Session 2012 - 13
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Finance Bill


Finance Bill
Schedule 6 — Seed enterprise investment scheme
Part 1 — The scheme

213

 

(l)   

qualifying subsidiaries (see section 257DM), and

(m)   

property managing subsidiaries (see section 257DN).

The requirements

257DA   

 The trading requirement

(1)   

The issuing company must meet the trading requirement

5

throughout period B.

(2)   

The trading requirement is that—

(a)   

the company, ignoring any incidental purposes, exists

wholly for the purpose of carrying on one or more new

qualifying trades (see section 257HF), or

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(b)   

the company is a parent company and the business of the

group does not consist wholly or as to a substantial part in the

carrying on of non-qualifying activities.

(3)   

If the company intends that one or more other companies should

become its qualifying subsidiaries with a view to their carrying on

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one or more new qualifying trades—

(a)   

the company is treated as a parent company for the purposes

of subsection (2)(b), and

(b)   

the reference in subsection (2)(b) to the group includes the

company and any existing or future company that will be its

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qualifying subsidiary after the intention in question is carried

into effect.

   

This subsection does not apply at any time after the abandonment of

that intention.

(4)   

For the purpose of subsection (2)(b) the business of the group means

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what would be the business of the group if the activities of the group

companies taken together were regarded as one business.

(5)   

For the purpose of determining the business of a group, activities are

ignored so far as they are activities carried on by a mainly trading

subsidiary otherwise than for its main purpose.

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(6)   

For the purposes of determining the business of a group, activities of

a group company are ignored so far as they consist in—

(a)   

the holding of shares in or securities of a qualifying

subsidiary of the parent company,

(b)   

the making of loans to another group company,

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(c)   

the holding and managing of property used by a group

company for the purpose of one or more qualifying trades

carried on by a group company, or

(d)   

the holding and managing of property used by a group

company for the purpose of research and development from

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which it is intended—

(i)   

that a qualifying trade to be carried on by a group

company will be derived, or

(ii)   

that a qualifying trade carried on or to be carried on

by a group company will benefit.

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Finance Bill
Schedule 6 — Seed enterprise investment scheme
Part 1 — The scheme

214

 

(7)   

Any reference in subsection (6)(d)(i) or (ii) to a group company

includes a reference to any existing or future company which will be

a group company at any future time.

(8)   

Where period B begins after the incorporation of the company, the

requirement of subsection (2) must have been complied with since its

5

incorporation; but for the purposes of that subsection any interval

between the incorporation of the company and the time when it

commenced business is to be ignored.

(9)   

In this section—

“incidental purposes” means purposes having no significant

10

effect (other than in relation to incidental matters) on the

extent of the activities of the company in question;

“mainly trading subsidiary” means a qualifying subsidiary

which, apart from incidental purposes, exists wholly for the

purpose of carrying on one or more qualifying trades, and

15

any reference to the main purpose of such a subsidiary is to

be read accordingly;

“non-qualifying activities” means—

(a)   

excluded activities (within the meaning of sections

192 to 199), and

20

(b)   

activities (other than research and development)

carried on otherwise than in the course of a trade;

“qualifying trade” has the same meaning as in Part 5 (see

sections 189 and 192 to 200).

257DB   

 Ceasing to meet trading requirement: administration etc

25

(1)   

A company is not regarded as ceasing to meet the trading

requirement merely because of anything done in consequence of the

company or any of its subsidiaries being in administration or

receivership.

   

This is subject to subsections (2) and (3).

30

(2)   

Subsection (1) applies only if—

(a)   

the entry into administration or receivership, and

(b)   

everything done as a result of the company concerned being

in administration or receivership,

   

is for genuine commercial reasons, and is not part of a scheme or

35

arrangement the main purpose or one of the main purposes of which

is the avoidance of tax.

(3)   

A company ceases to meet the trading requirement if before the end

of period B—

(a)   

a resolution is passed, or an order is made, for the winding up

40

of the company or any of its subsidiaries (or, in the case of a

winding up otherwise than under the Insolvency Act 1986 or

the Insolvency (Northern Ireland) Order 1989, any other act

is done for the like purpose), or

(b)   

the company or any of its subsidiaries is dissolved without

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winding up.

   

This is subject to subsection (4).

 
 

Finance Bill
Schedule 6 — Seed enterprise investment scheme
Part 1 — The scheme

215

 

(4)   

Subsection (3) does not apply if the winding up or dissolution is for

genuine commercial reasons, and is not part of a scheme or

arrangement the main purpose or one of the main purposes of which

is the avoidance of tax.

257DC   

 The issuing company to carry on the qualifying business activity

5

(1)   

The requirement of this section is met in relation to the issuing

company if, at no time in period B, is any of the following—

(a)   

the relevant new qualifying trade,

(b)   

relevant preparation work (if any), and

(c)   

relevant research and development (if any),

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carried on by a person other than the issuing company or a

qualifying 90% subsidiary of that company.

(2)   

Subsection (3) has effect for the purpose of determining whether the

requirement of this section is met in relation to the issuing company

in a case where relevant preparation work is carried out by that

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company or a qualifying 90% subsidiary of that company.

(3)   

The carrying on of the relevant new qualifying trade by a company

other than the issuing company or a subsidiary of that company is to

be ignored if it takes place at any time in period B before the issuing

company or any qualifying 90% subsidiary of that company begins

20

to carry on that trade.

(4)   

The requirement of this section is not regarded as failing to be met in

relation to the issuing company if, merely because of any act or event

within subsection (5), the relevant new qualifying trade—

(a)   

ceases to be carried on in period B by the issuing company or

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any qualifying 90% subsidiary of that company, and

(b)   

is subsequently carried on in that period by a person who is

not at any time in period A connected with the issuing

company.

(5)   

The following are acts and events within this subsection—

30

(a)   

anything done as a consequence of the issuing company or

any other company being in administration or receivership,

and

(b)   

the issuing company or any other company being wound up,

or dissolved without being wound up.

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(6)   

Subsection (4) applies only if—

(a)   

the entry into administration or receivership, and everything

done as a consequence of the company concerned being in

administration or receivership, or

(b)   

the winding up or dissolution,

40

   

is for genuine commercial reasons, and is not part of a scheme or

arrangement the main purpose or one of the main purposes of which

is the avoidance of tax.

(7)   

In this section—

“the relevant new qualifying trade” means the new qualifying

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trade which is the subject of that qualifying business activity;

 
 

Finance Bill
Schedule 6 — Seed enterprise investment scheme
Part 1 — The scheme

216

 

“relevant preparation work” means preparations within section

257HG(2)(b) which are the subject of the qualifying business

activity mentioned in section 257CB;

“relevant research and development” means—

(a)   

research and development within section 257HG(3)

5

which is the subject of that qualifying business

activity, and

(b)   

any other preparations for the carrying on of the new

qualifying trade which is the subject of that activity.

257DD   

  The UK permanent establishment requirement

10

(1)   

The issuing company must meet the UK permanent establishment

requirement throughout period B.

(2)   

The UK permanent establishment requirement is that the issuing

company has a permanent establishment in the United Kingdom.

257DE   

 The financial health requirement

15

(1)   

The issuing company must meet the financial health requirement at

the beginning of period B.

(2)   

The financial health requirement is that the issuing company is not

in difficulty.

(3)   

The issuing company is “in difficulty” if it is reasonable to assume

20

that it would be regarded as a firm in difficulty for the purposes of

the Community Guidelines on State Aid for Rescuing and

Restructuring Firms in Difficulty (2004/C 244/02).

257DF   

 The unquoted status requirement

(1)   

At the beginning of period B—

25

(a)   

the issuing company must be an unquoted company,

(b)   

there must be no arrangements in existence for the issuing

company to cease to be an unquoted company, and

(c)   

there must be no arrangements in existence for the issuing

company to become a subsidiary of another company (“the

30

new company”) by virtue of an exchange of shares, or shares

and securities, if—

(i)   

section 257HB applies in relation to the exchange, and

(ii)   

arrangements have been made with a view to the new

company ceasing to be an unquoted company.

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(2)   

In this section “unquoted company” means a company none of

whose shares, stocks, debentures or other securities are marketed to

the general public.

(3)   

For the purposes of subsection (2), shares, stock, debentures or other

securities are marketed to the general public if they are—

40

(a)   

listed on a recognised stock exchange,

(b)   

listed on a designated exchange in a country outside the

United Kingdom, or

(c)   

dealt in outside the United Kingdom by such means as may

be designated.

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Finance Bill
Schedule 6 — Seed enterprise investment scheme
Part 1 — The scheme

217

 

(4)   

In subsection (3)(b) and (c) “designated” means designated by an

order made by the Commissioners for Her Majesty’s Revenue and

Customs for the purposes of that provision.

(5)   

An order made for the purposes of subsection (3)(b) may designate

an exchange by name, or by reference to any class or description of

5

exchanges, including a class or description framed by reference to

any authority or approval given in a country outside the United

Kingdom.

(6)   

The arrangements referred to in subsection (1)(b) and (c)(ii) do not

include arrangements in consequence of which any shares, stocks,

10

debentures or other securities of the company are at any subsequent

time—

(a)   

listed on a stock exchange that is a recognised stock exchange

by virtue of an order made under section 1005(1)(b), or

(b)   

listed on an exchange, or dealt in by any means, designated

15

by an order made for the purposes of subsection (3)(b) or (c),

   

if the order was made after the beginning of period B.

257DG   

 The control and independence requirement

(1)   

The control element of the requirement is that—

(a)   

the issuing company must not at any time in period A control

20

(whether on its own or together with any person connected

with it) any company which is not a qualifying subsidiary of

the issuing company, and

(b)   

no arrangements must be in existence at any time in that

period by virtue of which the issuing company could fail to

25

meet paragraph (a) (whether during that period or

otherwise).

(2)   

The independence element of the requirement is that—

(a)   

the issuing company must not at any time in period A be

under the control of any other company (whether on its own

30

or together with any person connected with it), and

(b)   

no arrangements must be in existence at any time in that

period by virtue of which the issuing company could fail to

meet paragraph (a) (whether during that period or

otherwise).

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(3)   

This section is subject to section 257HB(4) (exchange of shares).

257DH   

  The no partnerships requirement

(1)   

Neither the issuing company nor any qualifying 90% subsidiary of

that company may, at any time during period A, be a member of a

partnership.

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(2)   

“Partnership” includes—

(a)   

a limited liability partnership, and

(b)   

an entity established under the law of a territory outside the

United Kingdom of a similar character to a partnership,

   

and “member”, in relation to a partnership, is to be read accordingly.

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Revised 9 May 2012