Finance Bill (HC Bill 1)

are insignificant in relation to the market value of the remaining
issued share capital of the social enterprise, or (as the case may be)
the subsidiary, immediately after the event occurs.

This is subject to subsection (3).

5This is subject to subsection (3).

(2) For the purposes of subsection (1) it is to be assumed that the target
shares are cancelled at the time the repayment is made.

(3) Subsection (1) does not apply if repayment arrangements are in
existence at any time in the period—

(a) 10beginning 12 months before the investment date, and

(b) ending at the end of the investment date.

(4) For this purpose “repayment arrangements” means arrangements
which provide—

(a) for a repayment by the social enterprise or any subsidiary of
15the social enterprise (whether or not it is such a subsidiary at
the time the arrangements are made), or

(b) for anyone to be entitled to such a repayment,

at any time in the longer applicable period.

257QL Amount of repayments etc if there is more than one issue of shares

(1) 20This section applies if, in relation to the same repayment, section
257QJ(2) applies to SI relief attributable to two or more issues of
shares.

(2) Section 257QJ(3) has effect in relation to the shares included in each
of those issues as if the amount referred to as A were reduced by
25multiplying it by the fraction—

257QM Single issue affecting more than one individual

(1) 35This section applies if, in relation to the same repayment, section
257QJ(2) applies to SI relief attributable to shares held by two or
more individuals.

(2) Section 257QJ(3) has effect in relation to each individual as if the
amount referred to as A were reduced by multiplying it by the
40fraction—

257QN Single issue treated as made partly in previous tax year

(1) 5This section applies if—

(a) section 257QJ(2) applies to SI relief attributable to shares held
by an individual, and

(b) part of the issue of shares has been treated as issued to the
individual in a previous tax year for the purposes of section
10257JA(1) and (2).

(2) This subsection explains how the calculation under section 257QJ(3)
is to be made.

Step 1

Apportion the amount referred to as A between the tax year in which
15the shares were issued and the previous tax year by multiplying that
amount by the fraction—

Step 2

25In relation to each of the amounts (“A1” and “A2”) so apportioned to
the 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 257QO if
30appropriate but do not apply section 257QL or 257QM.

Step 3

Add amounts X1 and X2 together.

The result is the required amount.

The result is the required amount.

257QO 35 Maximum relief not obtained for share issue

(1) This section applies if section 257QJ(2) applies to SI relief attributable
to shares held by the investor and—

(a) the amount of the reduction (“D”) in the investor’s liability to
income tax for any tax year in respect of the shares, is less
40than

(b) the amount given by—

(2) Section 257QJ(3) has effect as if the amount referred to as A were
reduced by multiplying it by the fraction—

(3) If the amount of SI relief attributable to any of the shares has been
5reduced before the SI relief was obtained, the amount referred to in
subsections (1) and (2) as D is to be treated for the purposes of those
subsections as the amount it would have been without that
reduction.

(4) Subsection (3) does not apply to a reduction of SI relief by virtue of
10section 257N(5) (attribution of SI relief where there is a
corresponding issue of bonus shares).

257QP Repayment of authorised minimum within 12 months

(1) This section applies if—

(a) a company issues share capital (“the original shares”) of
15nominal value equal to the authorised minimum (within the
meaning of the Companies Act 2006) for the purposes of
complying with section 761 of that Act (public company:
requirement as to minimum share capital), and

(b) the registrar of companies issues the company with a
20certificate under that section.

(2) Section 257QJ(2) does not apply in relation to any redemption of the
original shares within 12 months of the date on which they were
issued.

Miscellaneous

257QQ 25 Acquisition of a trade or trading assets

(1) Any SI relief attributable to the investment is withdrawn if—

(a) at any time in the longer applicable period, the social
enterprise or any qualifying subsidiary—

(i) begins to carry on as its trade, or as part of its trade, a
30trade which was previously carried on at any time in
that period otherwise than by the social enterprise 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
35on, and

(b) the investor 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
40share in the trade (as previously carried on) belonged at any
time in the longer applicable period, and

(b) who is or are a person or group of persons to whom such an
interest in the trade carried on by the social enterprise
belongs or has, at any such time, belonged.

(3) 45This subsection applies to any person or group of persons who—

(a) control or, at any time in the longer applicable period, have
controlled the social enterprise, and

(b) is or are a person or group of persons who, at any such time,
controlled another company which previously carried on the
5trade.

(4) For the purposes of subsection (2)—

(a) for the purpose of determining the person to whom a trade
belongs and, if a trade belongs to two or more persons, their
respective shares in that trade—

(i) 10apply 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) any interest, rights or powers of a person who is an associate
15of another person are treated as those of that other person.

(5) If the investor—

(a) is a director of, or of a company which is a partner of, the
social enterprise or any qualifying subsidiary, and

(b) is in receipt of, or entitled to receive, remuneration as such a
20director falling within section 257LF(5)(g) (reasonable
remuneration for services),

then, in determining whether any SI relief attributable to the
investment is to be withdrawn, the reference in subsection (3)(b), and
(so far as relating to that provision) the reference in subsection
25(1)(a)(i), to any time in the longer applicable period are to be read as
references to any time before the end of the longer applicable period.

(6) Section 257LF(8) (director also an employee) applies for the purposes
of subsection (5) as it applies for the purposes of section 257LF, and
in subsection (5) “remuneration” includes any benefit or facility.

(7) 30In this section “trade” includes any business or profession, and
references to a trade previously carried on include references to part
of such a trade.

257QR Acquisition of share capital

(1) Any SI relief attributable to the investment is withdrawn if—

(a) 35the social enterprise comes to acquire all of the issued share
capital of another company at any time in the longer
applicable period, and

(b) the investor is a person, or one of a group of persons, to
whom subsection (2) applies.

(2) 40This subsection applies to any person or group of persons who—

(a) control or have, at any time in the longer applicable period,
controlled the social enterprise, and

(b) is or are a person or group of persons who, at any such time,
controlled the other company.

(3) 45If the investor—

(a) is a director of, or of a company which is a partner of, the
social enterprise or any qualifying subsidiary, and

(b) is in receipt of, or entitled to receive, remuneration as such a
director falling within section 257LF(5)(g) (reasonable
remuneration for services),

then, in determining whether any SI relief attributable to the
5investment is to be withdrawn, the reference in subsection (2)(b) to
any time in the longer applicable period is to be read as a reference
to any time before the end of the longer applicable period.

(4) Section 257LF(8) (director also an employee) applies for the purposes
of subsection (3) as it applies for the purposes of section 257LF, and
10in subsection (3) “remuneration” includes any benefit or facility.

257QS Relief subsequently found not to have been due

(1) Any SI relief obtained by the investor which is subsequently found
not to have been due must be withdrawn.

(2) SI relief obtained by the investor in respect of the investment may not
15be withdrawn on the ground that the requirements of Chapter 4 are
not met unless the requirements of subsection (3) are met.

(3) The requirements of this subsection are met if either—

(a) the social enterprise has given notice under section 257SF in
relation to the investment (information to be provided by the
20social enterprise etc), or

(b) an officer of Revenue and Customs has given notice to the
social enterprise stating the officer’s opinion that, because of
the ground in question, the whole or any part of the SI relief
attributable to the investment (whether alone or with other SI
25relief) was not due.

Disposals

257R Disposal of whole or part of the investment

(1) This section applies if—

(a) the investor disposes of the whole or part of the investment,

(b) 30the disposal takes place before the shorter applicable period
ends,

(c) SI relief is attributable to the shares, or qualifying debt
investments, disposed of,

(d) the disposal is not to an individual who—

(i) 35is the spouse, or civil partner, of the investor, and

(ii) is living together with the investor at the time of the
disposal, and

(e) the disposal does not occur as a result of the investor’s death.

(2) If the disposal is not made by way of a bargain at arm’s length, the SI
40relief attributable to those shares, or qualifying debt investments,
must be withdrawn.

(3) If the disposal is made by way of a bargain at arm’s length, the SI
relief attributable to those shares or qualifying debt investments
must—

(a) 45if it is greater than the amount given by the formula set out in
subsection (4), be reduced by that amount, and

(b) in any other case, be withdrawn.

(4) The formula is—

257RA Cases where maximum relief not obtained

(1) Subsection (2) applies if the investor’s liability to income tax for any
10tax year is reduced under this Part in respect of the investment and—

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

(b) the amount given by—

(2) Section 257R(3) and (4) have effect as if the amount or value referred
to as C were reduced by multiplying it by the fraction—

20

(3) If section 257JA(1) and (2) apply in the case of the investment as if
part of it had been made in a previous tax year, subsections (1) and
(2) of this section have effect as if that part and the remainder had
been invested by separate investments (and that part had been
25invested by an investment made on a day in the previous tax year).

(4) If the amount of SI relief attributable to the investment or any part of
it has been reduced before SI relief was obtained, the amount
referred to in subsections (1) and (2) as D is to be treated for the
purposes of those subsections as the amount that it would have been
30without that reduction.

(5) Subsection (4) does not apply to a reduction of SI relief by virtue of
section 257N(5) (attribution of SI relief if there is a corresponding
issue of bonus shares).

257RB Call options

(1) 35This section applies if the investor grants an option which, if
exercised, would bind the investor to sell the whole or part of
investment.

(2) The grant of the option is treated for the purposes of section 257R as
a disposal—

(a) 40of the investment, or

(b) (as the case may be) of the part of the investment to which the
option relates.

(3) Nothing in this section prejudices section 257LB (no pre-arranged
exits).

257RC Put options

(1) This section applies if, at any time in the longer applicable period, a
person grants the investor an option which, if exercised, would bind
the grantor to purchase the whole or part of the investment.

(2) 5Any SI relief—

(a) attributable to the investment, or

(b) (as the case may be) attributable to the part of the investment
to which the option relates,

must be withdrawn.

(3) 10For the purposes of subsection (2)(b), the part of the investment to
which an option relates is the part which, if—

(a) the option were exercised immediately after the grant, and

(b) any investments made in the social enterprise by the investor
after the grant were disposed of immediately after being
15made,

would be treated for the purposes of section 257R as disposed of in
pursuance of the option.

CHAPTER 8 Withdrawal or reduction of SI relief: procedure

Assessments and appeals

257S 20 Assessments for the withdrawal or reduction of SI relief

If any SI relief which has been obtained falls to be withdrawn or
reduced under Chapter 7, 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.

257SA 25 Appeals against section 257QS(3)(b) notices

For the purposes of the provisions of TMA 1970 relating to appeals,
the giving of notice by an officer of Revenue and Customs under
section 257QS(3)(b) is taken to be a decision disallowing a claim by
the social enterprise.

257SB 30 Time limits for assessments

(1) An officer of Revenue and Customs may—

(a) make an assessment for withdrawing or reducing the SI relief
attributable to whole or any part of the investment, or

(b) give a notice under section 257QS(3)(b),

35at any time not more than 6 years after the end of the relevant tax
year.

(2) In subsection (1) “the relevant tax year” means—

(a) the tax year containing the end of the 28 months beginning
with the investment date, or

(b) 40if later, the tax year in which occurs the event which causes
the SI relief to be withdrawn or reduced.

(3) Subsection (1) is without prejudice to section 36(1A) of TMA 1970
(loss of tax brought about deliberately etc).

257SC Cases where assessment not to be made

(1) No assessment for withdrawing or reducing SI relief in respect of the
5investment may be made because of an event occurring after the
investor’s death.

(2) Subsection (3) applies if the investor has, by a disposal or disposals
to which section 257R(3) applies, disposed of all investments
which—

(a) 10have been made by the investor in the social enterprise, and

(b) are investments—

(i) to which SI relief is attributable, or

(ii) have not been held by the investor until the end of the
third anniversary of the date on which they were
15made.

(3) No assessment for withdrawing or reducing SI relief in respect of
those investments may be made because of any subsequent event
unless the event occurs at a time when the requirements of sections
257LF, 257LG and 257LH are not met in relation to the investor by
20reference to any of those investments.

Interest

257SD Date from which interest is chargeable

(1) In its application to an assessment made by virtue of section 257S in
the case of relief withdrawn or reduced by virtue of a provision listed
25in subsection (2), section 86 of TMA 1970 (interest on overdue income
tax) has effect as if the relevant date were 31 January next following
the tax year for which the assessment is made.

(2) The provisions are—

• section 257LD,

• 30any of sections 257LF to 257LH,

• any of sections 257MA to 257MJ,

• section 257MN,

• section 257Q,

• section 257QJ,

• 35section 257QQ,

• section 257QR

• section 257R, and

• section 257RC.

Information

257SE 40 Information to be provided by the investor

(1) This section applies if the investor has obtained SI relief in respect of
the investment, and an event occurs as a result of which—

(a) the SI relief falls to be withdrawn or reduced by virtue of any
of sections 257LD, 257LF, 257LG and 257LH,

(b) the SI relief falls to be withdrawn or reduced under section
257Q (receipt of value), or would fall to be so withdrawn or
reduced but for section 257QH (receipt of replacement
value), or

(c) 5the SI relief falls to be withdrawn or reduced under any of
sections 257R, 257RB and 257RC (disposals and options).

(2) The 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) 10If the investor—

(a) is required under this section to give notice of a receipt of
value which is within section 257Q, or would be within that
section but for section 257QH, and

(b) has knowledge of any replacement value received (or
15expected to be received) because of a qualifying receipt,

the notice must include particulars of that receipt (or expected
receipt).

(4) In subsection (3) “qualifying receipt” and “replacement value” are to
be read in accordance with section 257QH.

257SF 20 Information to be provided by the social enterprise etc

(1) This section applies if the social enterprise has provided an officer of
Revenue and Customs with a compliance statement in respect of the
investment and an event occurs as a result of which—

(a) any of the requirements in sections 257MC to 257MK,
25257MM(1) and 257MN is not met in respect of the investment,
or

(b) any of sections 257Q, 257QJ, 257QQ and 257QR has effect to
cause any SI relief attributable to the investment to be
withdrawn or reduced, or—

(i) 30would have such an effect if SI relief had been
obtained in respect of the investment, or

(ii) in the case of section 257Q, would have such an effect
but for section 257QH (receipt of replacement value).

(2) If this section applies—

(a) 35the social enterprise, and

(b) any person connected with the social enterprise who has
knowledge of the matters mentioned in subsection (1),

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

(3) 40Any notice required to be given by the social enterprise under
subsection (2)(a) must be given—

(a) within 60 days of the event, or

(b) if the event is a receipt of value within section 257QE(2) from
a person connected with the social enterprise (see section
45257QG), within 60 days of the social enterprise coming to
know of the event.

(4) Any notice required to be given by a person under subsection (2)(b)
must be given within 60 days of the person coming to know of the
event.

(5) If a person—

(a) 5is required under this section to give notice of a receipt of
value which is within section 257Q, or would be within that
section but for section 257QH, and

(b) has knowledge of any replacement value received (or
expected to be received) because of a qualifying receipt,

10the notice must include particulars of that receipt of replacement
value (or expected receipt).

(6) In subsection (5) “qualifying receipt” and “replacement value” are to
be read in accordance with section 257QH.

257SG Power to require information in section 257SE or 257SF cases

(1) 15This section applies if an officer of Revenue and Customs has reason
to believe that a person—

(a) has not given a notice which the person is required to give
under section 257SE or 257SF in respect of any event,

(b) has given or received value within the meaning of section
20257QE(2) or (6) which, but for the fact that the amount given
or received was an insignificant receipt, would have
triggered a requirement to give such a notice, or

(c) has made or received any repayment within the meaning
given by section 257QJ(8) which, but for the fact that it falls to
25be ignored for the purposes of section 257QJ by virtue of
section 257QK(1), would have triggered a requirement to
give a notice under section 257SF.

(2) The officer may by notice require the person concerned to supply the
officer, within such time as the officer may specify in the notice, with
30such information relating to the event as the officer may reasonably
require for the purposes of this Part.

(3) The period specified in a notice under subsection (2) must be at least
60 days.

(4) In subsection (1)(b) the reference to an insignificant receipt is to be
35read in accordance with section 257QA(1).

257SH Power to require information in other cases

(1) Subsection (2) applies if SI relief is claimed in respect of the
investment, and an officer of Revenue and Customs has reason to
believe that it may not be due because of any such arrangements as
40are mentioned in section 257LB(1), 257LC, 257LE, 257LH, 257ME(3),
257MK(2) or (4), 257MM(5) or (6), 257MN(5), 257MU or 257MV(1),
(5), (6) or (7).

(2) The officer may by notice require any person concerned to supply
the officer within such time as may be specified in the notice with—

(a) 45a declaration in writing stating whether or not, according to
the information which that person has or can reasonably
obtain, any such arrangements exist or have existed, and