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Income Tax Bill


Income Tax Bill
Part 5 — Enterprise investment scheme
Chapter 6 — Withdrawal or reduction of EIS relief

124

 

231     

Restriction on withdrawal of relief under section 224

(1)   

This section applies if, because of a repayment, any investment relief which is

attributable under Schedule 15 to FA 2000 to any shares is withdrawn under

paragraph 56(2) of that Schedule.

(2)   

For the purposes of this section “the relevant amount” is the amount

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determined by the formula—equation: plus[char[A],minus[times[num[5.0000000000000000,"5"],char[B]]]]

   

where—

A is the amount of the repayment, and

B is the total amount of investment relief withdrawn because of the

repayment.

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(3)   

If the relevant amount does not exceed £1,000, the repayment is ignored for the

purposes of section 224(1), unless repayment arrangements are in existence at

any time in the period—

(a)   

beginning 12 months before the issue of the shares mentioned in

subsection (1), and

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(b)   

ending at the end of the issue date.

(4)   

For this purpose “repayment arrangements” means arrangements which

provide—

(a)   

for a repayment by the issuing company or any subsidiary of that

company, or

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(b)   

for anyone to be entitled to such a repayment,

   

at any time.

(5)   

Subsection (4)(a) applies in relation to a subsidiary of the issuing company

whether or not it is such a subsidiary when the arrangements were made.

(6)   

If the repayment is not ignored by virtue of subsection (3), the amount received

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because of the repayment is treated for the purposes of section 224(2) as an

amount equal to the relevant amount.

(7)   

In this section—

(a)   

“investment relief” has the same meaning as in Schedule 15 to FA 2000

(corporate venturing scheme), and

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(b)   

references to the withdrawal of investment relief include its reduction.

Miscellaneous

232     

Acquisition of a trade or trading assets

(1)   

Any EIS relief attributable to any shares in a company held by an individual is

withdrawn if—

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(a)   

at any time in period A, the company or any qualifying subsidiary—

(i)   

begins to carry on as its trade, or as part of its trade, a trade

which was previously carried on at any time in that period

otherwise than by the company or any qualifying subsidiary, or

 
 

Income Tax Bill
Part 5 — Enterprise investment scheme
Chapter 6 — Withdrawal or reduction of EIS relief

125

 

(ii)   

acquires the whole, or the greater part, of the assets used for the

purposes of a trade previously so carried on, and

(b)   

the individual is a person, or one of a group of persons, to whom

subsection (2) or (3) applies.

(2)   

This subsection applies to any person or group of persons—

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(a)   

to whom an interest amounting in total to more than a half share in the

trade (as previously carried on) belonged at any time in period A, and

(b)   

who is or are a person or group of persons to whom such an interest in

the trade carried on by the company belongs or has, at any such time,

belonged.

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(3)   

This subsection applies to any person or group of persons who—

(a)   

control or, at any time in period A, have controlled the company, and

(b)   

is or are a person or group of persons who, at any such time, controlled

another company which previously carried on the trade.

(4)   

For the purposes of subsection (2)—

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(a)   

the person to whom a trade belongs and, if a trade belongs to two or

more persons, their respective shares in that trade are determined in

accordance with section 344(1)(a) and (b), (2) and (3) of ICTA, and

(b)   

any interest, rights or powers of a person who is an associate of another

person are treated as those of that other person.

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(5)   

In determining whether any EIS relief attributable to any shares in the issuing

company held by an individual who—

(a)   

is a director of, or of a company which is a partner of, the issuing

company or any qualifying subsidiary, and

(b)   

is in receipt of, or entitled to receive, remuneration as such a director

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falling within section 169(2) (reasonable remuneration for services),

   

is to be withdrawn, the reference in subsection (3)(b), and (so far as relating to

that provision) the reference in subsection (1)(a)(i), to any time in period A are

to be read as references to any time before the end of period A.

(6)   

Section 167(3) (director also an employee) applies for the purposes of

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subsection (5) as it applies for the purposes of section 168, and in subsection (5)

“remuneration” includes any benefit or facility.

(7)   

In this section “trade” includes any business or profession, and references to a

trade previously carried on include references to part of such a trade.

233     

Acquisition of share capital

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(1)   

Any EIS relief attributable to any shares in a company held by an individual is

withdrawn if —

(a)   

the company comes to acquire all of the issued share capital of another

company at any time in period A, and

(b)   

the individual is a person, or one of a group of persons, to whom

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subsection (2) applies.

(2)   

This subsection applies to any person or group of persons who—

(a)   

control or have, at any time in period A, controlled the company, and

(b)   

is or are a person or group of persons who, at any such time, controlled

the other company.

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Income Tax Bill
Part 5 — Enterprise investment scheme
Chapter 7 — Withdrawal or reduction of EIS relief: procedure

126

 

(3)   

In determining whether any EIS relief attributable to any shares in the issuing

company held by an individual who—

(a)   

is a director of, or of a company which is a partner of, the issuing

company or any qualifying subsidiary, and

(b)   

is in receipt of, or entitled to receive, remuneration as such a director

5

falling within section 169(2),

   

is to be withdrawn, the reference in subsection (2)(b) to any time in period A is

to be read as a reference to any time before the end of period A.

(4)   

Section 167(3) applies for the purposes of subsection (3) as it applies for the

purposes of section 168, and in subsection (3) “remuneration” includes any

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benefit or facility.

234     

Relief subsequently found not to have been due

(1)   

Any EIS relief obtained by the investor which is subsequently found not to

have been due must be withdrawn.

(2)   

EIS relief obtained by the investor in respect of the relevant shares may not be

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withdrawn on the ground—

(a)   

that the requirements of sections 174 and 175 (the purpose of the issue

and use of money raised requirements) are not met in respect of the

shares, or

(b)   

that the issuing company is not a qualifying company in relation to the

20

shares (see Chapter 4),

   

unless the requirements of subsection (3) are met.

(3)   

The requirements of this subsection are met if either—

(a)   

the issuing company has given notice under section 241, or paragraph

16(2) or (4) of Schedule 5B to TCGA 1992, (information to be provided

25

by issuing company etc) in relation to the relevant issue of shares, or

(b)   

an officer of Revenue and Customs has given notice to that company

stating the officer’s opinion that, because of the ground in question, the

whole or any part of the EIS relief obtained by any individual in respect

of shares included in the relevant issue of shares was not due.

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(4)   

In this section “the relevant issue of shares” means the issue of shares in the

issuing company which includes the relevant shares.

Chapter 7

Withdrawal or reduction of EIS relief: procedure

Assessments and appeals

35

235     

Assessments for the withdrawal or reduction of EIS relief

If any EIS relief which has been obtained falls to be withdrawn or reduced

under Chapter 6, it must be withdrawn or reduced by the making of an

assessment to income tax for the tax year for which the relief was obtained.

 
 

Income Tax Bill
Part 5 — Enterprise investment scheme
Chapter 7 — Withdrawal or reduction of EIS relief: procedure

127

 

236     

Appeals against section 234(3)(b) notices

(1)   

For the purposes of the provisions of TMA 1970 relating to appeals, the giving

of notice by an officer of Revenue and Customs under section 234(3)(b) is taken

to be a decision disallowing a claim by the issuing company.

(2)   

If any issue has been determined on an appeal brought by virtue of paragraph

5

1A(6) of Schedule 5B to TCGA 1992 (appeal against notice that shares never

have been, or have ceased to be, eligible shares), the determination is

conclusive for the purposes of any appeal brought by virtue of subsection (1)

on which that issue arises.

237     

Time limits for assessments

10

(1)   

An officer of Revenue and Customs may not—

(a)   

make an assessment for withdrawing or reducing the EIS relief

attributable to any of the relevant shares, or

(b)   

give a notice under section 234(3)(b),

   

more than 6 years after the end of the relevant tax year.

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(2)   

In subsection (1) “the relevant tax year” means—

(a)   

the tax year in which the time mentioned in section 175(3) (the use of

money raised requirement) falls, or

(b)   

the tax year in which the event which causes the EIS relief to be

withdrawn or reduced occurs,

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whichever is the later.

(3)   

Subsection (1) is without prejudice to section 36 of TMA 1970 (fraudulent or

negligent conduct).

238     

Cases where assessment not to be made

(1)   

No assessment for withdrawing or reducing EIS relief in respect of shares

25

issued to an individual may be made because of an event occurring after the

individual’s death.

(2)   

Subsection (3) applies if an individual has, by a disposal or disposals to which

section 209(3) applies, disposed of all shares which—

(a)   

have been issued to the individual by the issuing company, and

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(b)   

are shares—

(i)   

to which EIS relief is attributable, or

(ii)   

in relation to which period A has not come to an end.

(3)   

No assessment for withdrawing or reducing EIS relief in respect of those shares

may be made because of any subsequent event unless the event occurs at a time

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when the individual is connected with the company within the meaning of

section 166.

Interest

239     

Date from which interest is chargeable

(1)   

In its application to an assessment made by virtue of section 235 in the case of

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relief withdrawn or reduced by virtue of a provision listed in column 1 of the

 
 

Income Tax Bill
Part 5 — Enterprise investment scheme
Chapter 7 — Withdrawal or reduction of EIS relief: procedure

128

 

following table, section 86 of TMA 1970 (interest on overdue income tax) has

effect as if the relevant date were given by the corresponding entry in column

2 of the table.

 

Provision

Relevant date

 
 

Section 163, any of

The date of the event which caused the

 

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sections 181 to 188 or

withdrawal or reduction of EIS relief

 
 

section 224, 232 or 233

  
 

Section 164

The date of the making of the loan (see

 
  

subsection (2))

 
 

Section 209

The date of the disposal

 

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Section 212(1)

The date of the grant of the option

 
 

Section 213

The date of the receipt of value

 

(2)   

The reference in the second entry in the table to the making of a loan is to be

read in accordance with section 164(3).

Information

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240     

Information to be provided by the investor

(1)   

This section applies if the investor has obtained EIS relief in respect of the

relevant shares, and an event occurs as a result of which—

(a)   

the investor is not a qualifying investor in relation to the shares,

(b)   

the EIS relief falls to be withdrawn or reduced by virtue of section 164

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(no linked loans requirement),

(c)   

the EIS relief falls to be withdrawn or reduced under—

(i)   

section 209 (disposal of shares),

(ii)   

section 211 (call options), or

(iii)   

section 212 (put options), or

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(d)   

the EIS relief falls to be withdrawn or reduced under section 213

(receipt of value by the investor), or would fall to be so withdrawn or

reduced but for section 222 (receipt of replacement value).

(2)   

The investor must within 60 days of coming to know of the event give a notice

to an officer of Revenue and Customs containing particulars of the event.

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(3)   

If the investor—

(a)   

is required under this section to give notice of a receipt of value which

is within section 213, or would be within that section but for section 222,

and

(b)   

has knowledge of any replacement value received (or expected to be

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received) because of a qualifying receipt,

   

the notice must include particulars of that receipt of replacement value (or

expected receipt).

(4)   

In subsection (3) “qualifying receipt” and “replacement value” are to be read in

accordance with section 222.

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