Finance Bill (HC Bill 49)

(a) is paid for services rendered to the issuing company or a
person connected with that company in the course of a trade
or profession (not being secretarial or managerial services or
services of a kind provided by the person to whom they are
5rendered), and

(b) is taken into account in calculating for tax purposes the
profits of that trade or profession.

(5) For the purposes of subsection (2)(d) the issuing company is to be
treated as having released or waived a liability if the liability is not
10discharged within 12 months of the time when it ought to have been
discharged.

(6) For the purposes of subsection (2)(e) the following is to be treated as
if it were a loan made by the issuing company to the investor—

(a) the amount of any debt (other than an ordinary trade debt)
15incurred by the investor to the issuing company, and

(b) the amount of any debt due from the investor to a third party
which has been assigned to the issuing company.

(7) The investor also receives value from the issuing company if—

(a) in respect of ordinary shares held by the investor any
20payment or asset is received in a winding up or in connection
with a dissolution of the company, and

(b) the winding up or dissolution falls within section 257DB(4)
(no tax avoidance).

(8) The investor also receives value from the issuing company if a
25person within subsection (9)—

(a) purchases any of its share capital or securities which belong
to the investor, or

(b) makes any payment to the investor for giving up any right in
relation to any of the company’s share capital or securities.

(9) 30Those persons are—

(a) any person who has a substantial interest in the company
within the meaning of section 257BB;

(b) any employee of the issuing company;

(c) any director of the issuing company.

(10) 35If because of the investor’s disposal of shares in a company any SEIS
relief attributable to those shares is withdrawn or reduced under
section 257FA, the investor is not to be treated as receiving value
from the company in respect of the disposal.

(11) The investor is not to be treated as receiving value from the issuing
40company merely because of the payment to the investor, or any
associate of the investor, of any remuneration for services rendered
to that company as a director if the remuneration is reasonable
remuneration.

(12) For the purposes of subsection (11)—

(a) 45the reference in that subsection to the payment of
remuneration includes a reference to the provision of any
benefit or facility, and

(b) in the case of an individual who is both a director and an
employee of a company, the reference in that subsection to
services rendered to that company as a director includes a
reference to services rendered to that company as an
5employee.

(13) In this section—

(a) “ordinary trade debt” means any debt for goods or services
supplied in the ordinary course of a trade or business if any
credit given—

(i) 10is for not more than 6 months, and

(ii) is not longer than that normally given to customers of
the person carrying on the trade or business, and

(b) any reference to a payment to an individual includes a
payment made to the individual indirectly or to the
15individual’s order or for the individual’s benefit.

257FI The amount of value received

In a case falling within a provision listed in column 1 of the following
table, the amount of value received for the purposes of sections
257FE and 257FJ is given by the corresponding entry in column 2 of
20the table.

257FJ Value received where there is more than one issue

(1) This section applies if—

(a) 55two or more issues of shares in the issuing company have
been made to the investor which include shares in respect of
which the investor obtains SEIS relief, and

(b) value is received by the investor at any time in the applicable
periods for two or more of those issues.

(2) 60Section 257FE(2) has effect in relation to the shares included in each
of the issues referred to in subsection (1)(b) as if the amount of value
referred to as “R” were reduced by multiplying it by the fraction—

65where—

• A is the amount on which the investor obtains SEIS relief in
  respect of the shares included in the issue in question, and

• B is the sum of that amount and the corresponding amount or
  amounts in respect of the other issue or issues.

(3) 70For the purposes of subsection (1) “the applicable period” for an
issue of shares is period A in relation to those shares.

257FK Value received where part of issue treated as made in previous tax
year

(1) This section applies if—

(a) 75section 257FE(2) applies to an issue of shares, and

(b) section 257AB(1) and (2) (form and amount of SEIS relief)
applies in the case of that issue as if part of the issue had been
issued in a previous tax year.

(2) This subsection explains how the calculation under section 257FE(2)
80is to be made.

Step 1

Apportion the amount referred to as “R” between the tax year in
which the shares were issued and the previous tax year by
multiplying that amount by the fraction—

85

• where—

  • A is the amount on which the investor obtains SEIS
    relief in respect of the shares treated as issued in the
    tax year in question, and

  • 90B is the sum of that amount and the corresponding
    amount in respect of the shares treated as issued in
    the other tax year.

Step 2

In relation to each of the amounts (“R1” and “R2”) so apportioned to
95the two tax years, calculate the amounts (“X1” and “X2”) that would
be given by the formula if there were separate issues of shares in
those tax years.

In calculating amounts X1 and X2, apply section 257FL if appropriate
but do not apply section 257FJ.

Step 3

Add amounts X1 and X2 together.

The result is the required amount.

257FL Cases where maximum SEIS relief not obtained

(1) 5If the investor’s liability to income tax is reduced for any tax year in
respect of any issue of shares and—

(a) the amount of the reduction (“A”), is less than

(b) the amount (“B”) which is equal to income tax at the SEIS rate
on the amount on which the investor claims SEIS relief in
10respect of the shares,

section 257FE(2) has effect in relation to any value received as if the
amount referred to as “R” were reduced by multiplying it by the
fraction—

(2) 15If 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
that subsection as the amount that it would have been without that
reduction.

(3) 20Subsection (2) does not apply to a reduction of SEIS relief by virtue
of section 257E(4) (attribution of SEIS relief where there is a
corresponding issue of bonus shares).

257FM Receipts of value by and from connected persons etc

In sections 257FE, 257FF and 257FH to 257FJ—

(a) 25any reference to a payment or transfer to the investor
includes a reference to a payment or transfer made to the
investor indirectly or to the investor’s order or for the
investor’s benefit,

(b) any reference to the investor includes a reference to an
30associate of the investor, and

(c) any reference to the issuing company includes a reference to
a person who at any time in period A relating to the relevant
shares is connected with that company (whether or not that
person is so connected at the material time).

257FN 35 Receipt of replacement value

(1) If—

(a) any SEIS relief attributable to the relevant shares would, in
the absence of this section, be reduced or withdrawn under
section 257FE because of a receipt of value within section
40257FH(2), (7) or (8) (“the original value”),

(b) the original supplier receives value (“replacement value”)
from the original recipient and the receipt is a qualifying
receipt, and

(c) the amount of the replacement value is at least the amount of
45the original value,

section 257FE does not, because of the receipt of value, have effect to
reduce or withdraw the SEIS relief.

This is subject to section 257FO(1) and (2).

(2) For the purposes of this section—

• 5“the original recipient” means the person who receives the
  original value;

• “the original supplier” means the person from whom that value
  was received.

(3) If the amount of the original value is, by virtue of section 257FJ,
10treated as reduced for the purposes of section 257FE(2) as it applies
in relation to the relevant shares in question, the reference in
subsection (1)(c) to the amount of the original value is to be read as a
reference to the amount of that value ignoring the reduction.

(4) A receipt of the replacement value is a qualifying receipt for the
15purposes of subsection (1) if it arises—

(a) because of the original recipient doing one or more of the
following—

(i) making a payment to the original supplier, other than
a payment within paragraph (c) or a payment to
20which subsection (5) applies,

(ii) acquiring any asset from the original supplier for a
consideration the amount or value of which is more
than the market value of the asset,

(iii) disposing of any asset to the original supplier for no
25consideration or for a consideration the amount or
value of which is less than the market value of the
asset,

(b) if the receipt of the original value was within section
257FH(2)(d), because of an event the effect of which is to
30reverse the event which constituted the receipt of the original
value, or

(c) if the receipt of the original value was within section
257FH(8), because of the original recipient repurchasing the
share capital or securities in question, or (as the case may be)
35re-acquiring the right in question, for a consideration the
amount or value of which is at least the amount of the
original value.

(5) This subsection applies to—

(a) any payment for any goods, services or facilities, provided
40(whether in the course of trade or otherwise) by—

(i) the original supplier, or

(ii) any other person who, at any time in period A
relating to the relevant shares, is an associate of, or is
connected with, that supplier (whether or not the
45other person is such an associate, or is so connected,
at the material time),

which is reasonable in relation to the market value of those
goods, services or facilities,

(b) any payment of any interest which represents no more than a
50reasonable commercial return on any money lent to—

(i) the original recipient, or

(ii) any person who, at any time in period A relating to
the relevant shares, is an associate of that recipient
(whether or not the person is such an associate at the
5material time),

(c) any payment for the acquisition of an asset which does not
exceed its market value,

(d) any payment, as rent for any property occupied by—

(i) the original recipient, or

(ii) 10any person who, at any time in period A relating to
the relevant shares, is an associate of that recipient
(whether or not the person is such an associate at the
material time),

of an amount not exceeding a reasonable and commercial
15rent for the property,

(e) any payment in discharge of an ordinary trade debt, and

(f) any payment for shares in or securities of any company in
circumstances that do not fall within subsection (4)(a)(ii).

(6) For the purposes of this section, the amount of the replacement value
20is—

(a) in a case within paragraph (a) of subsection (4), the sum of—

(i) the amount of any payment within sub-paragraph (i)
of that paragraph, and

(ii) the difference between the market value of any asset
25to which sub-paragraph (ii) or (iii) of that paragraph
applies and the amount or value of the consideration
(if any) received for it,

(b) in a case within subsection (4)(b), the same as the amount of
the original value, and

(c) 30in a case within subsection (4)(c), the amount or value of the
consideration received by the original supplier.

Section 257FI applies for the purpose of determining the original
value.

(7) In this section—

(a) 35any reference to a payment to a person (however expressed)
includes a reference to a payment made to the person
indirectly or to the person’s order or for the person’s benefit,
and

(b) “ordinary trade debt” has the meaning given by section
40257FH(13).

257FO Section 257FN: supplementary

(1) The receipt of the replacement value by the original supplier is
ignored for the purposes of section 257FN(1) to the extent to which it
has previously been set (under that section) against a receipt of value
45to prevent any reduction or withdrawal of SEIS relief under section
257FE.

(2) The receipt of the replacement value by the original supplier (“the
event”) is ignored for the purposes of section 257FN if—

(a) the event occurs before period A relating to the relevant
shares,

(b) if the event occurs after the time the original recipient
receives the original value, it does not occur as soon after that
5time as is reasonably practicable in the circumstances, or

(c) if an appeal has been brought by the investor against an
assessment to withdraw or reduce any SEIS relief attributable
to the relevant shares because of the receipt of the original
value, the event occurs more than 60 days after the day on
10which the amount of relief which falls to be withdrawn has
been finally determined.

But nothing in section 257FN or this section requires the replacement
value to be received after the original value.

(3) This subsection applies if—

(a) 15the receipt of the replacement value by the original supplier
is a qualifying receipt for the purposes of section 257FN(1),

(b) in consequence of the receipt, any receipts of value are
ignored for the purposes of section 257FE as that section
applies in relation to the shares in question or any other
20shares subscribed for by the investor, and

(c) the event which gives rise to the receipt is (or includes) a
subscription for shares by—

(i) the investor, or

(ii) any person who at any time in period A relating to the
25relevant shares is an associate of the investor
(whether or not the person is such an associate at the
material time).

(4) If subsection (3) applies, the person who subscribes for the shares is
not to be eligible for any SEIS relief in relation to those shares or any
30other shares in the same issue.

(5) In this section “the original recipient”, “the original supplier” and
“replacement value” have the same meaning as in section 257FN.

Miscellaneous

257FP Acquisition of trade or trading assets

(1) 35Any 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
40trade 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
45on, 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
5in 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) 10at 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
15respective 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) 20any 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 25 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) 30the 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) 35at 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
40may 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
45relation 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) 5an 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) 10In 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

15If 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

20For 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) 25An 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
30year.

(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,

35whichever 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
40shares 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) 5are 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
10the 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.

15Interest

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
20tax) 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) 25section 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) 30section 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
35of 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) 40the 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) 5The 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
10value 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
15value (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
20of 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
25in 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
30question, 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
35obtained 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) 40section 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
45knowledge of the matters mentioned in subsection (1),

must give a notice to an officer of Revenue and Customs containing
particulars of the event.