|
| |
|
164 | The no linked loans requirement |
| |
(1) | No linked loan is to be made by any person, at any time in period A, to the |
| |
investor or an associate of the investor. |
| |
(2) | In this section “linked loan” means any loan which— |
| |
(a) | would not have been made, or |
| 5 |
(b) | would not have been made on the same terms, |
| |
| if the investor had not subscribed for the relevant shares, or had not been |
| |
| |
(3) | References in this section to the making by any person of a loan to the investor |
| |
or an associate of the investor include references— |
| 10 |
(a) | to the giving by that person of any credit to the investor or any associate |
| |
| |
(b) | to the assignment to that person of a debt due from the investor or any |
| |
associate of the investor. |
| |
165 | The no tax avoidance requirement |
| 15 |
The relevant shares must be subscribed for by the investor for genuine |
| |
commercial reasons, and not as part of a scheme or arrangement the main |
| |
purpose or one of the main purposes of which is the avoidance of tax. |
| |
Meaning of connection with issuing company |
| |
166 | Connection with issuing company |
| 20 |
(1) | For the purposes of this Chapter (except section 168(4)), an individual is |
| |
connected with the issuing company if the individual or an associate of the |
| |
individual is connected with that company under— |
| |
(a) | section 167 (employees, directors and partners), |
| |
(b) | section 170 (persons interested in capital etc of company), or |
| 25 |
(c) | section 171 (persons subscribing for shares under certain |
| |
| |
(2) | See too section 257(2). |
| |
167 | Employees, directors and partners |
| |
(1) | An individual is connected with the issuing company if the individual— |
| 30 |
| |
| |
(ii) | any subsidiary of the issuing company, or |
| |
(iii) | a partner of the issuing company or any of its subsidiaries, |
| |
| 35 |
(i) | the issuing company, or |
| |
(ii) | any subsidiary of the issuing company, or |
| |
(c) | subject to section 168, is a director of— |
| |
| |
(ii) | any subsidiary of the issuing company, or |
| 40 |
|
| |
|
| |
|
(iii) | a company which is a partner of the issuing company or any of |
| |
| |
(2) | In subsection (1) “subsidiary”, in relation to the issuing company, means a |
| |
company which at any time in period A is a 51% subsidiary of the issuing |
| |
company, whether or not it is such a subsidiary while the individual or |
| 5 |
associate concerned is such an employee, partner or director as is mentioned in |
| |
| |
(3) | For the purposes of this section and sections 168 and 169, in the case of an |
| |
individual (“A”) who is both a director and an employee of a company— |
| |
(a) | references (however expressed) to A in A’s capacity as a director of the |
| 10 |
company include A in A’s capacity as an employee of the company, but |
| |
(b) | (apart from that) A is to be treated as a director, and not as an employee, |
| |
| |
168 | Directors excluded from connection |
| |
(1) | An individual is not connected with the issuing company under section 167 |
| 15 |
merely because the individual, or an associate of the individual, is a director of |
| |
that or another company unless the individual or associate (or a partnership of |
| |
which the individual or associate is a member)— |
| |
(a) | receives a payment from the issuing company or a related person |
| |
during the period mentioned in section 163, or |
| 20 |
(b) | is entitled to receive such a payment in respect of that period or any |
| |
| |
(2) | For the purposes of subsection (1) the following are ignored— |
| |
(a) | any payment or reimbursement of travelling or other expenses wholly, |
| |
exclusively and necessarily incurred by the individual or an associate |
| 25 |
of the individual in the performance of the individual’s or associate’s |
| |
| |
(b) | any interest which represents no more than a reasonable commercial |
| |
return on money lent to the issuing company or a related person, |
| |
(c) | any dividend or other distribution which does not exceed a normal |
| 30 |
return on the investment, |
| |
(d) | any payment for the supply of goods which does not exceed their |
| |
| |
(e) | any payment of rent for any property occupied by the issuing company |
| |
or a related person which does not exceed a reasonable and commercial |
| 35 |
rent for the property, and |
| |
(f) | any necessary and reasonable remuneration which meets the |
| |
conditions in subsection (3). |
| |
(3) | The conditions are that the remuneration— |
| |
(a) | is paid for services rendered to the issuing company or related person |
| 40 |
in the course of a trade or profession carried on wholly or partly in the |
| |
United Kingdom (not being secretarial or managerial services or |
| |
services of a kind provided by the person to whom they are rendered), |
| |
| |
(b) | is taken into account in calculating for tax purposes the profits of that |
| 45 |
| |
| |
|
| |
|
| |
|
(a) | “related person”, in relation to the issuing company, means— |
| |
(i) | any company of which the individual or an associate of the |
| |
individual is a director and which is a subsidiary or partner of |
| |
the issuing company, or a partner of a subsidiary of the issuing |
| |
| 5 |
(ii) | any person connected with the issuing company or with a |
| |
company falling within sub-paragraph (i), and |
| |
(b) | any reference to a payment to an individual includes a payment made |
| |
to the individual indirectly or to the individual’s order or for the |
| |
| 10 |
(5) | In this section and section 169 “subsidiary”, in relation to the issuing company, |
| |
means a company which at any time in period A is a 51% subsidiary of the |
| |
| |
169 | Directors qualifying for relief despite connection |
| |
(1) | Section 163(1) does not prevent the investor from being a qualifying investor |
| 15 |
despite the investor’s connection with the issuing company at any time in |
| |
period A relating to the relevant shares if— |
| |
(a) | the investor is connected with that company merely because of the |
| |
investor, or the investor’s associate— |
| |
(i) | being a director of, or of a company which is a partner of, the |
| 20 |
issuing company or a subsidiary of the issuing company, and |
| |
(ii) | being in receipt of, or entitled to receive, remuneration as such, |
| |
| |
(b) | conditions A and B and (where applicable) condition C are met. |
| |
(2) | Condition A is that, in relation to the director (“D”), whether D is the investor |
| 25 |
or an associate of the investor— |
| |
| |
(b) | the remuneration to which D is entitled, |
| |
| consists only of remuneration which is reasonable remuneration for services |
| |
rendered to the company of which D is a director in D’s capacity as such. |
| 30 |
(3) | Condition B is that the investor was issued with the relevant shares, or a |
| |
previous issue of shares in the issuing company which meet the requirements |
| |
of section 173(2), at a time when the investor had never been— |
| |
(a) | connected with the issuing company, or |
| |
(b) | involved in carrying on (whether on the investor’s own account or as a |
| 35 |
partner, director or employee) the whole or any part of the trade, |
| |
business or profession carried on by the issuing company or a |
| |
subsidiary of that company. |
| |
(4) | Condition C is that, if the issue of the relevant shares did not meet condition B, |
| |
they were issued before the termination date relating to the latest issue of |
| 40 |
shares which met that condition. |
| |
(5) | For the purposes of condition A any necessary and reasonable remuneration |
| |
falling within section 168(2)(f) is to be left out of account. |
| |
(6) | In this section “remuneration” includes any benefit or facility. |
| |
|
| |
|
| |
|
170 | Persons interested in capital etc of company |
| |
(1) | An individual is connected with the issuing company if the individual directly |
| |
or indirectly possesses or is entitled to acquire more than 30% of— |
| |
(a) | the ordinary share capital of the company or any subsidiary of the |
| |
| 5 |
(b) | the loan capital and issued share capital of the company or any such |
| |
| |
(c) | the voting power in the company or any such subsidiary. |
| |
(2) | An individual is connected with the issuing company if the individual directly |
| |
or indirectly possesses or is entitled to acquire such rights as would— |
| 10 |
(a) | in the event of the winding up of the company or any subsidiary of the |
| |
| |
(b) | in any other circumstances, |
| |
| entitle the individual to receive more than 30% of the assets of the company or |
| |
subsidiary (“the company in question”) which would then be available for |
| 15 |
distribution to equity holders of the company in question. |
| |
(3) | For the purposes of subsection (2)— |
| |
(a) | the persons who are equity holders of the company in question, and |
| |
(b) | the percentage of the assets of the company in question to which the |
| |
individual would be entitled, |
| 20 |
| are determined in accordance with paragraphs 1 and 3 of Schedule 18 to ICTA. |
| |
(4) | In making that determination— |
| |
(a) | references in paragraph 3 of that Schedule to the first company are to |
| |
be read as references to an equity holder, and |
| |
(b) | references in that paragraph to a winding up are to be read as including |
| 25 |
references to any other circumstances in which assets of the company |
| |
in question are available for distribution to its equity holders. |
| |
(5) | An individual is not connected with a company merely because one or more |
| |
shares in the company are held by the individual or by an associate of the |
| |
individual, at a time when the company— |
| 30 |
(a) | has not issued any shares other than subscriber shares, and |
| |
(b) | has not begun to carry on, or make preparations for carrying on, any |
| |
| |
(6) | An individual is connected with the issuing company if the individual has |
| |
control of the issuing company or of any subsidiary of that company. |
| 35 |
(7) | In this section “subsidiary”, in relation to the issuing company, means a |
| |
company which at any time in period A is a 51% 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. |
| 40 |
(8) | For the purposes of this section the loan capital of a company is treated as |
| |
including any debt incurred by the company— |
| |
(a) | for any money borrowed or capital assets acquired by the company, |
| |
(b) | for any right to receive income created in favour of the company, or |
| |
(c) | for consideration the value of which to the company was (at the time |
| 45 |
when the debt was incurred) substantially less than the amount of the |
| |
debt (including any premium on it). |
| |
|
| |
|
| |
|
(9) | For the purposes of this section— |
| |
(a) | an individual is treated as entitled to acquire anything which the |
| |
individual is entitled to acquire at a future date or will at a future date |
| |
be entitled to acquire, and |
| |
(b) | there is attributed to any individual any rights or powers of any other |
| 5 |
person who is an associate of the individual. |
| |
(10) | In determining for the purposes of this section whether an individual is |
| |
connected with a company, no debt incurred by— |
| |
| |
(b) | any subsidiary of the company, |
| 10 |
| by overdrawing an account with a person carrying on a business of banking is |
| |
to be treated as loan capital of the company or subsidiary if the debt arose in |
| |
the ordinary course of that business. |
| |
171 | Persons subscribing for shares under certain arrangements |
| |
(1) | This section applies if an individual (“A”) subscribes for shares in a company |
| 15 |
(“the company”) with which A is not connected under section 167 or 170. |
| |
| |
(a) | A subscribes for the shares as part of an arrangement, and |
| |
(b) | the arrangement provides for another person to subscribe for shares in |
| |
another company with which (assuming it to be the issuing company) |
| 20 |
A, or any other individual who is a party to the arrangement, is |
| |
| |
| A is connected with the company under this section. |
| |
| |
| 25 |
| |
| |
The general requirements are met in respect of the relevant shares if the |
| |
requirements of this Chapter are met as to— |
| |
(a) | the shares (see section 173), |
| 30 |
(b) | the purpose of the issue (see section 174), |
| |
(c) | the use of the money raised (see section 175), |
| |
(d) | the minimum period (see section 176), |
| |
(e) | no pre-arranged exits (see section 177), and |
| |
(f) | no tax avoidance (see section 178). |
| 35 |
| |
173 | The shares requirement |
| |
(1) | The relevant shares must meet— |
| |
(a) | the requirements of subsection (2), and |
| |
|
| |
|
| |
|
(b) | unless they are bonus shares, the requirements of subsection (3). |
| |
(2) | Shares meet the requirements of this subsection if they are ordinary shares |
| |
which do not, at any time during period B, carry— |
| |
(a) | any present or future preferential right to dividends or to a company’s |
| |
assets on its winding up, or |
| 5 |
(b) | any present or future right to be redeemed. |
| |
(3) | Shares meet the requirements of this subsection if they— |
| |
(a) | are subscribed for wholly in cash, and |
| |
(b) | are fully paid up at the time they are issued. |
| |
(4) | Shares are not fully paid up for the purposes of subsection (3)(b) if there is any |
| 10 |
undertaking to pay cash to any person at a future date in respect of the |
| |
acquisition of the shares. |
| |
174 | The purpose of the issue requirement |
| |
The relevant shares (other than any of them which are bonus shares) must be |
| |
issued in order to raise money for the purpose of a qualifying business activity. |
| 15 |
175 | The use of the money raised requirement |
| |
(1) | The requirement of this section is that— |
| |
(a) | at least 80% of the money raised by the issue of— |
| |
(i) | the relevant shares (other than any of them which are bonus |
| |
| 20 |
(ii) | all other shares (if any) in the company of the same class which |
| |
meet the requirements of section 173(2) and are issued on the |
| |
| |
| is employed wholly for the purpose of the qualifying business activity |
| |
for which it was raised not later than the time mentioned in subsection |
| 25 |
| |
(b) | all of the money so raised is employed wholly for that purpose not later |
| |
than 12 months after that time. |
| |
(2) | The requirements in subsection (1)(a) and (b) do not fail to be met merely |
| |
because an amount of money which is not significant is employed for another |
| 30 |
| |
(3) | The time referred to in subsection (1)(a) is— |
| |
(a) | the end of the period of 12 months beginning with the issue of the |
| |
| |
(b) | in the case of money raised only for the purpose of an activity to which |
| 35 |
section 179(2) applies, the end of the period of 12 months beginning |
| |
| |
(i) | the issue of the shares, or |
| |
(ii) | if later, the time when the company or a qualifying 90% |
| |
subsidiary of the company begins to carry on the qualifying |
| 40 |
| |
(4) | In determining for the purposes of subsection (3)(b) when a qualifying trade is |
| |
begun to be carried on by a qualifying 90% subsidiary of a company, any |
| |
carrying on by it of the trade before it became such a subsidiary is ignored. |
| |
|
| |
|