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

(3) If section 150E(2) and (5) apply on the disposal, section 150E(2) applies only to so much of the gain as is found by—

(a) taking the part of the gain found under section 150E(5), and

(b) deducting from that part so much of it as is found by multiplying it by the fraction mentioned in subsection (2) above.

(4) Where the SEIS relief attributable to the shares is reduced as mentioned in subsection (1) by more than one amount, “A” in subsection (2) is to be taken to be equal to the aggregate of the amounts.

(5) The amount which is “B” in subsection (2) is to be found without regard to any reduction mentioned in subsection (1).

(6) For the purposes of this section, Part 5A of ITA 2007 (seed enterprise investment scheme) applies to determine whether SEIS relief is attributable to any shares and, if so, the amount of SEIS relief so attributable.”

Seed enterprise investment scheme: re-investment relief

4 After section 150F (inserted by paragraph 3 of this Schedule) insert—

“150G Seed enterprise investment scheme: re-investment

Schedule 5BB to this Act (which provides relief in respect of re-investment under the seed enterprise investment scheme in the tax year 2012-13) has effect.”

5 After Schedule 5B insert—

“Schedule 5BB Seed enterprise investment scheme: re-investment

SEIS re-investment relief

1 (1) Sub-paragraph (5) applies where conditions A to C are met in relation to an individual (“the investor”).

(2) Condition A is that—

(a) there would (ignoring sub-paragraphs (5) and (6)) be a chargeable gain (“the original gain”) accruing to the investor at any time in the tax year 2012-13, and

(b) the original gain is one accruing on the disposal of an asset by the investor at any time (“the disposal time”) in that year.

(3) Condition B is that—

(a) the investor is eligible for SEIS relief for the tax year 2012-13 in respect of an amount subscribed for an issue of shares in a company made to the investor in that year,

(b) the investor makes a claim for and obtains SEIS relief for that year in respect of all or some of those shares (“the relevant SEIS shares”), and

(c) if the relevant SEIS shares, or any corresponding bonus shares in relation to those shares, were issued before the disposal time, they are still held by the investor at the disposal time.

(4) Condition C is that—

(a) the investor has made a claim under this paragraph for relief in relation to the original gain, and

(b) the claim is in respect of the amount on which SEIS relief is claimed by the investor in respect of the relevant SEIS shares (“the SEIS expenditure”) or part of that amount.

(5) So much of the SEIS expenditure as—

(a) is specified in the claim,

(b) is unused, and

is to be set against a corresponding amount of the original gain.

(6) Where an amount of the SEIS expenditure is set against the whole or part of the original gain under sub-paragraph (5), so much of that gain as is equal to that amount is to be treated as not being a chargeable gain.

(7) For the purposes of this paragraph—

(a) the SEIS expenditure is unused to the extent that it has not already been set under sub-paragraph (5) or paragraph 2(1) of Schedule 5B against the whole or any part of a chargeable gain, and

(b) the original gain is unmatched, in relation to the SEIS expenditure, to the extent that it has not had any other expenditure set against it under sub-paragraph (5) or paragraph 2(1) of Schedule 5B.

Restrictions on relief under paragraph 1

2 (1) Sub-paragraph (2) applies if the investor’s tax reduction under section 257AB of ITA 2007 for the tax year 2012-13 is limited by subsection (2)(b) of that section (calculation of tax reduction where claim made for amounts subscribed for shares which exceed £100,000).

(2) Paragraph 1(5) to (7) has effect as if references to the SEIS expenditure were references to so much of that expenditure as is given by the formula—

where—

SA means the SEIS expenditure (ignoring this paragraph);
TSA means the total of the amounts subscribed for shares issued in the tax year 2012-13 in respect of which the investor is eligible for and claims SEIS relief for that tax year.

(3) Sub-paragraph (4) applies if the amount of SEIS relief attributable to any of the relevant SEIS shares has been reduced under Chapter 6 of Part 5A of ITA 2007 before the SEIS relief was obtained (otherwise than by virtue of corresponding bonus shares being issued in respect of those shares).

(4) Paragraph 1(5) to (7) has effect as if the SEIS expenditure were the amount found by multiplying that expenditure by the fraction—

where—

(5) In a case where sub-paragraphs (2) and (4) both apply, sub-paragraph (2) is to be applied before sub-paragraph (4).

Claims

3 (1) Section 257EA of ITA 2007 (time for making claims for SEIS relief) applies in relation to a claim made by the investor for the purposes of paragraph 1 in relation to the SEIS expenditure as it applies in relation to a claim for SEIS relief in respect of that expenditure.

(2) Nothing in paragraph 1(3) prevents a claim being made by the investor under paragraph 1 before SEIS relief has actually been obtained by the investor in relation to the SEIS relief.

Attribution of SEIS re-investment relief to relevant SEIS shares

4 (1) References in this Schedule to the SEIS re-investment relief attributable to any shares are to be read as references to the total amount attributed to those shares in accordance with this paragraph.

(2) Sub-paragraph (3) applies where the whole or part of the SEIS expenditure is set off against a chargeable gain under paragraph 1(5).

(3) A proportionate part of the expenditure which is so set off is attributed to each of the relevant SEIS shares.

(4) Sub-paragraph (5) applies if corresponding bonus shares are issued in respect of all or some of the relevant SEIS shares (“the original shares”) to which relief is attributed under this paragraph.

(5) A proportionate part of the total amount attributed to the original shares immediately before those bonus shares are issued is attributed to each of the shares in the holding comprising the original shares and those bonus shares.

Removal or reduction of the relief

5 (1) This paragraph applies where in respect of shares issued to an individual—

(a) SEIS relief is attributable to the shares,

(b) SEIS re-investment relief is also attributable to the shares, and

(c) the SEIS relief which is attributable to the shares is withdrawn or reduced under Chapters 6 and 7 of Part 5A of ITA 2007.

(2) A chargeable gain accrues to the individual in the tax year 2012-13 on a disposal made in that tax year.

(3) The amount of that gain is—

(a) in a case where the SEIS relief is withdrawn, the amount of SEIS re-investment relief which is attributable to the shares immediately before the withdrawal, and

(b) in a case where the SEIS relief is reduced, the appropriate fraction of that amount.

(4) In a case where the SEIS re-investment relief is withdrawn, the SEIS re-investment relief ceases to be attributable to the shares.

(5) In a case where the SEIS relief is reduced, the appropriate fraction of the SEIS re-investment relief ceases to be attributable to the shares.

(6) “The appropriate fraction” is—

where—

Transfers of shares to spouses and civil partners

6 (1) This paragraph 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,

(d) subsection (4) of section 257FA of ITA 2007 (provision about disposals of shares disapplied where disposal between spouses or civil partners) prevented that section applying to the transfer.

(2) Any chargeable gain which accrues by virtue of paragraph 5(2), as a result of SEIS relief attributable to the shares being withdrawn or reduced after the shares are transferred, is to accrue to B (instead of to A).

Adjustment of capital gains tax liability

7 (1) 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 relief being obtained, or a gain accruing, under this Schedule.

(2) In its application to an assessment made by virtue of this paragraph, section 86 of TMA 1970 (interest on overdue capital gains tax) has effect as if the relevant date were 31 January next following the tax year in which the assessment is made.

Interpretation etc

8 (1) In this Schedule—

“bonus shares” means shares which are issued otherwise than for payment (whether in cash or otherwise);
“corresponding bonus shares”, in relation to any shares (“the original shares”), means bonus shares which are in the same company, of the same class, and carry the same rights as the original shares;
“SEIS relief” has the same meaning as in Part 5A of ITA 2007.

(2) In this Schedule, 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 and on the same day.

(3) If section 257AB(1) and (2) of ITA 2007 applies, in the case of any issue of shares made to an individual, as if part of the issue had been issued in a previous tax year, this Schedule has effect as if that part and the remainder were separate issues of shares (and that part had been issued on a day in the previous tax year).

(4) Part 5A of ITA 2007 applies, for the purposes of this Schedule, to determine whether SEIS relief is attributable to any shares and, if so, the amount of relief so attributable.”

Part 3 Consequential amendments

ITA 2007

6 ITA 2007 is amended as follows.

7 In section 2 (overview of Act), after subsection (5) insert—

“(5A) Part 5A is about relief under the seed enterprise investment scheme.”

8 In section 26 (tax reductions), in subsection (1)(a), after the entry for Chapter 1 of Part 5, insert—

“Chapter 1 of Part 5A (SEIS relief),”.

9 In section 27 (order of deducting tax reductions: individual), in subsection (5), after the entry for “Chapter 1 of Part 5 (EIS relief)” insert—

“Chapter 1 of Part 5A (SEIS relief),”.

10 In section 169 (directors qualifying for relief despite connection), in subsection (4), for the words after “before” substitute “—

(a) the termination date relating to the latest issue of shares which met that condition, or

(b) if that issue is an issue in respect of which the investor is eligible for SEIS relief (within the meaning of Part 5A), before the date specified in section 257AC(4) in relation to the shares.”

11 In section 172 (overview of Chapter 3), after paragraph (aa) insert—

“(ab) the spending of money raised by SEIS investments (see section 173B),”.

12 In section 173A (enterprise investment scheme: maximum amount raised annually through risk capital schemes requirement), in subsection (3)(b), after sub-paragraph (i) (and the “or” at the end of it) insert—

“(ia) a compliance statement under section 257ED (seed enterprise investment scheme).”

13 After that section insert—

“173B The spending of money raised by SEIS investment requirement

(1) The requirement of this section is that, if an SEIS investment has been made in the issuing company, at least 70% of the money raised by the investment has been spent as mentioned in section 257CC (seed enterprise investment scheme: spending of the money raised requirement) before the relevant shares are issued.

(2) An “SEIS investment” is made in a company if the company issues shares (money having been subscribed for them), and (at any time) the company provides a compliance statement under section 257ED(seed enterprise investment scheme).”

14 (1) Section 246 (identification of shares on a disposal) is amended as follows.

(2) In subsection (3)—

(a) in paragraph (a) for “neither EIS relief nor deferral relief” substitute “no EIS relief, deferral relief or SEIS relief”, and

(b) after that paragraph insert—

“(aa) next any to which SEIS relief is attributable,”.

(3) In subsection (7), at the end insert—

““SEIS relief” means relief under Part 5A (seed enterprise investment scheme).”

15 In section 286 (qualifying holdings: introduction), in subsection (3), after paragraph (ea) insert—

“(eb) the spending of money raised by SEIS investment (see section 292B),”.

16 In section 292A (venture capital trusts: maximum amount raised annually through risk capital schemes requirement), in subsection (3)(b), after sub-paragraph (i) (and the “or” at the end of it) insert—

“(ia) a compliance statement under section 257ED (seed enterprise investment scheme).”

17 After that section insert—

“292B The spending of money raised by SEIS investment requirement

(1) The requirement of this section is that, if an SEIS investment has been made in the relevant company, at least 70% of the money raised by the investment has been spent as mentioned in section 257CC (seed enterprise investment scheme: the spending of the money raised requirement) before the issue of the relevant holding.

TCGA 1992

18 TCGA 1992 is amended as follows.

19 (1) Section 150A (enterprise investment scheme) is amended as follows.

(2) For “relief”, in each place it occurs (except subsections (6)(c) and (10)), substitute “EIS relief”.

(3) In subsection (6)—

(a) omit the “and” at the end of paragraph (b) and after that paragraph insert—

“(ba) shares to which SEIS relief is attributable; and”,

(b) in paragraph (c), for “relief is not” substitute “neither EIS nor SEIS relief is”, and

(4) In subsection (10), for “the relief” substitute “EIS relief”.

(5) In subsection (10A), at the appropriate place, insert—

““EIS relief” means relief under Chapter 3 of Part 7 of the Taxes Act or Part 5 of ITA 2007;”, and
““SEIS relief” means relief under Part 5A of ITA 2007.”

20 (1) Section 150B (enterprise investment scheme: reduction of relief) is amended as follows.

(2) For “relief”, in each place it occurs, substitute “EIS relief”.

(3) After subsection (5) insert—

“(5A) In this section “EIS relief” means relief under Chapter 3 of Part 7 of the Taxes Act or Part 5 of ITA 2007.”

21 In Schedule 5B (enterprise investment scheme: re-investment), in paragraph 2 (postponement of original gain)—

(a) in sub-paragraph (3)(b), after “Schedule” insert “or paragraph 1(5) of Schedule 5BB”, and

(b) in sub-paragraph (4), after “this Schedule” insert “or paragraph 1(5) of Schedule 5BB”.

TMA 1970

22 In section 98 of TMA 1970 (special returns, etc)—

(a) in the first column of the Table, after the entry for “sections 242 and 243(1) and (2) of ITA 2007” insert—

“sections 257GG and 257GH(1) and (2) of ITA 2007;”, and”

(b) in the second column of that Table, after the entry for “sections 240 and 241 of ITA 2007” insert—

“sections 257GE and 257GF of ITA 2007;”.

Part 4 Commencement

23 (1) Subject to sub-paragraphs (2) and (3), the amendments made by this Schedule have effect in relation to shares issued on or after 6 April 2012.

(2) The amendments made by paragraphs 15 to 17 have effect for the purpose of determining whether shares or securities issued on or after 6 April 2012 are to be regarded as comprised in a company’s qualifying holdings.

(3) Sub-paragraph (1) does not apply to the amendments made by paragraphs 4, 5 and 21.

Section 39

SCHEDULE 7 Enterprise investment scheme

Part 1 Enterprise investment scheme

Introduction

1 Part 5 of ITA 2007 (enterprise investment scheme) is amended as follows.

Minimum subscription

2 In section 157 (eligibility for EIS relief), omit subsections (2) and (3).

Increase in amount of relief

3 (1) In section 158 (form and amount of EIS relief), in subsection (2)(b) for “£500,000” substitute “£1 million”.

(2) Accordingly, section 31 of FA 2008 is repealed.

Loan capital

4 In section 170 (person interested in capital etc of company)—

(a) in subsection (1)(b), omit “loan capital and”, and

(b) omit subsections (8) and (10).

Overview of Chapter 3

5 In section 172 (overview of Chapter 3), omit the “and” at the end of paragraph (e) and after paragraph (f) insert “, and

(g) no disqualifying arrangements (see section 178A).”

Relaxation of the shares requirement

6 (1) Section 173 (the shares requirement) is amended as follows.

(2) In subsection (2), for paragraph (a) (but not the “or” after it) substitute—

“(a) any present or future preferential right to dividends that is within subsection (2A),

(aa) any present or future preferential right to a company’s assets on its winding up,”

(3) After that subsection insert—

“(2A) A preferential right to dividends carried by a share in a company is within this subsection if—

(a) the amount of any dividends payable pursuant to the right, or the date or dates on which they are payable, depend to any extent on a decision of the company, the holder of the share or any other person, or

(b) the amount of any dividends that become payable at any time pursuant to the right includes any amount that became payable at any earlier time pursuant to the right, but has not been paid.”

Increase in the maximum amount permitted to be raised annually

7 (1) Section 173A (the maximum amount raised annually through risk capital schemes requirement) is amended as follows.

(2) In subsection (1) for “£2 million” substitute “£5 million”.

(3) In subsection (3)—

(a) in paragraph (b), omit sub-paragraph (ii), and

(b) after that paragraph insert “, or

(c) any other investment is made in the company which is aid received by it pursuant to a measure approved by the European Commission as compatible with

Article 107 of the Treaty on the Functioning of the European Union in accordance with the principles laid down in the Community Guidelines on Risk Capital Investments in Small and Medium-sized Enterprises (as those guidelines may be amended or replaced from time to time).”

Acquisition of shares or stock

8 In section 175 (the use of the money raised requirement), after subsection (1) insert—

“(1A) Employing money on the acquisition of shares or stock in a company does not of itself amount to employing the money for the purposes of a qualifying business activity.”

No disqualifying arrangements requirement

9 After section 178 insert—

“178A The no disqualifying arrangements requirement

(1) The relevant shares must not be issued in consequence of, or otherwise in connection with, disqualifying arrangements.

(2) Arrangements are “disqualifying arrangements” if—

(a) the main purpose, or one of the main purposes, of any person (“P”) in being a party to them is to secure—

(i) that the issuing company, or a qualifying 90% subsidiary of that company, carries on a business which consists of or includes the relevant qualifying business activity, and

(ii) that one or more persons (whether or not including P) may obtain relevant tax relief in respect of shares issued by the issuing company which raise money for the purposes of that activity or that such shares may comprise part of the qualifying holdings of a VCT, and

(b) one or both of conditions A and B are met.

(3) Condition A is that, as a (direct or indirect) result of the money raised by the issue of the relevant shares being employed as required by section 175, an amount representing the whole or the majority of the amount raised is paid to or for the benefit of a party to the arrangements or a person connected with such a party.

(4) Condition B is that, in the absence of the arrangements, it would have been reasonable to expect that the component activities of the relevant qualifying business activity would have been carried on as part of another business by a person who is a party to the arrangements or a person connected with such a party.

(5) For the purposes of this section it is immaterial whether the issuing company is a party to the arrangements.

(6) In this section—

“component activities” means—

(a)

if the relevant qualifying business activity is activity A (see section 179(2)), the carrying on of a qualifying trade or preparing to carry on such a trade, which constitutes that activity, and

(b)

if the relevant qualifying business activity is activity B (see section 179(4)), the carrying on of research and development which constitutes that activity;
“qualifying holdings”, in relation to the issuing company, is to be construed in accordance with section 286 (VCTs: qualifying holdings);
“relevant qualifying business activity” means the activity for the purposes of which the issue of the relevant shares raised money;
“relevant tax relief”, in respect of shares, means one or more of the following—

(a)

EIS relief in respect of the shares;

(b)

SEIS relief under Part 5A in respect of the shares;

(c)

relief under Chapter 6 of Part 4 (losses on disposal of shares) in respect of the shares;

(d)

relief under section 150A or 150E of TCGA 1992 (enterprise investment scheme) in respect of the shares;

(e)

relief under Schedule 5B to that Act (enterprise investment scheme: reinvestment) in consequence of which deferral relief is attributable to the shares (see paragraph 19(2) of that Schedule);

(f)

relief under Schedule 5BB to that Act (seed enterprise investment scheme: re-investment) in consequence of which SEIS re-investment relief is attributable to the shares (see paragraph 4 of that Schedule).”

Meaning of “qualifying business activity”

10 In section 179 (meaning of “qualifying business activity”), in subsection (1) omit “This is subject to subsections (3) and (5).”

Increase in the gross assets limits

11 In section 186 (the gross assets requirement)—

(a) in subsections (1)(a) and (2)(a), for “£7 million” substitute “£15 million”, and

(b) in subsections (1)(b) and (2)(b), for “£8 million” substitute “£16 million”.

Relaxation of restriction on number of employees

12 In section 186A (the number of employees requirement), in subsections (1) and (2), for “50” substitute “250”.

Subsidised generation or export of electricity

13 (1) Section 192 (meaning of “excluded activities”) is amended as follows.

(2) In subsection (1), omit “and” at the end of paragraph (k) and after that paragraph insert—

“(ka) the subsidised generation or export of electricity, and”.

(3) In subsection (2), omit the “and” at the end of paragraph (e) and after paragraph (f) insert “, and

(g) section 198A (subsidised generation or export of electricity).”

14 After section 198 insert—

“198A Excluded activities: subsidised generation or export of electricity

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

(2) Electricity is exported if it is exported onto a distribution system or transmission system (within the meaning of section 4 of the Electricity Act 1989).

(3) The generation of electricity is “subsidised” if a person receives a FIT subsidy in respect of the electricity generated.

(4) The export of electricity is “subsidised” if a person receives a FIT subsidy in respect of the electricity exported.

(5) But the generation or export of electricity is not to be taken to fall within section 192(1)(ka) if Condition A, B or C is met.

(6) Condition A is that the generation or export is carried on by—

(a) a community interest company,

(b) a co-operative society,

(d) a NI industrial and provident society.

(7) Condition B is that the plant used for the generation of the electricity relies wholly or mainly on anaerobic digestion.

(8) Condition C is that the electricity is hydroelectric power.

(9) For the purposes of this section—

“anaerobic digestion” means the bacterial fermentation of organic material in the absence of free oxygen (excluding anaerobic digestion of sewage or material in a landfill);
“community benefit society” means—

(a)

a society registered under the Co-operative and Community Benefit Societies and Credit Unions Act 1965 as a community benefit society, or

(b)

a pre-2010 Act society (as defined at section 4A(1) of that Act) which meets the condition in section 1(3) of that Act;
“co-operative society” means—

(a)

a society registered under the Co-operative and Community Benefit Societies and Credit Unions Act 1965 as a co-operative society, or

(b)

a pre-2010 Act society (as defined at section 4A(1) of that Act) which meets the condition in section 1(2) of that Act;
“FIT subsidy” means—

(a)

a financial incentive under a scheme established by virtue of section 41 of the Energy Act 2008 (powers to amend licence conditions etc: feed-in tariffs) to encourage small-scale low-carbon generation of electricity, or

(b)

a financial incentive under a similar scheme established in a territory outside the United Kingdom to encourage small-scale low-carbon generation of electricity;
“NI industrial and provident society” means a society registered under the Industrial and Provident Societies Act (Northern Ireland) 1969 (c. 24 (N.I.));
“small-scale low-carbon generation” has the meaning given by section 41(4) of the Energy Act 2008.”

15 In section 199 (excluded activities: provision of services or facilities for another business), in subsection (1)(a), for “(k)” substitute “(ka)”.

Powers to amend

16 In section 200 (power to amend by Treasury order), the existing provision becomes subsection (1) and after that subsection insert—

“(2) An order under this section may—

(a) make different provision for different cases or purposes, or

(b) include such transitional provision as the Treasury consider appropriate.”

Disposal of shares

17 In section 209 (disposal of shares), after subsection (5) insert—

“(6) Nothing in this section applies to a disposal of shares occurring as a result of the investor’s death.”

Date from which interest is chargeable

18 In section 239 (date from which interest is chargeable), in subsection (2) for “sections 181 to 188” substitute “sections 180A to 188”.

Information

19 In section 243 (power to require information in other cases)—

(a) in subsection (1), omit the “or” at the end of paragraph (d) and after that paragraph insert—

“(da) section 178A (no disqualifying arrangements), or”, and”

(b) in subsection (4), at the appropriate place in the table, insert—

“Subsection (1)(da)

The claimant, the company, any person controlling the company and any person whom an officer of Revenue and Customs has reason to believe may be a party to the arrangements in question”

Approved investment fund as nominee

20 In section 251 (approved investment fund as nominee), omit subsection (3).

Interpretation

21 In section 257 (minor definitions etc), in subsection (1), for the definition of “arrangements” substitute—

““arrangements” includes any scheme, agreement, understanding, transaction or series of transactions (whether or not legally enforceable);”.

Commencement and transitional provision

22 (1) The amendments made by paragraphs 2 to 6, 7(1) and (3), 8, 9, 10 and 19 have effect in relation to shares issued on or after 6 April 2012.

(2) But—

(a) for the purposes of paragraphs 5, 9 and 19 it does not matter whether the disqualifying arrangements were entered into before or on or after 6 April 2012, and

(b) nothing in sub-paragraph (1) prevents shares issued before that date constituting a “relevant investment” (by virtue of the amendment made by paragraph 7(3)(b) of this Schedule) for the purposes of determining whether the requirement of section 173A(1) of ITA 2007 is met in relation to shares issued on or after that date.

23 (1) The amendments made by paragraphs 7(2), 11 and 12 come into force on such day as the Treasury may by order appoint.

(2) Those amendments have effect in relation to shares issued on or after 6 April 2012.

24 (1) Subject to sub-paragraph (2), the amendments made by paragraphs 13 to 15have effect in relation to shares issued on or after 23 March 2011.

(2) Those amendments do not have effect in relation to shares issued before 6 April 2012 if the issuing company, or a qualifying 90% subsidiary of that company, first began to carry on activities of the kind mentioned in section 192(1)(ka) of ITA 2007 before that day.

(3) Until such time as section 1 of the Co-operative and Community Benefit Societies and Credit Unions Act 2010 comes into force, section 198A(6) of ITA 2007 (inserted by paragraph 12 of this Schedule) has effect as if for paragraphs (b) and (c) there were substituted—

“(b) a society registered under the Industrial and Provident Societies Act 1965,”.

25 (1) The amendment made by paragraphs 18 and 21 are to be treated as having come into force on 6 April 2012.

Part 2 Enterprise investment scheme: chargeable gains

Introduction

26 TCGA 1992 is amended as follows.

Disposal of shares to which EIS relief is attributable

27 In section 150A (disposal of shares to which EIS relief is attributable)—

(a) in subsection (3), in paragraph (b) for “basic rate” substitute “EIS original rate”, and

(b) after that subsection insert—

“(3A) In subsection (3) “EIS original rate” has the meaning given by section 256A of ITA 2007, except that where the year mentioned in subsection (3)(b) is the tax year 2007-08 or an earlier year, it means 20%.”

28 Accordingly, in Schedule 1 to FA 2008, paragraph 48 is repealed.

Maximum annual investment

29 In paragraph 1 of Schedule 5B to the TCGA 1992 (EIS re-investment relief: application of Schedule), in sub-paragraph (2)(da), for “£2 million” substitute “£5 million”.

No disqualifying arrangements

30 After paragraph 11 insert—

“Disqualifying arrangements

11A (1) Where an individual subscribes for eligible shares (“the shares”) in a company (“the company”), the shares are to be treated as not being eligible shares for the purposes of this Schedule if the shares are issued in consequence of, or otherwise in connection with, disqualifying arrangements.

(2) Arrangements are “disqualifying arrangements” if—

(a) the main purpose, or one of the main purposes, of any person (“P”) in being a party to them is to secure—

(i) that the company, or a qualifying 90% subsidiary of the company, carries on a business which consists

of or includes the relevant qualifying business activity, and

(ii) that one or more persons (whether or not including P) may obtain relevant tax relief in respect of shares issued by the company which raise money for the purposes of that activity or that such shares may comprise part of the qualifying holdings of a venture capital trust, and

(b) one or both of conditions A and B are met.

(3) Condition A is that, as a (direct or indirect) result of the money raised by the issue of the shares being employed as required by paragraph 1(2)(g), an amount representing the whole or the majority of the amount raised is paid to or for the benefit of a party to the arrangements or a person connected with such a party.

(5) For the purposes of this paragraph, it is immaterial whether the company is a party to the arrangements.

(6) In this paragraph—

“component activities” means—

(a)

if the relevant qualifying business activity is activity A (see section 179(2) of ITA 2007), the carrying on of a qualifying trade, or preparing to carry on such a trade, which constitutes that activity, and

(b)

if the relevant qualifying business activity is activity B (see section 179(4) of that Act), the carrying on of research and development which constitutes that activity;
“qualifying holdings”, in relation to the issuing company, is to be construed in accordance with section 286 of ITA 2007 (VCTs: qualifying holdings);
“qualifying 90% subsidiary” has the meaning given by section 190 of ITA 2007;
“relevant qualifying business activity” means the activity for the purposes of which the issue of the shares raised money;
“relevant tax relief”, in respect of shares, means one or more of the following—

(a)

relief under this Schedule in consequence of which deferral relief is attributable to the shares;

(b)

relief under section 150A or 150E (enterprise investment scheme or seed enterprise investment scheme) in respect of the shares;

(c)

relief under Schedule 5BB (seed enterprise investment scheme: re-investment) in consequence of which SEIS re-investment relief is attributable to the shares (see paragraph 4 of that Schedule);

(d)

relief under Chapter 6 of Part 4 of ITA 2007 (losses on disposal of shares) in respect of the shares;

(e)

EIS relief (within the meaning of Part 5 of that Act) in respect of the shares;

(f)

SEIS relief (within the meaning of Part 5A of that Act) in respect of the shares.”

Information

31 In paragraph 16 (information)—

(a) in sub-paragraph (6), for “or 11(1)” substitute “, 11(1) or 11A”,

(b) in sub-paragraph (7), omit the “and” at the end of paragraph (b) and after that paragraph insert—

“(ba) in relation to paragraph 11A, the claimant, the company, any person controlling the company and any person whom an officer of Revenue and Customs has reason to believe may be a party to the arrangements in question; and”, and

Meaning of “arrangements”

32 In paragraph 19 (interpretation), in sub-paragraph (1) for the definition of “arrangements” substitute—

““arrangements” includes any scheme, agreement, understanding, transaction or series of transactions (whether or not legally enforceable);”.

Commencement

33 (1) The amendment made by paragraph 29 comes into force on such day as the Treasury may by order appoint.

(2) That amendment has effect in relation to shares issued on or after 6 April 2012.

34 (1) The amendments made by paragraphs 27, 28, 30 and 31 have effect in relation to shares issued on or after 6 April 2012.

(2) For the purposes of those paragraphs it does not matter whether the disqualifying arrangements were entered into before or on or after that date.

35 The amendment made by paragraph 32 is treated as having come into force on 6 April 2012.

Section 40

SCHEDULE 8 Venture capital schemes

Introduction

1 Part 6 of ITA 2007 (venture capital trusts) is amended in accordance with paragraphs 2 to 13.

VCT approvals

2 (1) Section 274 (requirements for the giving of approval) is amended as follows.

(2) In subsection (2), in the list of conditions, at the end insert—

“The investment limits condition

The company has not made and will not make an investment, in the relevant period, in a company which breaches the permitted investment limits”

(3) In subsection (3), omit the “and” at the end of paragraph (d), and after paragraph (e) insert “, and

(f) the investment limits condition by section 280B.”

3 After section 280A insert—

“280B The investment limits condition

(1) This section applies for the purposes of the investment limits condition.

(2) Where a company (“the investor”) makes an investment (“the current investment”) in another company (“the relevant company”), that investment breaches the permitted investment limits if the total annual investment in the relevant company exceeds the amount for the time being specified in section 292A(1).

(3) The total annual investment in the relevant company is the sum of—

(a) the amount of the current investment, and

(b) the total amount of other relevant investments made in the relevant company (whether or not by the investor) in the year ending with the day on which the current investment is made.

(4) A “relevant investment” is made in a company if—

(a) an investment (of any kind) in the company is made by a VCT,

(b) the company issues shares (money having been subscribed for them), and (at any time) the company provides—

(i) a compliance statement under section 205 (enterprise investment scheme), or

(ii) a compliance statement under section 257ED (seed enterprise investment scheme),

in respect of the shares, or

(c) any other investment is made in the company which is aid received by it pursuant to a measure approved by the European Commission as compatible with Article 107 of the Treaty on the Functioning of the European Union in accordance with the principles laid down in the Community Guidelines on Risk Capital Investments in Small and Medium-sized Enterprises (as those guidelines may be amended or replaced from time to time).

(5) For the purposes of subsections (2) and (3), an investment within subsection (4)(b) is regarded as made when the shares are issued.”

Qualifying holdings: introduction

4 In section 286 (qualifying holdings: introduction), in subsection (3), omit the “and” at the end of paragraph (k) and after paragraph (l) insert “, and

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