Finance Bill

Session 2012 - 13
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Finance Bill

Finance Bill
Schedule 6 — Seed enterprise investment scheme
Part 1 — The scheme
222

257EB
Entitlement to claim
(1)
The investor is entitled to make a claim for SEIS relief in respect of
the amount subscribed by the investor for the relevant shares if the
investor has received from the issuing company a compliance
certificate in respect of those shares.
5
(2)
For the purposes of PAYE regulations no regard is to be had to SEIS
relief unless a claim for it has been duly made.
(3)
No application may be made under section 55(3) or (4) of TMA 1970
(application for postponement of payment of tax pending appeal) on
the ground that the investor is eligible for SEIS relief unless a claim
10
for the relief has been duly made by the investor.
Claims: supporting documents
257EC
Compliance certificates
(1)
A “compliance certificate” is a certificate which—
(a)
is issued by the issuing company in respect of the relevant
15
shares,
(b)
states that, except so far as they fall to be met by or in relation
to the investor, the requirements for SEIS relief (see section
257AA) are for the time being met in relation to those shares,
and
20
(c)
is in such form as the Commissioners for Her Majesty’s
Revenue and Customs may direct.
(2)
Before issuing a compliance certificate in respect of the relevant
shares, the issuing company must provide an officer of Revenue and
Customs with a compliance statement in respect of the issue of
25
shares which includes the relevant shares.
(3)
The issuing company must not issue a compliance certificate without
the authority of an officer of Revenue and Customs.
(4)
If the issuing company, or a person connected with the issuing
company, has given notice to an officer of Revenue and Customs
30
under section 257GF, a compliance certificate must not be issued
unless the authority is given or renewed after the receipt of the
notice.
(5)
If an officer of Revenue and Customs—
(a)
has been requested to give or renew an authority to issue a
35
compliance certificate, and
(b)
has decided whether or not to do so,

the officer must give notice of the officer’s decision to the issuing
company.
257ED
  Compliance statements
40
(1)
A “compliance statement” is a statement, in respect of an issue of
shares, to the effect that, except so far as they fall to be met by or in
relation to the individuals to whom shares included in that issue
have been issued, the requirements for SEIS relief (see section
257AA)—
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Finance Bill
Schedule 6 — Seed enterprise investment scheme
Part 1 — The scheme
223

(a)
are for the time being met in relation to the shares to which
the statement relates, and
(b)
have been so met at all times since the shares were issued.
(2)
In determining for the purposes of subsection (1) whether the
requirements for SEIS relief are met at any time in relation to the
5
issue of shares, references in this Part to the relevant shares are read
as references to the shares included in the issue.
(3)
A compliance statement must not be made in respect of an issue of
shares before at least one of the following conditions is met—
(a)
at least 70% of the money raised by the issue has been spent
10
for the purposes of the qualifying business activity for which
it was raised;
(b)
the new qualifying trade which constitutes the qualifying
business activity or to which that activity relates has been
carried on by the issuing company or a qualifying 90%
15
subsidiary of that company for at least 4 months.
(4)
A compliance statement must be in such form as the Commissioners
for Her Majesty’s Revenue and Customs direct and must—
(a)
state which of the conditions in subsection (3) is met at the
time the statement is made,
20
(b)
contain such additional information as the Commissioners
reasonably require, including in particular information
relating to the persons who have requested the issue of
compliance certificates,
(c)
contain a declaration that the statement is correct to the best
25
of the issuing company’s knowledge and belief, and
(d)
contain such other declarations as the Commissioners may
reasonably require.
257EE
Appeal against refusal to authorise compliance certificate

For the purposes of the provisions of TMA 1970 relating to appeals,
30
the refusal of an officer of Revenue and Customs to authorise the
issue of a compliance certificate is taken to be a decision disallowing
a claim by the issuing company.
257EF
Penalties for fraudulent certificate or statement etc

The issuing company is liable to a penalty not exceeding £3,000 if—
35
(a)
it issues a compliance certificate, or provides a compliance
statement, which is made fraudulently or negligently, or
(b)
it issues a compliance certificate in contravention of section
257EC(3) or (4).
257EG
Power to amend sections 257EC and 257ED
40
(1)
The Treasury may by order make such amendments of sections
257EC and 257ED as they consider appropriate.
(2)
An order under this section may include incidental, supplemental,
consequential and transitional provision and savings.

Finance Bill
Schedule 6 — Seed enterprise investment scheme
Part 1 — The scheme
224

Chapter 6
Withdrawal or reduction of SEIS relief
Introduction
257F
Overview of Chapter

This Chapter provides for SEIS relief to be withdrawn or reduced
5
under—
(a)
section 257FA (disposal of shares),
(b)
section 257FC (call options),
(c)
section 257FD (put options),
(d)
section 257FE (value received by the investor),
10
(e)
section 257FP (acquisition of a trade or trading asset),
(f)
section 257FQ (acquisition of share capital), and
(g)
section 257FR (relief subsequently found not to have been
due).
257FA
Disposal of shares
15
(1)
This section applies if—
(a)
the investor disposes of any of the relevant shares,
(b)
the disposal takes place before period B ends, and
(c)
SEIS relief is attributable to the shares.
(2)
If the disposal is not made by way of a bargain made at arm’s length,
20
the SEIS relief attributable to the shares must be withdrawn.
(3)
If the disposal is made by way of a bargain made at arm’s length, the
SEIS relief attributable to the shares must—
(a)
if it is greater than the amount given by the formula set out
below, be reduced by that amount, and
25
(b)
in any other case, be withdrawn.

The formula is—
            R x SEISR


where—

R is the amount or value of the consideration received by the
investor for the shares, and
30

SEISR is the SEIS rate.
(4)
This section does not apply to a disposal of shares to which an
amount of SEIS relief is attributable if—
(a)
the disposal was made by an individual (“A”) to another
individual (“B”), and
35
(b)
A and B were married to, or were civil partners of, each other
and living together at the time of the disposal.
(5)
Section 257HA contains rules for determining which shares of any
class are treated as disposed of for the purposes of this section if the
investor disposes of some but not all of the shares of that class which
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are held by the investor.

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Schedule 6 — Seed enterprise investment scheme
Part 1 — The scheme
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(6)
Nothing in this section applies to a disposal of shares occurring as a
result of the investor’s death.
257FB
Cases where maximum SEIS relief not obtained
(1)
If the investor’s liability to income tax is reduced for any tax year in
respect of any issue of shares and—
5
(a)
the amount of the reduction (“A”), is less than
(b)
the amount (“B”) which is equal to tax at the SEIS rate on the
amount on which the investor claims SEIS relief in respect of
the shares,

section 257FA(3) has effect in relation to a disposal of any of the
10
shares as if the amount or value referred to as “R” were reduced by
multiplying it by the fraction—

A

B

(2)
If section 257AB(1) and (2) applies in the case of any issue of shares
as if part of the issue had been issued in a previous tax year,
subsection (1) has effect as if that part and the remainder were
15
separate issues of shares (and that part had been issued on a day in
the previous tax year).
(3)
If the amount of SEIS relief attributable to any of the relevant shares
has been reduced before the SEIS relief was obtained, the amount
referred to in subsection (1) as A is to be treated for the purposes of
20
that subsection as the amount that it would have been without that
reduction.
(4)
Subsection (3) does not apply to a reduction of SEIS relief by virtue
of section 257E(4) (attribution of SEIS relief if there is a
corresponding issue of bonus shares).
25
257FC
Call options
(1)
This section applies if the investor grants an option which, if
exercised, would bind the investor to sell any of the relevant shares.
(2)
The grant of the option is treated for the purposes of section 257FA
as a disposal of the shares to which the option relates.
30
(3)
Nothing in this section prejudices section 257CD (no pre-arranged
exits).
257FD
Put options
(1)
This section applies if, at any time in period A, a person grants the
investor an option which, if exercised, would bind the grantor to
35
purchase any of the relevant shares.
(2)
Any SEIS relief attributable to the shares to which the option relates
must be withdrawn.
(3)
For the purposes of subsection (2) the shares to which an option
relates are those which, if—
40
(a)
the option were exercised immediately after the grant, and

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Schedule 6 — Seed enterprise investment scheme
Part 1 — The scheme
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(b)
any shares in the issuing company acquired by the investor
after the grant were disposed of immediately after being
acquired,

would be treated for the purposes of section 257FA as disposed of in
pursuance of the option.
5
Value received by investor
257FE
Value received by the investor
(1)
This section applies if the investor receives any value from the
issuing company at any time in period A relating to the relevant
shares.
10
(2)
Any SEIS relief attributable to the shares must—
(a)
if it is greater than the amount given by the formula set out
below, be reduced by that amount, and
(b)
in any other case, be withdrawn.

The formula is—
            R x SEISR

15

where—

R is the amount of the value received by the investor, and

SEISR is the SEIS rate.
(3)
This section is subject to the following sections—
(a)
section 257FF (value received: receipts of insignificant value),
20
(b)
section 257FJ (value received where there is more than one
issue of shares),
(c)
section 257FK (value received where part of share issue
treated as made in previous tax year),
(d)
section 257FL (cases where maximum SEIS relief not
25
obtained),
(e)
section 257FM (receipts of value by and from connected
persons etc), and
(f)
section 257FN (receipt of replacement value).

Sections 257FJ to 257FL are to be applied in the order in which they
30
appear in this Part.
(4)
Value received is to be ignored, for the purposes of this section, to the
extent to which SEIS relief attributable to the shares has already been
withdrawn or reduced on its account.
(5)
For the purposes of this section and sections 257FF to 257FO, an
35
individual who acquires any relevant shares on such a transfer as is
mentioned in section 257H (spouses or civil partners) is treated as the
investor.
257FF
Value received: receipts of insignificant value
(1)
Section 257FE(2) does not apply if the receipt of value is a receipt of
40
insignificant value.

This is subject to subsection (2).
(2)
If—

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Part 1 — The scheme
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(a)
value is received (“the relevant receipt”) by the investor from
the issuing company at any time in period A relating to the
relevant shares,
(b)
the investor has received from the issuing company one or
more receipts of insignificant value at a time or times—
5
(i)
during that period, but
(ii)
not later than the time of the relevant receipt, and
(c)
the total value of the receipts within paragraphs (a) and (b) is
not an amount of insignificant value,

the investor is treated for the purposes of this Chapter as if the
10
relevant receipt had been a receipt of an amount of value equal to
that total amount.
(3)
A receipt does not fall within subsection (2)(b) if it has previously
formed part of a total amount falling within subsection (2)(c).
257FG
Meaning of “a receipt of insignificant value”
15
(1)
This section applies for the purposes of section 257FF.
(2)
“A receipt of insignificant value” means a receipt of an amount of
insignificant value, that is, an amount of value which—
(a)
is not more than £1,000, or
(b)
if it is more than £1,000, is insignificant in relation to the
20
amount subscribed by the investor for the relevant shares.

This is subject to subsection (3).
(3)
If at any time in the period—
(a)
beginning 12 months before the issue of the relevant shares,
and
25
(b)
ending at the end of the issue date,

repayment arrangements are in existence, no amount of value
received by the investor is treated as a receipt of insignificant value.
(4)
For this purpose “repayment arrangements” means arrangements
which provide for the investor to receive, or to be entitled to receive,
30
any value from the issuing company at any time in period A relating
to the relevant shares.
(5)
For the purposes of this section—
(a)
the references in this section to the investor include a
reference to any person who at any time in period A relating
35
to the relevant shares is an associate of the investor (whether
or not that person is such an associate at the material time),
and
(b)
the reference in subsection (4) to the issuing company
includes a reference to a person who at any time in period A
40
relating to the relevant shares is connected with that
company (whether or not that person is so connected at the
material time).
257FH
When value is received
(1)
This section applies for the purposes of sections 257FE (value
45
received by the investor) and 257FJ (value received where there is
more than one issue).

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Part 1 — The scheme
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(2)
The investor receives value from the issuing company at any time
when the issuing company—
(a)
repays, redeems or repurchases any of its share capital or
securities which belong to the investor or makes any
payment to the investor for giving up the investor’s right to
5
any of the issuing company’s share capital or any security on
its cancellation or extinguishment,
(b)
repays, in pursuance of any arrangements for or in
connection with the acquisition of the shares in respect of
which SEIS relief is claimed, any debt owed to the investor
10
other than a debt which was incurred by the company—
(i)
on or after the date of issue of those shares, and
(ii)
otherwise than in consideration of the
extinguishment of a debt incurred before that date,
(c)
makes to the investor any payment for giving up on its
15
extinguishment the investor’s right to any debt, other than a
debt in respect of a payment of the kind mentioned in
subsection (3)(a) or (f) or an ordinary trade debt,
(d)
releases or waives any liability of the investor to the issuing
company or discharges or undertakes to discharge any
20
liability of the investor to a third person,
(e)
makes a loan or advance to the investor which has not been
repaid in full before the issue of the shares in respect of which
SEIS relief is claimed,
(f)
provides a benefit or facility for the investor,
25
(g)
transfers an asset to the investor for no consideration or for
consideration less than its market value or acquires an asset
from the investor for consideration greater than its market
value, or
(h)
makes to the investor any other payment except—
30
(i)
an excluded payment, or
(ii)
a payment in discharge of an ordinary trade debt.
(3)
“Excluded payment” means—
(a)
any payment or reimbursement of travelling or other
expenses, exclusively and necessarily incurred by the
35
investor or an associate of the investor in the performance of
the investor’s or associate’s duties as a director,
(b)
any interest which represents no more than a reasonable
commercial return on money lent to the issuing company or
any person connected with that company,
40
(c)
any dividend or other distribution which does not exceed a
normal return on the investment,
(d)
any payment for the supply of goods which does not exceed
their market value,
(e)
any payment of rent for any property occupied by the issuing
45
company or a person connected with that company which
does not exceed a reasonable and commercial rent for the
property, and
(f)
any necessary and reasonable remuneration which meets the
conditions in subsection (4).
50
(4)
The conditions are that the remuneration—