Previous Next

Contents page 250-258 260-269 270-279 280-289 290-299 300-309 310-319 320-329 330-339 340-349 350-359 360-369 370-379 380-389 390-399 400-408 410-419 420-427 430-439 440-448 450-464 Last page

Finance BillPage 350

(b) it issues a compliance certificate in contravention of section
257PC(3) or (4).

257PE Power to amend Chapter

(1) The Treasury may by order amend this Chapter.

(2) 5An order under this section may include consequential, incidental or
transitional provision or savings, including consequential
amendments, repeals or revocations of provision made by or under
an enactment (including this Act) whenever passed or made.

(3) An order under this section may, in particular, make provision for
10persons to be liable to penalties whose amount, or maximum
amount, does not exceed £3,000.

CHAPTER 7 Withdrawal or reduction of SI relief
Value received by the investor
257Q Effect of the investor receiving value from the social enterprise

(1) 15If the investor receives any value from the social enterprise at any
time in the longer applicable period, any SI relief given in respect of
the investment must—

(a) if it is greater than the amount given by the formula set out in
subsection (2), be reduced by that amount, and

(b) 20in any other case, be withdrawn.

(2) The formula is—


V × R

where—

  • V is the amount of the value received, and

  • 25R is the SI rate for the tax year for which the SI relief was
    given.

(3) Subsections (1) and (2) are subject to—

(a) section 257QA (value received: insignificant receipts),

(b) section 257QB (value received where there is more than one
30issue of investments),

(c) section 257QC (value received where part of investment
treated as made in previous tax year),

(d) section 257QD (cases where maximum SI relief not obtained),

(e) section 257QG (receipts of value by and from connected
35persons etc), and

(f) section 257QH (receipt of replacement value).

(4) Sections 257QB to 257QD are to be applied in the order in which they
appear in this Part.

(5) Value received is to be ignored, for the purposes of this section, so far
40as SI relief attributable to the investment has already been
withdrawn or reduced on its account.

Finance BillPage 351

(6) For the purposes of this section and sections 257QA to 257QI, an
individual—

(a) who acquires any part of the investment, and

(b) who does so on such a transfer as is mentioned in section
5257T (spouses or civil partners),

is treated as the investor.

257QA Value received: insignificant receipts

(1) In this section “insignificant receipt” means a receipt whose
amount—

(a) 10is not more than £1,000, or

(b) is more than £1,000 but is insignificant in relation to the
amount invested.

(2) Section 257Q(1) does not apply to an insignificant receipt, subject as
follows.

(3) 15Section 257Q(1) applies to all receipts within the longer applicable
period if, at any time on the investment date or in the preceding 12
months, arrangements are in existence providing for the investor to
receive, or to be entitled to receive, value from the social enterprise
at any time in the longer applicable period.

(4) 20Once section 257Q(1) has applied to a receipt, it applies also to all
other receipts within the longer applicable period except any earlier
insignificant receipts.

(5) The amount of the first receipt to which section 257Q(1) applies is
treated as increased by the total amount of any earlier insignificant
25receipts.

(6) In subsection (3)—

(a) the reference to the investor includes any person who at any
time in the longer applicable period is an associate of the
investor (whether or not an associate at the material time),
30and

(b) the reference to the social enterprise includes any person who
at any time in the longer applicable period is connected with
the social enterprise (whether or not connected at the
material time).

257QB 35 Value received where there is more than one issue of investments

(1) Subsection (3) applies if—

(a) a time in the longer applicable period when the investor
receives value from the social enterprise is within the period
that for the purposes of this Part is the longer applicable
40period in relation to another investment in the social
enterprise, and

(b) that other investment is one for which the investor has SI
relief.

(2) That other investment is an “overlapping investment” for the
45purposes of subsection (3).

Finance BillPage 352

(3) Section 257Q(2) has effect in relation to the investment as if the
amount V were reduced by multiplying it by—


where—

  • 5I is the amount on which the investor has SI relief in the case of
    the investment, and

  • T is the total of that amount and the corresponding amount for
    each overlapping investment.

257QC Value received where part of investment treated as made in previous
10tax year

(1) Subsection (2) applies if—

(a) section 257Q(1) applies to a receipt, and

(b) section 257JA(1) and (2) apply as if part of the amount
invested had been invested in a previous tax year.

(2) 15The calculation under section 257Q(2) in relation to that receipt is to
be made as follows—

Step 1

Apportion the amount referred to as “V” between the tax year in
which the investment was made and the preceding tax year by
20multiplying that amount by—


where—

  • A is the part of the amount invested on which the investor
    obtains SI relief for the tax year in question, and

  • 25B is the sum of—

    (a)

    that part, and

    (b)

    the part of the amount invested on which the investor
    obtains SI relief for the other tax year.

Step 2

30In relation to each of the amounts (“V1” and “V2”) so apportioned to
the two tax years, calculate the amounts (“X1” and “X2”) that would
be given by the formula if separate investments had been made in
those tax years.

In calculating amounts X1 and X2, apply section 257QD if
35appropriate but do not apply section 257QB.

Step 3

Add amounts X1 and X2 together.

The result is the required amount.

The result is the required amount.

257QD 40 Cases where maximum SI relief not obtained

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

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

(b) the amount (“B”) which is equal to income tax at the SI rate
45for that tax year on the amount on which the investor has SI
relief in the case of the investment,

Finance BillPage 353

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


(2) If the amount of SI relief attributable to the investment has been
5reduced before the SI 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) Subsection (2) does not apply to a reduction of SI relief as a result of
10section 257N(5) (attribution of SI relief where there is a
corresponding issue of bonus shares).

257QE When value is received

(1) This section applies for the purposes of sections 257Q and 257QB.

(2) The investor receives value from the social enterprise at any time
15when the social enterprise—

(a) repays, redeems or repurchases any investments in the social
enterprise which belong to the investor, or makes any
payment to the investor for giving up the investor’s right to
investments in the social enterprise on their cancellation or
20extinguishment,

(b) repays, in pursuance of any arrangements for or in
connection with the making of the investment, any debt
owed to the investor other than a debt which was incurred by
the social enterprise—

(i) 25on or after the investment date, and

(ii) otherwise than in consideration of the
extinguishment of a debt incurred before that date,

(c) makes to the investor any payment for giving up on its
extinguishment the investor’s right to any debt, other than—

(i) 30a debt in respect of a repayment of the kind
mentioned in section 257LF(5)(a) or (f), or

(ii) an ordinary trade debt,

(d) releases or waives any liability of the investor to the social
enterprise or discharges or undertakes to discharge any
35liability of the investor to a third person,

(e) makes a loan or advance to the investor which has not been
repaid in full before the investment is made,

(f) provides a benefit or facility for the investor by providing, at
a price less than the arm’s-length price or free of charge,
40goods or services for whose provision the social enterprise
ordinarily makes a charge,

(g) otherwise provides any benefit or facility for the investor,

(h) transfers an asset to the investor for no consideration or for
consideration less than its market value or acquires an asset
45from the investor for consideration greater than its market
value, or

(i) makes to the investor any other payment except—

(i) a payment of a kind mentioned in section 257LF(5), or

Finance BillPage 354

(ii) a payment in discharge of an ordinary trade debt.

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

(4) For the purposes of subsection (2)(e), each of the following is treated
as a loan made by the social enterprise to the investor—

(a) the amount of any debt, other than an ordinary trade debt,
incurred by the investor to the social enterprise, and

(b) 10the amount of any debt due from the investor to a third party
which has been assigned to the social enterprise.

(5) The investor also receives value from the social enterprise if—

(a) in respect of ordinary shares, or qualifying debt investments,
held by the investor any payment or asset is received in a
15winding-up or dissolution of the social enterprise, and

(b) the winding-up or dissolution is for genuine commercial
reasons, and is not part of any arrangements the main
purpose or one of the main purposes of which is the
avoidance of tax.

(6) 20The investor also receives value from the social enterprise if—

(a) a person—

(i) purchases any investments in the social enterprise
which belong to the investor, or

(ii) makes any payment to the investor for giving up any
25right in relation to any investments in the social
enterprise, and

(b) that person is an individual in relation to whom not all of the
requirements in sections 257LF and 257LG would be met if
references in those sections to the investor were read as
30references to that person.

(7) If, because of the investor’s disposal of investments in the social
enterprise, any SI relief attributable to those investments is
withdrawn or reduced under section 257R, the investor is not to be
treated as receiving value from the social enterprise in respect of the
35disposal.

(8) If the investor is a director of the social enterprise, the investor is not
to be treated as receiving value from the social enterprise merely
because of the payment to the investor of reasonable remuneration
(including any benefit or facility) for any services rendered to the
40social enterprise as a director or employee.

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

(a) is for not more than 6 months, and

(b) 45is not for longer than that normally given to customers of the
person carrying on the trade or business.

Finance BillPage 355

257QF 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 257Q
and 257QB is given by the corresponding entry in column 2 of the
5table.

Provision The amount of value received
Section 257QE(2)(a),
(b) or (c)
The amount received by the
investor or, if greater, the market
value of the investments or debt
Section 257QE(2)(d) 10The amount of the liability
Section 257QE(2)(e) The amount of the loan or advance,
less the amount of any repayment
made before the investment is made
Section 257QE(2)(f) The arm’s-length price for the
15goods or services, less any amount
paid for them by the investor
Section 257QE(2)(g) The cost to the social enterprise of
providing the benefit or facility, less
any consideration given for it by the
20investor
Section 257QE(2)(h) The difference between the market
value of the asset and the
consideration (if any) given for it
Section 257QE(2)(i) The amount of the payment
Section 257QE(5) 25The amount of the payment or the
market value of the asset
Section 257QE(6) The amount received by the
investor or, if greater, the market
value of the investments
257QG 30 Receipts of value by and from connected persons etc

In sections 257Q, 257QA, 257QB, 257QE and 257QF—

(a) any 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
35investor’s benefit,

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

(c) any reference to the social enterprise includes a reference to a
person who at any time in the longer applicable period is
40connected with the social enterprise (whether or not that
person is so connected at the material time).

Finance BillPage 356

257QH Receipt of replacement value

(1) If—

(a) any SI relief attributable to the investment would, in the
absence of this section, be reduced or withdrawn under
5section 257Q because of a receipt of value within section
257QE(2) or (6) (“the original value”),

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

(c) 10the amount of the replacement value is at least the amount of
the original value,

section 257Q does not, because of the receipt of the original value,
have effect to withdraw or reduce the SI relief.

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

15This is subject to section 257QI(1) and (2).

(2) For the purposes of this section—

(3) If the amount of the original value is, by virtue of section 257QB,
treated as reduced for the purposes of section 257Q(2) as it applies in
relation to the investment, the reference in subsection (1)(c) to the
amount of the original value is to be read as a reference to the amount
25of that value ignoring the reduction.

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

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

(i) 30making a payment to the original supplier, other than
a payment within paragraph (c) or a payment to
which subsection (5) applies,

(ii) acquiring any asset from the original supplier for a
consideration the amount or value of which is more
35than the market value of the asset, and

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

(b) 40if the receipt of the original value was within section
257QE(2)(d), because of an event the effect of which is to
reverse the event which constituted the receipt of the original
value, or

(c) if the receipt of the original value was within section
45257QE(6), because of the original recipient repurchasing the
investments in question, or (as the case may be) re-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—

Finance BillPage 357

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

(i) the original supplier, or

(ii) any other person who at any time in the longer
5applicable period is an associate of, or is connected
with, the original supplier (whether or not the person
is such an associate, or is so connected, at the material
time),

which is reasonable in relation to the market value of those
10goods, services or facilities,

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

(i) the original recipient, or

(ii) any other person who at any time in the longer
15applicable period is an associate of the original
recipient (whether or not the person is such an
associate at the material time),

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

(d) 20any payment, as rent for any property occupied by—

(i) the original recipient, or

(ii) any person who at any time in the longer applicable
period is an associate of the original recipient
(whether or not the person is such an associate at the
25material time),

of an amount not exceeding a reasonable and commercial
rent 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
30circumstances that do not fall within subsection (4)(a)(ii).

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

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

(i) the amount of any payment within sub-paragraph (i)
35of that paragraph, and

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

(b) 40in a case within subsection (4)(b), the same as the amount of
the original value, and

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

Section 257QF applies for the purpose of determining the amount of
45the original value.

(7) In this section—

(a) any 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,
50and

Finance BillPage 358

(b) “ordinary trade debt” has the meaning given by section
257QE(9).

257QI Section 257QH: supplementary

(1) The receipt of the replacement value by the original supplier is
5ignored for the purposes of section 257QH(1) to the extent to which
it has previously been set under section 257QH against a receipt of
value to prevent any reduction or withdrawal of SI relief under
section 257Q.

(2) The receipt of the replacement value by the original supplier (“the
10event”) is ignored for the purposes of section 257QH if—

(a) the event occurs before the longer applicable period,

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

(c) 15where an appeal has been brought by the investor against an
assessment to withdraw or reduce any SI relief attributable to
the investment because of the receipt of the original value, the
event occurs more than 60 days after the day on which the
amount of the relief which falls to be withdrawn has been
20finally determined.

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

(3) This subsection applies if—

(a) the receipt of the replacement value by the original supplier
25is a qualifying receipt for the purposes of section 257QH(1),
and

(b) in consequence of the receipt, any receipts of value are
ignored for the purposes of section 257Q as that section
applies in relation to the investment or any other investments
30made by the investor, and

(c) the event which gives rise to the receipt is (or includes) the
making of an investment by—

(i) the investor, or

(ii) any person who at any time in the longer applicable
35period 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 makes the investment
concerned is not to be eligible for SI relief in relation to the
investment concerned or any other investments in the same issue.

(5) 40In this section “the original recipient”, “the original supplier” and
“replacement value” have the same meaning as in section 257QH.

Repayments etc of investments to other persons
257QJ Repayments etc of share capital to other persons

(1) This section applies if any SI relief is attributable to the whole or any
45part of the investment and, at any time in the longer applicable
period, the social enterprise or any subsidiary—

Finance BillPage 359

(a) repays, redeems or repurchases any of its share capital which
belongs to any member other than—

(i) the investor, or

(ii) a person who falls within subsection (5), or

(b) 5makes any payment to any such member for giving up the
member’s right to any of the share capital of the social
enterprise or subsidiary on its cancellation or
extinguishment.

(2) The SI relief must—

(a) 10if it is greater than the amount given by the formula set out in
subsection (3), be reduced by that amount, and

(b) in any other case, be withdrawn.

(3) The formula is—


A × R

15where—

  • A is the amount received by the member, and

  • R is the SI rate for the tax year for which the SI relief was given.

(4) This section is subject to sections 257QK to 257QP; and sections
257QL to 257QO are to be applied in the order in which they appear
20in this Part.

(5) A person falls within this subsection if the repayment causes any SI
relief attributable to that person’s shares in the social enterprise to be
withdrawn or reduced by virtue of—

(a) section 257QE(2)(a) (receipt of value by virtue of repayment
25of investments etc), or

(b) section 257R (disposal of whole or part of the investment).

(6) A repayment is treated as having the effect mentioned in subsection
(5)(a) if it would have that effect were it not an insignificant receipt;
and here “insignificant receipt” is to be read in accordance with
30section 257QA(1).

(7) A repayment is to be ignored, for the purposes of this section, to the
extent to which SI relief attributable to any shares has already been
withdrawn or reduced on its account.

(8) In this section and sections 257QK to 257QP—

(a) 35“repayment” means a repayment, redemption, repurchase or
payment mentioned in subsection (1)(a) or (b), and

(b) references to a subsidiary of the social enterprise are
references to a company which at any time in the longer
applicable period is a 51% subsidiary of the social enterprise
40(whether or not it is such a subsidiary at the time of the
repayment).

257QK Insignificant payments ignored for the purposes of section 257QJ

(1) A repayment is ignored for the purposes of section 257QJ if both—

(a) the market value of the shares to which it relates (“the target
45shares”) immediately before the event occurs, and

(b) the amount received by the member in question,

Previous Next

Contents page 250-258 260-269 270-279 280-289 290-299 300-309 310-319 320-329 330-339 340-349 350-359 360-369 370-379 380-389 390-399 400-408 410-419 420-427 430-439 440-448 450-464 Last page