House of Commons portcullis
House of Commons
Session 2006 - 07
Internet Publications
Other Bills before Parliament

Income Tax Bill


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

128

 

Information

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,

5

(b)   

the EIS relief falls to be withdrawn or reduced by virtue of section 164

(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the EIS relief falls to be withdrawn or reduced under—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

10

(iii)   

section 212 (put options), or

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the EIS relief falls to be withdrawn or reduced under section 213

(receipt of value by the investor), or would fall to be so withdrawn or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

15

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

(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

20

(b)   

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

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

25

accordance with section 222.

241     

Information to be provided by the issuing company etc

(1)   

This section applies if the issuing company has provided an officer of Revenue

and Customs with a compliance statement in respect of an issue of shares and

an event occurs as a result of which—

30

(a)   

the requirement of section 175 (the use of money raised) is not met in

respect of any of the shares included in the issue, or would not be met

if EIS relief had been obtained in respect of the shares in question,

(b)   

any provision of Chapter 4 has effect to prevent the issuing company

being a qualifying company in relation to any of the shares included in

35

the issue, or would have such an effect if EIS relief had been obtained

in respect of the shares in question, or

(c)   

any provision of Chapter 6 which is listed in subsection (2) has effect to

cause any EIS relief attributable to any of the shares included in the

issue to be withdrawn or reduced, or—

40

(i)   

would have such an effect if EIS relief had been obtained in

respect of the shares in question, or

(ii)   

in the case of section 213, would have such an effect but for

section 222 (receipt of replacement value).

(2)   

The provisions are—

45

 
 

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

129

 

(a)   

section 213 (value received by the investor),

(b)   

section 224 (repayments etc of share capital to other persons),

(c)   

section 232 (acquisition of a trade or trading assets), and

(d)   

section 233 (acquisition of share capital).

(3)   

If this section applies—

5

(a)   

the issuing company, and

(b)   

any person connected with the issuing company who has knowledge of

the matters mentioned in subsection (1),

   

must give a notice to an officer of Revenue and Customs containing particulars

of the event.

10

(4)   

Any notice required to be given by the issuing company under subsection

(3)(a) must be given—

(a)   

within 60 days of the event, or

(b)   

if the event is a receipt of value within section 216(2) from a person

connected with the company (see section 221), within 60 days of the

15

company coming to know of the event.

(5)   

Any notice required to be given by a person under subsection (3)(b) must be

given within 60 days of the person coming to know of the event.

(6)   

If a person—

(a)   

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

20

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

received) because of a qualifying receipt,

   

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

25

expected receipt).

(7)   

In subsection (6) “qualifying receipt” and “replacement value” are to be read in

accordance with section 222.

242     

Power to require information where section 240 or 241 applies or could have

applied

30

(1)   

This section applies if an officer of Revenue and Customs has reason to believe

that a person—

(a)   

has not given a notice which the person is required to give under

section 240 or 241 in respect of any event,

(b)   

has given or received value within the meaning of section 216(2) or (6)

35

which, but for the fact that the amount given or received was an

amount of insignificant value, would have triggered a requirement to

give such a notice, or

(c)   

has made or received any repayment within the meaning given by

section 224(7) which, but for the fact that it falls to be ignored for the

40

purposes of section 224 by virtue of section 225(1), would have

triggered a requirement to give a notice under section 241.

(2)   

The officer may by notice require the person concerned to supply the officer,

within such time as the officer may specify in the notice, with such information

relating to the event as the officer may reasonably require for the purposes of

45

this Part.

 
 

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

130

 

(3)   

The period specified in a notice under subsection (2) must be at least 60 days.

(4)   

In subsection (1)(b) the reference to an amount of insignificant value is

construed in accordance with section 215(2).

243     

Power to require information in other cases

(1)   

Subsection (2) applies if EIS relief is claimed in respect of shares in a company,

5

and an officer of Revenue and Customs has reason to believe that it may not be

due because of any such arrangement or scheme as is mentioned in—

(a)   

section 165 or 182(2) or (4) (no tax avoidance),

(b)   

section 171 (persons subscribing for shares under certain

arrangements),

10

(c)   

section 176(4) or (5), 183(6) or 191(3), (4) or (5) (winding up,

administration etc),

(d)   

section 177(1) (no pre-arranged exits), or

(e)   

section 185(1) or (2), 190(1) or 191(2) (conditions ceasing to be met).

   

The reference in paragraph (c) to subsections (3), (4) and (5) of section 191 is to

15

be read as including those subsections as applied by section 190(2).

(2)   

The officer may by notice require any person concerned to supply the officer

within such time as may be specified in the notice with—

(a)   

a declaration in writing stating whether or not, according to the

information which that person has or can reasonably obtain, any such

20

arrangement or scheme exists or has existed, and

(b)   

such other information as the officer may reasonably require for the

purposes of the provision in question and as that person has or can

reasonably obtain.

(3)   

The period specified in a notice under subsection (2) must be at least 60 days.

25

(4)   

For the purposes of subsection (2), in a case falling within a provision listed in

column 1 of the following table, the person concerned is given by the

corresponding entry in column 2 of the table.

 

Provision

The person concerned

 
 

Subsection (1)(a)

The claimant, the company and any person

 

30

  

controlling the company

 
 

Subsection (1)(b)

The claimant

 
 

Subsection (1)(c)

The claimant, the company, any other

 
  

company in question and any person

 
  

controlling the company or any other

 

35

  

company in question

 
 

Subsection (1)(d)

The claimant, the company and any person

 
  

connected with the company

 
 

Subsection (1)(e)

The company and any person controlling

 
  

the company

 

40

 
 

Income Tax Bill
Part 5 — Enterprise investment scheme
Chapter 8 — Supplementary and general

131

 

   

References in this subsection to the claimant include references to any person

to whom the claimant appears to have made such a transfer as is mentioned in

section 245 (spouses or civil partners) of any of the shares in question.

(5)   

If EIS relief has been obtained in respect of shares in a company—

(a)   

any person who receives from the company any payment or asset

5

which may constitute value received (by the person or another) for the

purposes of section 213, and

(b)   

any person on whose behalf such a payment or asset is received,

   

must, if so required by an officer of Revenue and Customs, state whether the

payment or asset so received is received on behalf of any other person and, if

10

so, the name and address of that other person.

(6)   

If EIS relief has been claimed in respect of shares in a company—

(a)   

any person who holds or has held shares in the company, and

(b)   

any person on whose behalf any such shares are or were held,

   

must, if so required by an officer of Revenue and Customs, state whether the

15

shares so held are or were held on behalf of any other person and, if so, the

name and address of that other person.

244     

Obligations of secrecy

No obligation of secrecy imposed by statute or otherwise prevents an officer of

Revenue and Customs from disclosing to a company that EIS relief has been

20

obtained or claimed in respect of a particular number or proportion of its

shares.

Chapter 8

Supplementary and general

Disposals of shares

25

245     

Transfers between spouses or civil partners

(1)   

This section applies if—

(a)   

shares to which an amount of EIS relief is attributable were issued to an

individual (“A”),

(b)   

A transferred the shares to another individual (“B”) during their lives,

30

(c)   

A was married to, or was the civil partner of, B at the time of the

transfer, and

(d)   

section 209 (disposal of shares) does not apply to the transfer.

(2)   

This Part has effect, in relation to any subsequent disposal or other event, as

if—

35

(a)   

B were the individual who had subscribed for the shares,

(b)   

the amount that B had subscribed for the shares were the amount that

A had subscribed for them,

(c)   

B’s liability to income tax had been reduced in respect of the shares for

the same tax year as that for which A’s was so reduced,

40

 
 

Income Tax Bill
Part 5 — Enterprise investment scheme
Chapter 8 — Supplementary and general

132

 

(d)   

the amount by which B’s liability to income tax had been reduced in

respect of the shares were the same as that by which A’s liability to

income tax had been so reduced, and

(e)   

that amount of EIS relief had continued to be attributable to the shares

despite the transfer.

5

(3)   

If the amount of EIS relief attributable to the shares had been reduced before

the relief was obtained by A—

(a)   

this Part has effect, in relation to any subsequent disposal or other

event, as if the amount of EIS relief attributable to the shares transferred

to B had been correspondingly reduced before the relief was obtained

10

by B, and

(b)   

sections 210(3), 220(2) and 229(3) apply in relation to B as they would

have applied in relation to A.

(4)   

If, because of any such disposal or other event, an assessment for reducing or

withdrawing EIS relief is to be made, the assessment is to be made on B.

15

246     

Identification of shares on a disposal

(1)   

The rules in subsections (2) and (3) are for determining which shares of any

class are treated as disposed of for the purposes of—

(a)   

section 209 (disposal of shares), or

(b)   

section 245 (spouses or civil partners),

20

   

if the investor disposes of some but not all of the shares of that class which the

investor holds in a company.

(2)   

Shares acquired on an earlier day are treated as disposed of before shares

acquired on a later day.

(3)   

Shares acquired on the same day are treated as disposed of in the following

25

order—

(a)   

first any to which neither EIS relief nor deferral relief is attributable,

(b)   

next any to which deferral relief, but not EIS relief, is attributable,

(c)   

next any to which EIS relief, but not deferral relief, is attributable, and

(d)   

finally any to which both EIS relief and deferral relief are attributable.

30

(4)   

Any shares within paragraph (c) or (d) of subsection (3) which are treated by

section 201(6) as issued on an earlier day are treated as disposed of before any

other shares falling within that paragraph of subsection (3).

(5)   

The following—

(a)   

any shares to which EIS relief is attributable and which were

35

transferred to an individual as mentioned in section 245, and

(b)   

any shares to which deferral relief, but not EIS relief, is attributable and

which were acquired by an individual on a disposal to which section 58

of TCGA 1992 applies,

   

are treated for the purposes of subsections (2) and (3) as acquired by the

40

individual on the day on which they were issued.

(6)   

In a case to which section 127 of TCGA 1992 applies (including the case where

that section applies by virtue of an enactment relating to chargeable gains),

shares included in the new holding are treated for the purposes of subsections

(2) and (3) as acquired when the original shares were acquired.

45

 
 

Income Tax Bill
Part 5 — Enterprise investment scheme
Chapter 8 — Supplementary and general

133

 

(7)   

In this section—

“deferral relief” has the same meaning as in Schedule 5B to TCGA 1992,

“new holding” and “original shares” have the same meaning as in section

127 of TCGA 1992 (or, as the case may be, that section as applied by the

enactment concerned).

5

Acquisition of issuing company

247     

Continuity of EIS relief where issuing company is acquired by new company

(1)   

This section applies if—

(a)   

a company (“the new company”) in which the only issued shares are

subscriber shares acquires all the shares (“old shares) in another

10

company (“the old company”),

(b)   

the consideration for the old shares consists wholly of the issue of

shares (“new shares”) in the new company,

(c)   

the consideration for the new shares of each description consists wholly

of old shares of the corresponding description,

15

(d)   

new shares of each description are issued to the holders of old shares of

the corresponding description in respect of and in proportion to their

holdings,

(e)   

at some time before the issue of the new shares—

(i)   

the old company issued shares which meet the requirements of

20

section 173(2), and

(ii)   

a compliance certificate in respect of those shares was issued by

that company for the purposes of subsection (1) of section 203

and in accordance with section 204, and

(f)   

before the issue of the new shares the Commissioners for Her Majesty’s

25

Revenue and Customs have, on the application of the new company or

the old company, notified that company that they are satisfied that the

exchange of shares—

(i)   

will be effected for genuine commercial reasons, and

(ii)   

will not form part of any such scheme or arrangements as are

30

mentioned in section 137(1) of TCGA 1992 (schemes with

avoidance purposes).

   

In this subsection references to shares, except in the expressions “subscriber

shares” and “shares which meet the requirements of section 173(2)”, include

securities.

35

(2)   

Subsection (2) of section 138 of TCGA 1992 (procedure for advance clearance)

applies for the purposes of subsection (1)(f) as it applies for the purposes of

subsection (1) of that section.

(3)   

For the purposes of this Part—

(a)   

the exchange of shares is not regarded as involving any disposal of the

40

old shares or any acquisition of the new shares, and

(b)   

any EIS relief which is attributable to any old shares is attributable

instead to the new shares for which they are exchanged.

(4)   

Nothing in section 185 (the control and independence requirement) applies in

relation to such an exchange of shares, or shares and securities, as is mentioned

45

in subsection (1), or arrangements with a view to such an exchange.

 
 

Income Tax Bill
Part 5 — Enterprise investment scheme
Chapter 8 — Supplementary and general

134

 

(5)   

For the purposes of this section old shares and new shares are of a

corresponding description if, on the assumption that they were shares in the

same company, they would be of the same class and carry the same rights.

(6)   

References in sections 248 and 249 to “old shares”, “new shares”, “the old

company” and “the new company” are to be read in accordance with this

5

section.

248     

Carry over of obligations etc where EIS relief attributed to new shares

(1)   

This section applies if, under section 247, any EIS relief which is attributable to

any old shares becomes attributable instead to any new shares.

(2)   

This Part has effect as if anything which, under—

10

(a)   

section 203(1) (entitlement to claim),

(b)   

section 234(3) (relief subsequently found not to be due), or

(c)   

sections 241 to 244 (information to be provided),

   

has been done, or is required to be done, by or in relation to the old company

had been done, or were required to be done, by or in relation to the new

15

company.

(3)   

Any appeal brought by the old company against a notice under section

234(3)(b) may be prosecuted by the new company as if it had been brought by

that company.

249     

Substitution of new shares for old shares

20

(1)   

Subsection (2) applies if, in the case of any new shares held by an individual to

which EIS relief becomes attributable under section 247, the old shares for

which they were exchanged were subscribed for by and issued to the

individual.

(2)   

This Part has effect as if—

25

(a)   

the new shares had been subscribed for by the individual at the time

when, and for the amount for which, the old shares were subscribed for

by the individual,

(b)   

the new shares had been issued to the individual by the new company

at the time when the old shares were issued to the individual by the old

30

company,

(c)   

the claim for EIS relief made in respect of the old shares had been made

in respect of the new shares, and

(d)   

the individual’s liability to income tax had been reduced in respect of

the new shares for the same tax year as that for which the individual’s

35

liability was so reduced in respect of the old shares.

(3)   

Subsection (4) applies if, in the case of any new shares held by an individual to

which EIS relief becomes so attributable under section 247, the old shares for

which they were exchanged were transferred to the individual as mentioned in

section 245.

40

(4)   

This Part has effect in relation to any subsequent disposal or other event as if—

(a)   

the new shares had been subscribed for by the individual at the time

when, and for the amount for which, the old shares were subscribed

for,

 
 

 
previous section contents continue
 
House of Commons home page Houses of Parliament home page House of Lords home page search page enquiries

© Parliamentary copyright 2007
Revised 5 February 2007