(b) make consequential, incidental or supplementary provision in
connection with any of those provisions.

46 (1) Regulations made under paragraph 45 may—

(a) modify any provision made by or under an Act (including paragraph
544 of this Schedule), as the Treasury think appropriate;

(b) make different provision for different cases or different
circumstances.

(2) In sub-paragraph (1)(a) “modify” includes amend, repeal or revoke.

Section 50

SCHEDULE 8 10Venture capital trusts

Time limits for making assessments

1 (1) In section 270 of ITA 2007 (assessment on withdrawal or reduction of relief),
in subsection (1), after “obtained” insert “, and may be made at any time not
more than 6 years after the end of that tax year”.

(2) 15The amendment made by this paragraph has effect in relation to
assessments made on or after 6 April 2014 (including those made for tax
years ending before that date).

Linked sales

2 (1) After section 264 of ITA 2007 insert—

“264A 20 Restricting relief where there is a linked sale

(1) This section applies where—

(a) an individual subscribes for shares (“the relevant shares”) in
a VCT (“the VCT”), and

(b) there is at least one linked sale of other shares by the
25individual.

(2) For the purposes of this Part, the amount the individual subscribes
for the shares is to be treated as reduced (but not below nil) by the
total consideration given for the linked sales of other shares.

This is subject to subsection (3).

30This is subject to subsection (3).

(3) If a sale is linked in relation to more than one subscription for
shares—

(a) the consideration for it is to be applied to reduce
subscriptions under subsection (2) in the order in which the
35subscriptions are made, and

(b) accordingly, to the extent that any consideration has been
used to reduce an earlier subscription, it is not available to
reduce a later one.

(4) A sale of shares (“the sold shares”) is “linked” if conditions A and B
40are met.

(5) Condition A is that the sold shares are in—

(a) the VCT, or

(b) a company which is (or later becomes) a successor or
predecessor of the VCT.

(6) Condition B is that—

(a) 5the individual subscribes for the relevant shares in
circumstances where—

(i) the purchase of the sold shares from the individual
was conditional upon the individual subscribing for
shares in the VCT, or

(ii) 10the individual’s subscription for shares in the VCT
was conditional upon that purchase, or

(b) the subscription for the relevant shares and the sale of the
sold shares are within 6 months of each other (irrespective of
which came first).

(7) 15A company (“company X”) is a “successor or predecessor of the
VCT” if—

(a) there is a merger of two or more companies for the purposes
of Chapter 5 (see section 323) and—

(i) the VCT is one of the merged companies and
20company X is “the successor company” (as defined by
that section), or

(ii) the VCT is “the successor company” and company X
is one of the merged companies, or

(b) section 327 (effect of restructuring of VCT) applies and—

(i) 25the VCT is “the old company” and company X is “the
new company” for the purposes of that section, or

(ii) company X is “the old company” and the VCT is “the
new company” for those purposes.

(8) This section does not apply if, or to the extent that, the subscription
30for the relevant shares is a result of the individual electing to reinvest
dividends payable to the individual on shares in the VCT, in
acquiring further shares in the VCT.”

(2) The amendment made by this paragraph has effect in relation to claims for
relief by reference to shares issued on or after 6 April 2014.

35Approval of VCT: return of capital

3 (1) Section 281 of ITA 2007 (withdrawal of VCT approval of a company) is
amended as follows.

(2) In subsection (1), omit the “or” at the end of paragraph (d) and after
paragraph (e) insert—

“(f) 40that, while it has been a VCT, the company has issued shares
and, before the end of the restricted period, the company,
other than for the purpose of redeeming or repurchasing any
of those shares, has—

(i) made a payment to all or any of its shareholders of an
45amount representing (directly or indirectly) a
repayment of its share capital, whether that payment
was made out of a reserve arising from a reduction of
share capital or otherwise,

(ii) where the shares were issued at a premium, made a
payment to all or any of its shareholders of an amount
representing (directly or indirectly) that premium or
any part of it, whether that payment was made out of
5a share premium reserve or otherwise, or

(iii) used an amount which represents (directly or
indirectly) the company’s share capital or an amount
by which that share capital has been diminished, or,
where the shares were issued at a premium, that
10premium (or any part of it), to pay up new shares to
be allotted to all or any of its shareholders.”

(3) After that subsection insert—

“(1A) In subsection (1)(f)—

• “payment”—

  (a)

  15does not include any distribution of assets made in
  connection with the winding up of the company, but

  (b)

  does include every other description of distribution of
  the company’s assets to its members,

  and for this purpose “distribution” includes (but is not
  20limited to) a distribution within the meaning of section 989,

• “reduction of share capital” has the same meaning as in section
  1027A(2) of CTA 2010, and

• “the restricted period” means the period of 3 years beginning at
  the end of the accounting period of the company in which the
  25shares were issued.”

(4) The amendments made by this paragraph have effect in relation to shares
issued on or after 6 April 2014.

(5) In section 281(1)(f)(i) or (iii) of ITA 2007 references to a company’s share
capital do not include so much (if any) of its share capital as consists of
30shares issued before 6 April 2014.

4 In section 322 of ITA 2007 (power to facilitate mergers of VCTs: provision
that may be made by regulations), after subsection (5) insert—

“(5A) Provision for section 281(1)(f) (withdrawal of VCT approval where
company has made a repayment of share capital etc) not to apply, or
35to apply subject to modifications, to the successor company or any of
the merging companies, in relation to payments made, or amounts
used to pay up new shares, in connection with or after the merger.”

Nominees

5 (1) After section 330 of ITA 2007 insert—

40“Nominees

330A Nominees

Shares subscribed for, issued to, held by or disposed of for an
individual by a nominee are treated for the purposes of this Part as
subscribed for, issued to, held by or disposed of by the individual.”

(2) In section 284 of that Act (power to make regulations as to procedure), in
subsection (1)(d), after “persons” include “(including nominees)”.

Section 53

SCHEDULE 9 Tax relief for social investments

5Part 1 New Part 5B of ITA 2007

1 In ITA 2007, after Part 5A (seed enterprise investment scheme) insert—

“ Part 5B Tax relief for social investments

CHAPTER 1 10Introduction

257J Meaning of “SI relief” and “social enterprise”

(1) This Part provides for income tax relief for social investments (“SI
relief”), that is, entitlement to tax reductions in respect of amounts
invested in social enterprises by individuals.

(2) 15In this Part “social enterprise” means—

(a) a community interest company,

(b) a community benefit society (see section 257JB) that is not a
charity,

(c) a charity, or

(d) 20any other body prescribed, or of a description prescribed, by
an order made by the Treasury.

(3) An order under subsection (2)(d) may make provision as to the
bodies which are social enterprises for the purposes of this Part at
times before the order comes into force or FA 2014 is passed but,
25where a body is a social enterprise for the purposes of this Part as a
result of an order under subsection (2)(d) that has come into force, no
subsequent order under subsection (2)(d) may undo that result in
respect of times before the subsequent order comes into force.

257JA Form and amount of relief

(1) 30If an individual—

(a) is eligible for SI relief in respect of any amount, and

(b) makes a claim in respect of all or some of the amount,

the individual is entitled to a tax reduction for the tax year in which
the amount was invested.

35This is subject to the provisions of this Part.

This is subject to the provisions of this Part.

(2) The amount of the reduction to which an individual is entitled under
this Part for any particular tax year is the amount equal to tax, at the
SI rate for that year, on—

(a) the amount or, as the case may be, the sum of the amounts
5invested in that year in respect of which the individual is
eligible for and claims SI relief, or

(b) if less, £1 million.

(3) The tax reduction is given effect at Step 6 in section 23.

(4) If an individual—

(a) 10is eligible for and claims SI relief in respect of an amount, and

(b) makes a claim for part of that amount to be treated for the
purposes of subsections (1) and (2) as if it had been invested
not in the tax year in which it was actually invested but in the
preceding tax year,

15those subsections apply, and the individual’s liability to tax for both
tax years is determined, in accordance with the claim.

(5) In this Part “the SI rate” means 30%.

257JB Meaning of “community benefit society”

(1) In this Part “community benefit society” means a body that—

(a) 20is registered as a community benefit society under the 2014
Act,

(b) is a pre-commencement society (within the meaning of the
2014 Act) that meets the condition in section 2(2)(a)(ii) of the
2014 Act, or

(c) 25is a society registered, or treated as registered, under section
1 of the Industrial and Provident Societies Act (Northern
Ireland) 1969 in the case of which the condition in section
1(2)(b) of that Act is fulfilled,

and in respect of which the condition in subsection (2) is met.

(2) 30The condition is that—

(a) the body is of a kind prescribed by regulation 5 of, and

(b) the body’s rules include a rule in the terms set out in
Schedule 1 to,

the Community Benefit Societies (Restriction on Use of Assets)
35Regulations 2006 (S.I. 2006/264S.I. 2006/264) or the Community Benefit Societies
(Restriction on Use of Assets) Regulations (Northern Ireland) 2006
(S.R. 2006/258S.R. 2006/258).

(3) The Treasury may by order amend this section for the purpose of—

(a) replacing—

(i) 40the condition in subsection (2), or

(ii) the condition, or all or any of the conditions, for the
time being replacing the condition in subsection (2),

with one or more other conditions;

(b) varying—

(i) 45the condition in subsection (2), or

(ii) the condition, or any of the conditions, for the time
being replacing the condition in subsection (2);

(c) dispensing with—

(i) the condition in subsection (2), or

(ii) the condition, or all or any of the conditions, for the
time being replacing the condition in subsection (2).

(4) 5In this section—

• “the 2014 Act” means the Co-operative and Community Benefit
  Societies Act 2014;

• “the 2010 Act” means the Co-operative and Community Benefit
  Societies and Credit Unions Act 2010.

(5) 10While neither the 2014 Act, nor section 1 of the 2010 Act, is in force,
subsection (1) of this section has effect as if for paragraphs (a) and (b)
of that subsection there were substituted—

“(a) is a society registered, or treated as registered, under section 1
of the Industrial and Provident Societies Act 1965 in the case of
15which the condition in section 1(2)(b) of that Act is fulfilled, or”.

(6) If section 1 of the 2010 Act (registration of societies) comes into force
before the 2014 Act comes into force then, with effect from the
coming into force of that section and until the coming into force of
the 2014 Act, subsection (1) of this section has effect as if for
20paragraphs (a) and (b) of that subsection there were substituted—

“(a) is registered as a community benefit society under section 1 of
the Industrial and Provident Societies Act 1965 (“the 1965 Act”),

(b) is a pre-2010 Act society (as defined by section 4A(1) of the 1965
Act) that meets the condition in section 1(3) of the 1965 Act, or”.

(7) 25In the event that section 2 of the 2010 Act (renaming of the 1965 Act)
is brought into force before its repeal by the 2014 Act takes effect
then, with effect from the coming into force of that section,
subsections (5) and (6) of this section have effect as if, in the
provisions which they substitute, the references to the Industrial and
30Provident Societies Act 1965 were references to the Co-operative and
Community Benefit Societies and Credit Unions Act 1965.

257JC Charities that are trusts

In this Part, a reference to a company includes a reference to a charity
that is a trust.

CHAPTER 2 35Eligibility for relief: basic rule and key definitions

Eligibility

257K Eligibility for SI relief

(1) An individual (“the investor”) who invests in a social enterprise is
eligible for SI relief in respect of the amount invested if—

(a) 40the investment is made—

(i) by the investor on the investor’s own behalf,

(ii) on or after 6 April 2014, and

(iii) before 6 April 2019 (but see subsection (4)), and

(b) the conditions set out in Chapters 3 and 4 are met.

(2) The investor is not eligible for SI relief in respect of the amount
invested if—

(a) the investor has obtained in respect of that amount, or any
5part of it, relief under—

(i) Part 5 (enterprise investment scheme),

(ii) Part 5A (seed enterprise investment scheme), or

(iii) Part 7 (community investment tax relief), or

(b) that amount, or any part of it, has under Schedule 5B to
10TCGA 1992 (enterprise investment scheme: re-investment)
been set against a chargeable gain.

(3) Investments made by, subscribed for, issued to, held by or disposed
of for an individual by a nominee are treated for the purposes of this
Part as made by, subscribed for, issued to, held by or disposed of by
15the individual.

(4) The Treasury may by order substitute a later date for the date for
time being specified in subsection (1)(a)(iii).

Key definitions

257KA Key to reading the rest of the Part

20 In the following provisions of this Part (except section 257N), a
reference to—

• “the amount invested”,

• “the investment”,

• “the investor”, or

• 25“the social enterprise”,

is to be read in accordance with section 257K(1).

257KB When investment is made, and “investment date”

(1) For the purposes of this Part “the investment date” means the date on
which the investment is made.

(2) 30So far as the investment is in shares, for the purposes of this Part it is
made when the shares are issued to the investor by the social
enterprise.

(3) If the investment, so far as it is in qualifying debt investments (see
section 257L), involves making the only advance covered by the
35debenture or debentures concerned, for the purposes of this Part it is
made—

(a) when the social enterprise issues the debenture or debentures
to the investor, or

(b) in a case where there is to be no such issuing, when the
40debenture or debentures, so far as relating to the advance,
take effect between the social enterprise and the investor.

(4) If the investment, so far as it is in qualifying debt investments,
involves making the first of multiple advances covered by the
debenture or debentures concerned, for the purposes of this Part it is
45made—

(a) when the social enterprise issues the debenture or debentures
to the investor, or

(b) in a case where there is to be no such issuing, when the
debenture or debentures, so far as relating to all of those
5advances, take effect between the social enterprise and the
investor.

(5) If the investment, so far as it is in qualifying debt investments,
involves making the second of multiple advances covered by the
debenture or debentures concerned, or a subsequent one of those
10advances, for the purposes of this Part it is made—

(a) when the amount of that advance is fully advanced in cash, or

(b) if later—

(i) when the social enterprise issues the debenture or
debentures to the investor, or

(ii) 15in a case where there is to be no such issuing, when
the debenture or debentures, so far as relating to all of
those advances, takes effect between the social
enterprise and the investor.

(6) For the purposes of subsections (3) to (5) “debenture” includes any
20instrument creating or acknowledging indebtedness.

257KC “Shorter applicable period” and “longer applicable period”

(1) In this Part “the shorter applicable period” and “the longer
applicable period” have the meaning given by this section.

(2) The shorter applicable period begins with the investment date.

(3) 25The longer applicable period begins with—

(a) the day on which the social enterprise is—

(i) incorporated (if it is a body corporate), or

(ii) established (in any other case), or

(b) if later, the day whose first anniversary is the investment
30date.

(4) Each of the periods ends with the third anniversary of the investment
date.

CHAPTER 3 Eligibility: conditions relating to the investor and the investment

257L Investment to be in new shares or new qualifying debt investments

(1) 35At all times during the shorter applicable period, the investment
must be in—

(a) shares that meet conditions A and B and are issued to the
investor by the social enterprise in return for the amount
invested, or

(b) 40qualifying debt investments of which the investor is the
holder in return for advancing the amount invested to the
social enterprise.

(2) Condition A is that the shares must carry none of the following—

(a) a right to a return which, or any part of which, is a fixed
amount;

(b) a right to a return which, or any part of which, is at a fixed
rate;

(c) 5a right to a return which, or any part of which, is otherwise
fixed by reference to the amount invested;

(d) a right to a return which, or any part of which, is fixed by
reference to some other factor that is not contingent on
successful financial performance by the social enterprise;

(e) 10a right to a return at a rate greater than a reasonable
commercial rate.

(3) Condition B is that, for the purpose of determining the amounts due
in respect of the shares to their holder in the event of the winding-up
of the social enterprise—

(a) 15those amounts rank after all debts of the social enterprise
except any due to holders of qualifying debt investments in
the social enterprise in respect of their qualifying debt
investments, and

(b) the shares do not rank above any other shares in the social
20enterprise.

(4) In this Part “qualifying debt investments”, in relation to the social
enterprise, means any debentures of the social enterprise in respect
of which the following conditions are met—

(a) neither the principal of the debt concerned, nor any return on
25that, is charged on any assets,

(b) the rate of any such return is not greater than a reasonable
commercial rate of return, and

(c) in the event of the winding-up of the social enterprise and so
far as the law allows, any sums due in respect of the debt
30(whether principal or return)—

(i) are subordinated to all other debts of the social
enterprise except sums due in the case of other
unsecured debentures of the social enterprise which
rank equally,

(ii) 35rank equally, if there are shares in the social
enterprise and they all rank equally among
themselves, with amounts due to share-holders in
respect of their shares, and

(iii) rank equally, if there are shares in the social
40enterprise and they do not all rank equally, with
amounts due in respect of their shares to the holders
of shares that do not rank above any other shares.

(5) The condition in subsection (3)(a) or (4)(c)(i) is met even if the sums
concerned do not rank after debts which are postponed—

(a) 45by rules under section 411 of the Insolvency Act 1986, or

(b) by or under any other enactment.

(6) For the purposes of subsection (4) “debenture” includes any
instrument creating or acknowledging indebtedness.

257LA Condition that the amount invested must have been paid over

(1) So far as the investment is in shares—

(a) the shares must be subscribed for wholly in cash, and

(b) must be fully paid up at the time they are issued.

(2) 5If the investment, so far as it is in qualifying debt investments,
involves making—

(a) the only advance covered by the debenture or debentures
concerned, or

(b) one of multiple advances covered by the debenture or
10debentures concerned,

the full amount of that advance must have been advanced wholly in
cash by the time the investment is made.

(3) For the purposes of this section—

(a) shares are not fully paid up, or

(b) 15the full nominal amount of qualifying debt investments has
not been advanced,

if there is any undertaking to pay cash to any person at a future time
in respect of the acquisition of the shares or investments.

(4) For the purposes of subsection (2) “debenture” includes any
20instrument creating or acknowledging indebtedness.

257LB The no pre-arranged exits requirements

(1) There must not at any time in the shorter applicable period be any
arrangements in existence for the investment to be redeemed, repaid,
repurchased, exchanged or otherwise disposed of in that period.

(2) 25The issuing arrangements for the investment must not include—

(a) arrangements for or with a view to the cessation of any trade
which is being or is to be or may be carried on by the social
enterprise or a person connected with the social enterprise, or

(b) arrangements for the disposal of, or of a substantial amount
30(in terms of value) of, the assets of the social enterprise or of
a person connected with the social enterprise.

(3) The arrangements referred to in subsection (2)(a) and (b) do not
include any arrangements applicable only on the winding-up of a
company except in a case where—

(a) 35the issuing arrangements include arrangements for the
company to be wound up, or

(b) the arrangements are applicable on the winding-up of the
company otherwise than for genuine commercial reasons.

(4) In this section “the issuing arrangements” means—

(a) 40the arrangements under which the investor makes the
investment, and

(b) any arrangements made before, and in relation to or in
connection with, the making of the investment by the
investor.