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SCHEDULE 13
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CHANGES TO EIS ETC |
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PART I |
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EIS INCOME TAX RELIEF |
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Eligibility for relief |
| | 1. - (1) In subsection (1) of section 289 of the Taxes Act 1988-
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(a) in paragraph (a), after the words "has subscribed" there shall be inserted the words "wholly in cash"; |
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(b) after that paragraph there shall be inserted the following paragraph- |
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"(aa) at the time when they are issued the shares are fully paid up (disregarding for this purpose any undertaking to pay cash to the company at a future date),"; |
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(c) in paragraph (b), after the words "the shares" there shall be inserted the words "and all other shares comprised in the same issue"; and |
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(d) in paragraph (c), for the words "that activity" there shall be substituted the words "the activity mentioned in paragraph (b) above". |
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(2) In subsection (1A)(c) of that section, for the word "subsidiary" there shall be substituted the words "90 per cent subsidiary".
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(3) In subsection (6) of that section, after the word "subscribed" there shall be inserted the word "for".
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(4) In subsection (7) of that section, the word "preferential", in the second place where it occurs, shall cease to have effect.
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(5) After subsection (8) of that section there shall be inserted the following subsection-
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"(9) In this section "90 per cent subsidiary", in relation to the qualifying company, means a subsidiary of a kind which the company might hold by virtue of section 308 if-
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(a) the references in subsection (2) of that section to 75 per cent were references to 90 per cent; and |
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(b) subsection (4) of that section were omitted." |
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Form of relief |
| | 2. In subsection (4) of section 289A of the Taxes Act 1988, for "£15,000" there shall be substituted "£25,000".
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Attribution of relief to shares |
| | 3. - (1) In subsection (3)(b) of section 289B of the Taxes Act 1988, for the words "bonus shares in that company which are eligible shares" there shall be substituted the words "corresponding bonus shares in that company".
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(2) After that subsection there shall be inserted the following subsection-
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"(3A) In subsection (3) above "corresponding bonus shares" means bonus shares which-
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(a) are issued in respect of the shares comprised in the original issue; and |
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(b) are of the same class, and carry the same rights, as those shares." |
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(3) For subsection (4) of that section there shall be substituted the following subsection-
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"(4) Subject to subsection (5) below, in this Chapter references (however expressed) to an issue of eligible shares in any company to an individual are references to any eligible shares in the company that are of the same class and are issued to him on the same day."
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(4) In subsection (5) of that section, for the words "the following provisions of this Chapter (except section 290(1))" there shall be substituted the words "sections 299(4) and 306(1)".
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(5) Sub-paragraphs (1) and (2) above have effect in relation to bonus shares issued on or after 6th April 1998.
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Maximum subscriptions etc. |
| | 4. In subsection (2) of section 290 of the Taxes Act 1988, for "£100,000" there shall be substituted "£150,000".
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| | 5. Section 290A of the Taxes Act 1988 shall cease to have effect.
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Individuals qualifying for relief |
| | 6. - (1) In subsection (1) of section 291 of the Taxes Act 1988, for the words "the relevant period connected with the company" there shall be substituted the words "the seven year period connected with the company (whether before or after its incorporation)".
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(2) In subsection (2) of that section, the words "and sections 291A and 291B" shall cease to have effect.
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(3) For subsection (3) of that section there shall be substituted the following subsection-
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"(3) In subsection (2) above "subsidiary", in relation to the issuing company, means a company which at any time in the relevant period is a 51 per cent subsidiary of the issuing company, whether or not it is such a subsidiary while the individual concerned or his associate is such an employee, partner or director as is mentioned in that subsection."
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(4) After subsection (5) of that section there shall be inserted the following subsection-
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"(6) In this Chapter "the seven year period", in relation to relief in respect of any eligible shares issued by a company, means the period beginning two years before, and ending five years after, the issue of the shares."
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Connected persons: directors |
| | 7. - (1) In subsection (1)(a) of section 291A of the Taxes Act 1988, for the words "the relevant period" there shall be substituted the words "the seven year period".
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(2) In subsection (5) of that section-
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(a) for sub-paragraph (ii) of paragraph (b) there shall be substituted the following sub-paragraph- |
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"(ii) involved in carrying on (whether on his own account or as a partner, director or employee) the whole or any part of the trade carried on by the issuing company or a subsidiary, and"; and
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(b) the words "and the reference to a trade previously carried on includes part of such a trade" shall cease to have effect. |
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Connected persons: persons interested in capital etc. |
| | 8. - (1) After subsection (5) of section 291B of the Taxes Act 1988 there shall be inserted the following subsection-
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"(5A) An individual is not connected with a company by reason only of the fact that one or more shares in the company are held by him, or by an associate of his, at a time when the company-
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(a) has not issued any shares other than subscriber shares; and |
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(b) has not begun to carry on, or to make preparations for carrying on, any trade or business." |
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(2) For subsection (6) of that section there shall be substituted the following subsection-
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"(6) In this section "subsidiary", in relation to the issuing company, means a company which at any time in the relevant period is a 51 per cent subsidiary of the issuing company, whether or not it is such a subsidiary while the individual concerned has, or is entitled to acquire, such capital, voting power, rights or control as are mentioned in this section."
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Qualifying companies and qualifying trades |
| | 9. - (1) In subsection (3B)(b) of section 293 of the Taxes Act 1988, after the word "activities" there shall be inserted the words "(other than research and development and oil exploration)".
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(2) In paragraph (a) of subsection (6) of that section, the words "it is shown that" shall cease to have effect.
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(3) After that subsection there shall be inserted the following subsections-
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"(6A) The value of the relevant assets-
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(a) must not exceed £10 million immediately before the issue of the eligible shares; and |
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(b) must not exceed £11 million immediately afterwards. |
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(6B) Subject to subsection (6C) below, the reference in subsection (6A) above to the value of the relevant assets is a reference-
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(a) in relation to a time when the company did not have any qualifying subsidiaries, to the value of the gross assets of the company at that time; and |
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(b) in relation to any other time, to the aggregate value at that time of the gross assets of all the companies in the company's group. |
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(6C) For the purposes of subsection (6B) above assets of any member of the company's group that consist in rights against, or in shares in or securities of, another member of the group shall be disregarded.
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(6D) In subsections (6B) and (6C) above references, in relation to any time, to the company's group are references to the company and its qualifying subsidiaries at that time."
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(4) Subsection (7) of that section shall cease to have effect.
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(5) In subsection (8) of that section, for the words "Subject to section 308" there shall be substituted the words "Subject to sections 304A and 308".
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(6) Sub-paragraph (2) above has effect in relation to events occurring on or after 6th April 1998.
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| | 10. In subsection (1) of section 297 of the Taxes Act 1988, the words "Subject to section 298(7) below" shall cease to have effect.
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| | 11. In subsection (1) of section 298 of the Taxes Act 1988, for the words "sections 293(9) and 297" there shall be substituted the words "section 297".
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Disposal of shares |
| | 12. - (1) In subsection (1) of section 299 of the Taxes Act 1988-
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(a) for the words from the beginning to "relevant period" there shall be substituted the words "Subject to section 304(1), where an individual makes, before the end of the relevant period, any disposal of eligible shares to which relief is attributable"; and |
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(b) in paragraphs (a) and (b)(ii), for the words "any relief" there shall be substituted the words "the relief". |
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(2) In subsection (3) of that section-
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(a) for the words "any issue of shares held by any person" there shall be substituted the words "any issue of eligible shares held by any individual"; and |
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(b) for the words "the shares" there shall be substituted the words "the issue". |
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(3) In subsection (4) of that section-
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(a) after the words "any issue of" there shall be inserted the word "eligible"; and |
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(b) after the word "shares" there shall be inserted the words "issued in that year (or treated by section 289B(5) as so issued)". |
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(4) After subsection (5) of that section there shall be inserted the following subsection-
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"(5A) The shares to which such an option relates shall be taken to be those which, if-
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(a) the option were exercised immediately after the grant; and |
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(b) any shares in the company acquired by the individual after the grant were disposed of immediately after being acquired,
would be treated for the purposes of this section as disposed of in pursuance of the option."
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(5) For subsection (6) of that section there shall be substituted the following subsections-
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"(6) Where shares of any class in a company have been acquired by an individual on different days, any disposal by him of shares of that class shall be treated for the purposes of this section as relating to those acquired on an earlier day rather than to those acquired on a later day.
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(6A) Where shares of any class in a company have been acquired by an individual on the same day, any of those shares disposed of by him shall be treated for the purposes of this section as disposed of in the following order, namely-
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(a) first any to which neither relief under this Chapter nor deferral relief is attributable; |
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(b) next any to which deferral relief, but not relief under this Chapter, is attributable; |
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(c) next any to which relief under this Chapter, but not deferral relief, is attributable; and |
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(d) finally any to which both relief under this Chapter and deferral relief are attributable;
and in this subsection and subsection (6C) below "deferral relief" has the same meaning as in Schedule 5B to the 1992 Act.
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(6B) Any shares falling within paragraph (c) or (d) of subsection (6A) above which are treated by section 289B(5) as issued on an earlier day shall be treated as disposed of before any other shares falling within that paragraph.
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(6C) The following, namely-
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(a) any shares to which relief under this Chapter is attributable and which were transferred to an individual as mentioned in section 304; and |
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(b) any shares to which deferral relief, but not relief under this Chapter, is attributable and which were acquired by an individual on a disposal to which section 58 of the 1992 Act applies,
shall be treated for the purposes of subsections (6) and (6A) above as acquired by him on the day on which they were issued.
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(6D) In a case to which section 127 of the 1992 Act applies (whether or not by virtue of section 135(3) of that Act), shares comprised in the new holding shall be treated for the purposes of subsections (6) and (6A) above as acquired when the original shares were acquired.
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In this subsection "new holding" and "original shares" shall be construed in accordance with sections 126, 127, 135 and 136 of the 1992 Act."
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(6) Subsection (7) of that section shall cease to have effect.
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(7) Subsection (8)(a) of that section shall cease to have effect.
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(8) Sub-paragraphs (1), (3)(b), (5) and (6) above have effect in relation to disposals made on or after 6th April 1998.
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(9) Sub-paragraph (4) above has effect in relation to options granted on or after that date.
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