 | |
| |
Value received by other persons |
| | 56. - (1) Where any investment relief is attributable to such of the relevant shares as are held by the investing company, sub-paragraph (2) shall apply if at any time in the period of restriction relating to the relevant shares the issuing company or any subsidiary-
|
| |
(a) repays, redeems or repurchases any of its share capital which belongs to any member other than- |
| |
(i) the investing company, or
|
| |
(ii) a person who falls within sub-paragraph (3), or
|
| |
(b) makes any payment to any such member for giving up his right to any of the share capital of the company or subsidiary on its cancellation or extinguishment. |
| |
(2) The investment relief-
|
| |
(a) if it is greater than the amount mentioned in sub-paragraph (4), shall be reduced by that amount, and |
| |
(b) in any other case, must be withdrawn. |
| |
(3) A person falls within this sub-paragraph if the repayment, redemption, repurchase or payment in question-
|
| |
(a) causes any investment relief attributable to that person's shares in the issuing company to be withdrawn or reduced by virtue of- |
| |
(i) paragraph 46 (disposal of shares), or
|
| |
(ii) paragraph 49(1)(a) (receipt of value by virtue of repayment of share capital etc.);
|
| |
(b) causes any relief under Chapter III of Part VII of the Taxes Act 1988 (EIS income tax relief) attributable to that person's shares in the issuing company to be withdrawn or reduced by virtue of- |
| |
(i) section 299 of that Act (disposal of shares), or
|
| |
(ii) section 300(2)(a) of that Act (receipt of value by virtue of repayment of share capital etc.);
|
| |
|
| |
(c) gives rise to a qualifying chargeable event (within the meaning of paragraph 14(4) of Schedule 5B to the 1992 Act (EIS: deferral relief)) in respect of that person. |
| |
(4) The amount referred to in sub-paragraph (2) is an amount equal to 20%-
|
| |
(a) where sub-paragraph (1) does not apply in the case of any other company holding shares in the issuing company, of the amount received by the member, and |
| |
(b) where sub-paragraph (1) also applies in the case of one or more such other companies, of the appropriate fraction of that amount. |
| |
(5) For the purposes of sub-paragraph (4) "the appropriate fraction" is-
A
-----
B
|
| | where-
|
| |
A is the amount subscribed by the investing company for such of the relevant shares as are shares to which investment relief is or, but for sub-paragraph (2)(b), would be attributable, and |
| |
B is the aggregate of that amount and the amount or amounts subscribed by the other company or companies for such shares which are comprised in the same issue of shares. |
| |
(6) Where-
|
| |
(a) the amount of the reduction ("C") 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 |
| |
(b) the amount ("D") which is equal to 20% of the amount subscribed by the investing company for those shares, |
| |
sub-paragraph (4) has effect as if the amount received by the member, or (as the case may be) the appropriate fraction of that amount, were reduced by multiplying it by the fraction-
C
-----
D
|
| |
(7)
|
| |
Where the amount of investment relief attributable to the relevant shares has been reduced before the 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 (6) to be the amount of the corporation tax reduction that would have been obtained had no such reduction of investment relief been made before the relief was obtained.
|
| |
(8) Sub-paragraph (7) 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).
|
| |
Insignificant repayments disregarded |
| | 57. - (1) Any repayment shall be disregarded for the purposes of paragraph 56(1) (repayments etc. which cause withdrawal of investment relief) if whichever is the greater of-
|
| |
(a) the market value of the shares to which it relates ("the target shares") immediately before the event occurs, and |
| |
(b) the amount received by the member in question, |
| |
is insignificant in relation to the market value of the remaining share capital of the issuing company (or, as the case may be, subsidiary) immediately after the event occurs.
|
| |
This is subject to sub-paragraph (4).
|
| |
(2) For the purposes of this paragraph "repayment" means a repayment, redemption, repurchase or payment mentioned in paragraph 56(1) (repayments etc. which cause withdrawal of investment relief).
|
| |
(3) For the purposes of sub-paragraph (1) it shall be assumed that the target shares are cancelled at the time the payment is made.
|
| |
(4) Sub-paragraph (1) does not apply if, at a relevant time, arrangements are in existence that provide-
|
| |
(a) for a repayment by the issuing company or any subsidiary of that company (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 period of restriction relating to the shares.
|
| |
(5) For the purposes of sub-paragraph (4) "a relevant time" means any time in the period-
|
| |
(a) beginning one year before the relevant shares are issued, and |
| |
(b) expiring at the end of the issue date. |
| |
Provision supplementary to paragraph 56 and 57 |
| | 58. - (1) Any repayment shall be disregarded for the purposes of paragraph 56(1) (repayments etc. which cause withdrawal of investment relief) to the extent to which investment relief attributable to any shares has already been reduced or withdrawn on its account.
|
| |
(2) In any case where-
|
| |
(a) investment relief is attributable to such of the relevant shares as are held by the investing company; |
| |
(b) the issuing company has made one or more other issues of shares each of which includes shares ("designated shares") to which investment relief is attributable, and |
| |
|
| |
(i) within the period of restriction relating to the relevant shares, and
|
| |
(ii) within one or more of the equivalent periods relating to any of the designated shares,
|
| |
paragraph 56(4) shall have effect in relation to each of the issues of shares as if the amount received by the member, or (as the case may be) the appropriate fraction of that amount, were reduced by multiplying it by the relevant fraction.
|
| |
(3) For the purposes of sub-paragraph (2) "the equivalent period", in relation to any designated shares, means the period-
|
| |
(a) beginning one year before the shares are issued, and |
| |
(b) ending at the end of the qualification period relating to the shares. |
| |
For the purposes of determining the qualification period relating to any designated shares, the references in paragraph 3 to the relevant shares shall be read as references to those designated shares.
|
| |
(4) In sub-paragraph (2)-
|
| |
(a) "the appropriate fraction" has the meaning given by paragraph 56(5), and |
| |
(b) "the relevant fraction" means-
E
-----
F
|
| | Where-
|
| |
E is the amount subscribed by companies for shares which are included in the issue in question and to which investment relief is or, but for paragraph 56(2)(b), would be attributable; and |
| |
F is the aggregate of that amount and the corresponding amount or amounts for the other issue or issues. |
| |
(5) Where-
|
| |
(a) a company issues share capital of nominal value equal to the authorised minimum (within the meaning of the Companies Act 1985) for the purposes of complying with the requirements of section 117 of that Act (public company not to do business unless requirements as to share capital complied with), and |
| |
(b) the registrar of companies issues the company with a certificate under section 117, |
| |
paragraph 56(1) shall not apply in relation to any redemption of those shares within 12 months of the date on which they were issued.
|
| |
(6) In relation to companies incorporated under the law of Northern Ireland references in sub-paragraph (5) to the Companies Act 1985 and to section 117 of that Act shall have effect as references to the Companies (Northern Ireland) Order 1986 and to Article 127 of that Order.
|
| |
(7) References in paragraphs 56 and 57 and this paragraph to a subsidiary of the issuing company are references to any company which at any time in the period of restriction relating to the relevant shares is a 51% subsidiary of the issuing company whether or not it is such a subsidiary at the time of the repayment in question.
|
| |
(8) For the purposes of this paragraph "repayment" has the meaning given in paragraph 57(2).
|
| |
Put options and call options |
| | 59. - (1) Sub-paragraph (2) applies where-
|
| |
(a) an option, the exercise of which would bind the grantor to purchase any of the relevant shares, is granted to the investing company during the qualification period relating to those shares; or |
| |
(b) an option, the exercise of which would bind the investing company to sell such shares, is granted by the investing company during that period. |
| |
(2) Any investment relief attributable to the shares to which the option relates must be withdrawn.
|
| |
(3) The shares to which the option relates are those which, if-
|
| |
(a) the option were exercised immediately after the grant, and |
| |
(b) any shares in the issuing company acquired by the investing company after the grant were disposed of immediately after being acquired, |
| |
would be treated for the purposes of this Schedule as disposed of in pursuance of the option.
|
| |
(4) Nothing in this paragraph prejudices the operation of paragraph 37 (pre-arranged exits).
|
| |
Withdrawal of relief |
| | 60. - (1) Where any investment relief has been obtained which-
|
| |
(a) is subsequently found not to have been due, or |
| |
(b) falls to be withdrawn under this Part, |
| |
it shall be withdrawn by making an assessment to corporation tax under Case VI of Schedule D for the accounting period for which the relief was obtained.
|
| |
(2) Investment relief obtained by the investing company in respect of the relevant shares may not be withdrawn on the ground-
|
| |
(a) that the issuing company is not a qualifying issuing company in relation to those shares, |
| |
(b) that the requirements of Part IV of this Schedule are not met in respect of the shares, |
| |
(c) by virtue of paragraph 47 (value received by investing company), or |
| |
(d) by virtue of paragraph 56 (value received by other persons), |
| |
unless sub-paragraph (3) is satisfied.
|
| |
(3) This sub-paragraph is satisfied if-
|
| |
|
| |
(i) the issuing company has given notice under paragraph 65 (information to be provided by issuing company etc.) in relation to those shares, or
|
| |
(ii) the Inland Revenue have given notice to that company stating that, by reason of the ground in question, the whole or any part of the investment relief obtained by any company or companies in respect of shares included in the relevant issue of shares was not in their opinion due,
|
| |
|
| |
(b) in the case of a withdrawal within sub-paragraph (2)(c) or (d), the Inland Revenue have given notice to the investing company stating the matters mentioned in paragraph (a)(ii) above. |
| |
(4) In this paragraph-
|
| |
(a) references to the withdrawal of investment relief include its reduction; and |
| |
(b) "the relevant issue of shares" means the issue of shares in the issuing company which includes the relevant shares. |
| |
Appeals against withdrawal of relief |
| | 61. For the purposes of the provisions of the Taxes Management Act 1970 relating to appeals, the giving of notice by the Inland Revenue under paragraph 60(3)(a)(ii) shall be taken to be a decision disallowing a claim by the issuing company which is not a claim for discharge or repayment of tax.
|
