Finance Bill

Session 2012 - 13
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Finance Bill

Finance Bill
Schedule 6 — Seed enterprise investment scheme
Part 2 — Relief for capital gains
255

      (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
5
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—
10
(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withdrawn or reduced under Chapters 6 and 7 of Part 5A
15
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in a case where the SEIS relief is withdrawn, the amount of
20
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In a case where the SEIS re-investment relief is withdrawn, the
25
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—

R1− R2

R1

30

where—

“R1” is the total amount of the SEIS relief attributable to
those shares immediately before the reduction, and

“R2” is the total amount of the SEIS relief attributable to
those shares immediately after the reduction.
35
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
40
their lives,
(c)
A was married to, or was the civil partner of, B at the time
of the transfer, and

Finance Bill
Schedule 6 — Seed enterprise investment scheme
Part 3 — Consequential amendments
256

(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
5
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
10
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
15
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
20
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;
25
“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.
30

This is subject to sub-paragraph (3).
      (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
35
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
40
Consequential amendments
ITA 2007
6
ITA 2007 is amended as follows.

Finance Bill
Schedule 6 — Seed enterprise investment scheme
Part 3 — Consequential amendments
257

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),”.
5
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 “—
10
(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
15
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
20
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—
25
“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
30
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).”
35
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—
40
“(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).”

Finance Bill
Schedule 6 — Seed enterprise investment scheme
Part 3 — Consequential amendments
258

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
5
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—
10
“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
15
requirement) before the issue of the relevant holding.
(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).”
20
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”.
25
      (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
30
relief is”, and
(c)
after “paragraph (a), (b)” insert “, (ba)”.
      (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
35
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”.
40

Finance Bill
Schedule 7 — Enterprise investment scheme
Part 1 — Enterprise investment scheme
259

      (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)—
5
(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
10
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
15
(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
20
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.
25
      (3)
Sub-paragraph (1) does not apply to the amendments made by paragraphs
4, 5 and 21.
Schedule 7
Section 39

Enterprise investment scheme
Part 1
30
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).
35

Finance Bill
Schedule 7 — Enterprise investment scheme
Part 1 — Enterprise investment scheme
260

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
5
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
10
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—
15
“(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—
20
“(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
25
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.”
30
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)—
35
(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
40

Finance Bill
Schedule 7 — Enterprise investment scheme
Part 1 — Enterprise investment scheme
261

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
5
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
10
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
15
(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—
20
(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)
25
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
30
(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
35
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
40
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—
45