(3) Despite section 16(2), subsection (2) does not apply to a disposal on
which a loss accrues.

(4) Subsection (5) applies where—

(a) an individual’s liability to income tax has been reduced (or
5treated by virtue of section 257H of ITA 2007 (spouses and
civil partners) as reduced) for any tax year under section
257AB of that Act in respect of an issue of shares,

(b) the amount of the reduction (“R”) is less than the amount
(“T”) which is equal to tax at the SEIS rate on the amount
10subscribed for the issue, and

(c) R is not within paragraph (b) solely by virtue of section 29(2)
and (3) of ITA 2007.

(5) If there is a disposal of the shares on which there is a gain, subsection
(2) applies only to so much of the gain as is found by multiplying it
15by the fraction—

(6) Any question as to—

(a) which of any shares that—

(i) are acquired by an individual at different times, and

(ii) 20are shares to which SEIS relief is attributable,

a disposal relates to, or

(b) whether a disposal relates to shares to which SEIS relief is
attributable,

is to be determined for the purposes of capital gains tax as for the
25purposes of section 257HA of ITA 2007.

Chapter 1 of this Part has effect subject to this subsection.

(7) Sections 104, 105 and 106A do not apply to shares to which SEIS relief
is attributable.

(8) Where—

(a) 30an individual holds shares (“the existing holding”) which
form part of the ordinary share capital of a company,

(b) there is, by virtue of any such allotment for payment as is
mentioned in section 126(2)(a), a reorganisation affecting the
existing holding, and

(c) 35immediately following the reorganisation, SEIS relief is
attributable to the existing holding or the allotted shares,

sections 127 to 130 do not apply in relation to the existing holding.

(9) Sections 135 and 136 do not apply in respect of shares to which SEIS
relief is attributable.

(10) 40Subsection (9) does not have effect to disapply section 135 or 136
where—

(a) the new holding consists of new ordinary shares carrying no
present or future preferential right to dividends or to a
company’s assets on its winding up and no present or future
45right to be redeemed,

(b) the new shares are issued after the end of the relevant period,
and

(c) the condition in subsection (11) is satisfied.

(11) The condition is that at some time before the issue of the new
5shares—

(a) the company issuing them issued eligible shares, and

(b) a certificate in relation to those eligible shares was issued by
the company for the purposes of section 257EB(1) of ITA 2007
and in accordance with sections 257EC and 257ED of that Act.

(12) 10All 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 the SEIS relief being given or
withdrawn.

(13) Where shares to which SEIS relief is attributable are exchanged for
15other shares in circumstances such that section 257HB of ITA 2007
(acquisition of share capital by new company) applies—

(a) subsection (9) above does not have effect to disapply section
135, and

(b) sections 257HB(3)(b), 257HC(2)(a) and 257HD of ITA 2007
20apply for the purposes of this section as they apply for the
purposes of Part 5A of that Act.

(14) For the purposes of this section—

• “eligible shares” means shares that meet the requirements of
  section 257CA(2);

• 25“new holding” is to be construed in accordance with sections
  126, 127, 135 and 136;

• “ordinary share capital” has the meaning given in section 989 of
  ITA 2007;

• “ordinary shares”, in relation to a company, means shares
  30forming part of its ordinary share capital;

• “relevant period” means the period found by applying section
  257AC(2) of ITA 2007 by reference to the company issuing the
  shares referred to in subsection (9) and by reference to those
  shares;

• 35“the SEIS rate” has the meaning given by section 257AB(3) of
  ITA 2007;

• “SEIS relief” means relief under Part 5A of ITA 2007 (seed
  enterprise investment scheme);

and that Part applies to determine whether SEIS relief is attributable
40to any shares and, if so, the amount of SEIS relief so attributable.

150F Seed enterprise investment scheme: reduction of relief

(1) This section has effect where—

(a) section 150E(2) applies on a disposal of shares, and

(b) before the disposal, value is received in circumstances where
45SEIS relief attributable to the shares is reduced by an amount
under section 257FE(2)(a) of ITA 2007.

(2) If section 150E(2) applies on the disposal but section 150E(5) does
not, section 150E(2) applies only to so much of the gain as remains

after deducting so much of it as is found by multiplying it by the
fraction—

where—

A is the amount by which the SEIS relief attributable to the shares is
5reduced as mentioned in subsection (1), and

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) 10deducting 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
15subsection (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
20investment 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 25 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 30Seed 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) 35there 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) 5the 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
10relevant 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) 15Condition 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
20shares (“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

(c) does not exceed so much of the original gain as is
25unmatched,

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
30chargeable 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
35chargeable 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.

40Restrictions 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
45£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—

5where—

• 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
  10year.

(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
15issued 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—

• 20“R1” means the amount of SEIS relief attributable to the
  relevant SEIS shares when the relief is obtained;

• “R2” means the amount of SEIS relief which would have
  been so attributable in the absence of the reduction.

(5) In a case where sub-paragraphs (2) and (4) both apply, sub-
25paragraph (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
30relation 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) 35References 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
40expenditure 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
5shares 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
10individual—

(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
15withdrawn 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) 20in 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) 25In 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) 30“The appropriate fraction” is—

where—

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

• 35“R2” is the total amount of the SEIS relief attributable to
  those shares immediately after the reduction.

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
40were issued to an individual (“A”),

(b) A transferred the shares to another individual (“B”) during
their lives,

(c) A was married to, or was the civil partner of, B at the time
of the transfer, and

(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) 5Any 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) 10All 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
15paragraph, 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—

• 20“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
  25as 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
30individual 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
35that 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 40Consequential 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—

• 5“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
10subsection (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
15the 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 20In 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 25After 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
30enterprise 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
35(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) 40after 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 5In 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 10After 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
15enterprise investment scheme: the spending of the money raised
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
20(seed enterprise investment scheme).”

18 (1) Schedule 4 (index of defined expressions) is amended as follows.

(2) Insert the following entries at the appropriate places—

(3) In the entry for “control”, in the second column, after “257(3),” insert
“257HJ(3),”.

75TCGA 1992

19 TCGA 1992 is amended as follows.

20 (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) 80In 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
85relief 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
  90Act or Part 5 of ITA 2007;”, and

• ““SEIS relief” means relief under Part 5A of ITA 2007.”

21 (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) 95After 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.”

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

(a) 100in 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

23 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—

• 5“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;”.

10Part 4 Commencement

24 (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
15of 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 22.

Section 39

SCHEDULE 7 20Enterprise investment scheme

Part 1 Enterprise investment scheme

Introduction

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

25Minimum 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) 30Accordingly, 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).