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.

(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 257FG(2).

257GH Power to require information in other cases

(1) Subsection (2) applies if SEIS 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 arrangements or scheme as is mentioned in—

(a) section 257BC (no related investment arrangements),

(b) section 257BE or 257DB(2) or (4) (no tax avoidance),

(c) section 257CD(1) (no pre-arranged exits),

(d) section 257CF (no disqualifying arrangements),

(e) section 257DB(4) (winding up, administration etc), or

(f) section 257DG(1) or (2) (conditions ceasing to be met).

(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.

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 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 SEIS relief has been obtained or claimed in respect of a particular number or proportion of its shares.

CHAPTER 8 Supplementary and general

Disposals of shares

257H Transfers between spouses or civil partners

(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 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 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.

Acquisition of issuing company

257HB Continuity of SEIS 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 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 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.

(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 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.

(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.

Nominees etc

257HE 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) “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 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 Meaning of “qualifying business activity”

(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).

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 Meaning of “disposal of shares”

(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 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

(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 Minor definitions

(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;

• “period A” and “period B” have the meaning given by section 257AC;

• “permanent establishment” has the same meaning as in Part 5 (see section 191A);

• “qualifying business activity” has the meaning given by section 257HG;

• “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 Seed enterprise investment scheme

(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—

(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.

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 Seed enterprise investment scheme: reduction of relief

(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—

where—

A is the amount by which the SEIS relief attributable to the shares is reduced as mentioned in subsection (1), and

B is the amount of the relief attributable to the shares.