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PART VI |
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WITHDRAWAL OF INVESTMENT RELIEF |
| Disposal of shares |
| 46. - (1) This paragraph applies where- |
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(a) the investing company disposes of any of the relevant shares which have been held by it continuously from the time they were issued until the disposal, |
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(b) the disposal takes place during the qualification period relating to the relevant shares, and |
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(c) investment relief is attributable to the shares. |
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(2) If the disposal is not- |
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(a) by way of a bargain made at arm's length for full consideration, |
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(b) by way of a distribution in the course of dissolving or winding up the issuing company, |
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(c) a disposal within section 24(1) of the 1992 Act (entire loss, destruction, dissipation or extinction of asset), or |
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(d) a deemed disposal under section 24(2) of that Act (claim that value of asset has become negligible), |
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the investment relief attributable to those shares must be withdrawn. |
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(3) If the disposal is within paragraph (a), (b), (c) or (d) of sub-paragraph (2) the investment relief attributable to those shares must- |
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(a) if it is greater than an amount equal to 20% of the amount or value of the consideration (if any) which the company receives for the shares, be reduced by that amount, and |
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(b) in any other case, be withdrawn. |
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(4) Where- |
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(a) the amount of the reduction ("A") in the investing company's liability to corporation tax obtained under paragraph 39 (form of investment relief) in respect of the relevant shares, is less than |
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(b) the amount ("B") which is equal to 20% of the amount subscribed by the investing company for those shares, |
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sub-paragraph (3)(a) shall have effect in relation to a disposal of any of those shares as if the amount or value referred to in that sub-paragraph were reduced by multiplying it by the fraction-
A
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B |
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(5) Where the amount of investment relief attributable to any of the relevant shares has been reduced before the investment relief was obtained, the amount of the corporation tax reduction obtained in respect of those shares shall be deemed for the purposes of sub-paragraph (4) to be the amount of the corporation tax reduction that would have been obtained had no such reduction of relief been made before the relief was obtained. |
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(6) Sub-paragraph (5) does not apply to a reduction by virtue of paragraph 45(4) (attribution of investment relief where there is a corresponding issue of bonus shares). |
| Value received by investing company |
| 47. - (1) Sub-paragraph (2) applies where the investing company receives any value (other than insignificant value) from the issuing company during the period of restriction relating to the relevant shares. |
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(2) Any investment relief attributable to the shares shall- |
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(a) if it exceeds the amount mentioned in sub-paragraph (3), be reduced by that amount, and |
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(b) in any other case, be withdrawn. |
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(3) The amount referred to in sub-paragraph (2)(a) is an amount equal to 20% of the amount of the value received. |
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(4) This paragraph is subject to the following paragraphs- |
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paragraph 51 (value received where there is more than one issue of shares); |
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paragraph 52 (cases where maximum investment relief not obtained); and |
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paragraph 54 (receipt of replacement value). |
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(5) Where- |
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(a) value is received ("the relevant receipt") by the investing company from the issuing company at any time during the period of restriction relating to the relevant shares, |
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(b) the investing company has received from the issuing company one or more receipts of insignificant value at a time or times- |
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(i) during that period, but
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(ii) not later than the time of the relevant receipt, and
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(c) the aggregate amount of the value of the receipts within paragraph (a) and (b) is not an amount of insignificant value, |
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the investing company shall be treated for the purposes of this Part as if the relevant receipt had been a receipt of an amount of value equal to that aggregate amount. |
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For this purpose a receipt does not fall within paragraph (b) if it has been previously aggregated under this sub-paragraph. |
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(6) If, at any time in the period- |
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(a) beginning one year before the relevant shares are issued, and |
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(b) expiring at the end of the issue date, |
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arrangements are in existence which provide for the investing company to receive, or to be entitled to receive, any value from the issuing company at any time in the period of restriction relating to those shares, no amount of value received by the investing company shall be treated as a receipt of insignificant value for the purposes of this paragraph. |
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(7) For the purposes of this paragraph- |
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(a) references to a receipt of insignificant value (however expressed) are references to a receipt of an amount of insignificant value; |
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(b) "an amount of insignificant value" means an amount of value which- |
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(i) does not exceed £1,000, or
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(ii) if it exceeds that amount, is insignificant in relation to the amount subscribed by the investing company for the shares.
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This is subject to sub-paragraph (6). |
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(8) Where by reason of the investing company's disposal of any shares any investment relief attributable to those shares is withdrawn or reduced, the investing company shall not be treated for the purposes of this paragraph as receiving value from the issuing company in respect of the disposal. |
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(9) Value received shall be disregarded, for the purposes of this paragraph, to the extent to which investment relief attributable to any shares has already been reduced or withdrawn on its account. |
| Meaning of "the period of restriction" |
| 48. For the purposes of this Schedule "the period of restriction" relating to the relevant shares means the period- |
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(a) beginning one year before the shares are issued, and |
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(b) ending at the end of the qualification period relating to the shares. |
| When value is received |
| 49. - (1) For the purposes of paragraphs 47 (value received by investing company) and 51 (value received where there is more than one issue of shares) the investing company receives value from the issuing company at any time when the issuing company- |
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(a) repays, redeems or repurchases any of its share capital or securities which belong to the investing company or makes any payment to that company for giving up its right to any of the issuing company's share capital or any security on its cancellation or extinguishment; |
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(b) repays, in pursuance of any arrangements for or in connection with the acquisition of the relevant shares, any debt owed to the investing company other than a debt which was incurred by the issuing company- |
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(i) on or after the date of issue of those shares; and
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(ii) otherwise than in consideration of the extinguishment of a debt incurred before that date;
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(c) makes to the investing company any payment for giving up the company's right to any debt on its extinguishment; |
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(d) releases or waives any liability of the investing company to the issuing company or discharges, or undertakes to discharge, any liability of the investing company to a third person; |
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(e) makes a loan or advance to the investing company which has not been repaid in full before the issue of the relevant shares; |
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(f) provides a benefit or facility for the directors or employees of the investing company or any of their associates; |
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(g) disposes of an asset to the investing company for no consideration or for a consideration which is or the value of which is less than the market value of the asset; |
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(h) acquires an asset from the investing company for a consideration which is or the value of which is more than the market value of the asset; or |
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(i) makes a payment to the investing company other than a qualifying payment. |
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(2) For the purposes of sub-paragraph (1)(e) there shall be treated as if it were a loan made by the issuing company to the investing company- |
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(a) the amount of any debt (other than an ordinary trade debt) incurred by the investing company to the issuing company, and |
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(b) the amount of any debt due from the investing company to a third person which has been assigned to the issuing company. |
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(3) For the purposes of sub-paragraph (1)(d) the issuing company shall be 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 discharged. |
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(4) For the purposes of this paragraph- |
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(a) references to a debt or liability do not, in relation to a person, include references to any debt or liability which would be discharged by the making by that person of a qualifying payment; |
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(b) references to a benefit or facility do not include references to any benefit or facility provided in circumstances such that, if a payment had been made of an amount equal to its value, that payment would be a qualifying payment; and |
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(c) any reference to a payment or disposal to a person includes a reference to a payment or disposal made to that person indirectly or to his order or for his benefit. |
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In paragraphs (a) to (c) references to "a person" include references to any person who, at any time in the period of restriction in question, is connected with that person, whether or not he is so connected at the material time. |
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(5) In this paragraph- |
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"ordinary trade debt" means any debt for goods or services supplied in the ordinary course of a trade or business where any credit given- |
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(a) does not exceed six months, and
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(b) is not longer than that normally given to customers of the person carrying on the trade or business; and
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"qualifying payment" means- |
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(a) any payment by any person for any goods, services or facilities provided by the investing company (in the course of its trade or otherwise) which is reasonable in relation to the market value of those goods, services or facilities;
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(b) the payment by any person of any interest which represents no more than a reasonable commercial return on money lent to that person;
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(c) the payment by any company of any dividend or other distribution which does not exceed a normal return on any investment in shares in or other securities of that company;
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(d) any payment for the acquisition of an asset which does not exceed its market value;
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(e) the payment by any person, as rent for any property occupied by the person, of an amount not exceeding a reasonable and commercial rent for the property; and
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(f) a payment in discharge of an ordinary trade debt.
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