Income Tax Bill

House of Commons

Session 2006 - 07
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Other Bills before Parliament

Income Tax Bill

Income Tax Bill
Part 5 — Enterprise investment scheme
Chapter 8 — Supplementary and general
135

(b)
the new shares had been issued by the new company at the time when
the old shares were issued by the old 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
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the new shares for the same tax year as that for which the liability of the
individual who subscribed for the old shares was so reduced in respect
of those shares.
Nominees etc
250
Nominees and bare trustees
10
(1)
Shares subscribed for, issued to, held by or disposed of for an individual by a
nominee are treated for the purposes of this Part as subscribed for, issued to,
held by or disposed of by the individual.
(2)
If shares have been issued to a bare trust for two or more beneficiaries, this Part
has effect (with the necessary modifications) as if—
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(a)
each beneficiary had subscribed as an individual for all of those shares,
and
(b)
the amount subscribed by each beneficiary was equal to the total
amount subscribed on the issue of those shares divided by the number
of beneficiaries.
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(3)
In subsection (2) and section 251 “shares” means shares which meet the
requirements of section 173(2).
251
Approved investment fund as nominee
(1)
Subsection (2) applies if an individual claims EIS relief in respect of shares in a
company at a time when—
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(a)
the shares have been issued to the managers of an approved fund as
nominee for the individual,
(b)
the fund has closed, that is to say, no further investments in the fund
are to be accepted, and
(c)
the amounts which the managers have, as nominee for the individual,
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subscribed for shares issued within 6 months after the closing of the
fund represent at least 90% of the individual’s investment in the fund.

In this section “the managers of an approved fund” means the person or
persons having the management of an investment fund approved for the
purposes of this section by the Commissioners for Her Majesty’s Revenue and
35
Customs.
(2)
In any case where this subsection applies, section 158 (form and amount of EIS
relief) and section 201 (attribution of EIS relief to shares) have effect as if—
(a)
any reference to the tax year or other period in which the shares are
issued were a reference to the tax year or other period in which the fund
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closes, and
(b)
any reference to the time of the issue of the shares, or the time of the
subscription for the shares, were a reference to the time of the closing
of the fund.

Income Tax Bill
Part 5 — Enterprise investment scheme
Chapter 8 — Supplementary and general
136

(3)
Section 157(2) (minimum subscription) does not apply if the amount is
subscribed as nominee for an individual by the managers of an approved fund.
(4)
If an individual claims EIS relief in respect of shares in a company which have
been issued to the managers of an approved fund as nominee for the
individual, section 203(1) (entitlement to claim) applies as if —
5
(a)
it required the certificate referred to in that section to be issued by the
company to the managers, and
(b)
it provided that no claim for EIS relief may be made unless the person
making the claim has received from the managers a certificate issued by
the managers in accordance with subsection (5).
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(5)
A certificate is issued in accordance with this subsection if—
(a)
it certifies that the managers hold compliance certificates issued to
them by the companies concerned, for the purposes of section 203(1), in
respect of the holding of shares shown on the managers’ certificate, and
(b)
it is in such form as the Commissioners for Her Majesty’s Revenue and
15
Customs may authorise.
(6)
The managers of an approved fund may be required by a notice given to them
by an officer of Revenue and Customs to deliver to the officer, within the time
limited by the notice, a return of the holdings of shares shown on certificates
issued by them in accordance with subsection (5) in the tax year to which the
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return relates.
(7)
Section 207 (penalties for fraudulent certificate or statement etc) does not apply
in relation to any certificate issued by the managers of an approved fund for
the purposes of subsection (4).
Interpretation
25
252
Meaning of a company being “in administration” or “in receivership”
(1)
References in this Part to a company being “in administration” or “in
receivership” are to be read as follows.
(2)
A company is “in administration” if—
(a)
it is in administration within the meaning of Schedule B1 to the
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Insolvency Act 1986 (c. 45) or Schedule B1 to the Insolvency (Northern
Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), or
(b)
there is in force in relation to it under the law of a country or territory
outside the United Kingdom any appointment corresponding to an
appointment of an administrator under either of those Schedules.
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(3)
A company is “in receivership” if there is in force in relation to it—
(a)
an order for the appointment of an administrative receiver, a receiver
and manager or a receiver under Chapter 1 or 2 of Part 3 of the
Insolvency Act 1986 or Part 4 of the Insolvency (Northern Ireland)
Order 1989, or
40
(b)
any corresponding order under the law of a country or territory outside
the United Kingdom.
253
Meaning of “associate”
(1)
In this Part “associate”, in relation to a person, means—

Income Tax Bill
Part 5 — Enterprise investment scheme
Chapter 8 — Supplementary and general
137

(a)
any relative or partner of that person,
(b)
the trustee or trustees of any settlement in relation to which that person,
or any relative of that person (living or dead), is or was a settlor, and
(c)
if that person has an interest in any shares or obligations of a company
which are subject to any trust or are part of the estate of a deceased
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person—
(i)
the trustee or trustees of the settlement concerned or, as the case
may be, the personal representatives of the deceased, and
(ii)
if that person is a company, any other company which has an
interest in those shares or obligations.
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(2)
In subsection (1)(a) and (b) “relative” means spouse or civil partner, ancestor or
lineal descendant.
254
Meaning of “disposal of shares”
(1)
In this Part references to a disposal of shares include references to a disposal of
an interest or right in or over shares.
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(2)
An individual is to be treated, for the purposes of this Part, as disposing of any
shares which the individual is treated by virtue of section 136 of TCGA 1992 as
exchanging for other shares.
255
Meaning of “issue of shares”
(1)
In this Part—
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(a)
references (however expressed) to an issue of shares in any company
are to such of the shares in the company as are of the same class and are
issued on the same day, and
(b)
references (however expressed) to an issue of shares in any company to
an individual are to such of the shares in the company as are of the same
25
class and are issued to the individual on the same day.
(2)
Subsection (1)(b) has effect subject to sections 201(6), 202(2), 210(2), 219(1) and
228(1).
256
Meaning of “the termination date”
(1)
In this Part “the termination date”, in relation to any shares issued by a
30
company, means—
(a)
the third anniversary of the issue date, or
(b)
if—
(i)
the money raised by the issue was raised wholly or mainly for
the purpose of a qualifying business activity within section
35
179(2) (the issuing company or a qualifying 90% subsidiary of
that company carrying on or preparing to carry on a qualifying
trade), and
(ii)
neither the issuing company nor any of its qualifying 90%
subsidiaries had begun to carry on the trade in question on the
40
issue date,

the third anniversary of the date on which the issuing company or any
qualifying 90% subsidiary of that company begins to carry on that
trade.

Income Tax Bill
Part 5 — Enterprise investment scheme
Chapter 8 — Supplementary and general
138

(2)
In determining for the purposes of subsection (1) when a qualifying trade is
begun to be carried on by a qualifying 90% subsidiary of a company, any
carrying on of the trade by it before it became such a subsidiary is to be
ignored.
257
Minor definitions etc
5
(1)
In this Part—
“arrangements” includes any scheme, agreement or understanding,
whether or not legally enforceable,
“bonus shares” means shares which are issued otherwise than for
payment (whether in cash or otherwise),
10
“director” is read in accordance with section 417(5) of ICTA,
“group” means a parent company and its qualifying subsidiaries,
“group company”, in relation to a group, means the parent company or
any of its qualifying subsidiaries,
“ordinary shares” means shares forming part of a company’s ordinary
15
share capital,
“parent company” means a company that has one or more qualifying
subsidiaries and “single company” means a company that does not,
“period A”, “period B” and “period C” have the meaning given by section
159, and
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“research and development” has the meaning given by section 1006.
(2)
Section 993 (connected persons) does not apply for the purposes of Chapter 2
(other than section 168(4)).
(3)
Section 995 (control) does not apply for the purposes of the following
provisions—
25
section 185(1)(a),
section 199(3)(a) and (b)(ii),
section 232(3),
section 233(2), and
section 243(4),
30

and in those provisions “control” is to be read in accordance with section 416(2)
to (6) of ICTA.
(4)
In this Part—
(a)
references in any provision to the reduction of any EIS relief
attributable to any shares include a reference—
35
(i)
to the reduction of the relief to nil, and
(ii)
if no relief has yet been obtained, to the reduction of the amount
which apart from that provision would be the EIS relief, and
(b)
references to the withdrawal of EIS relief in respect of any shares are—
(i)
to the withdrawal of the EIS relief attributable to those shares,
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or
(ii)
if no relief has yet been obtained, to ceasing to be eligible for EIS
relief in respect of those shares.
(5)
For the purposes of this Part shares in a company are not treated as being of the
same class unless they would be so treated if dealt in on the Stock Exchange.
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Income Tax Bill
Part 6 — Venture capital trusts
Chapter 1 — Introduction
139

(6)
For the purposes of this Part the market value at any time of any asset is the
price which it might reasonably be expected to fetch on a sale at that time in the
open market free from any interest or right which exists by way of security in
or over it.
(7)
In this Part—
5
(a)
references to EIS relief obtained by an individual in respect of any
shares include references to EIS relief obtained by the individual in
respect of those shares at any time after the individual has disposed of
them, and
(b)
references to the withdrawal or reduction of EIS relief obtained by an
10
individual in respect of any shares include references to the withdrawal
or reduction of EIS relief obtained by the individual in respect of those
shares at any such time.
(8)
In the case of requirements that cannot be met until a future date, references in
this Part to requirements being met for the time being are to nothing having
15
occurred to prevent their being met.
Part 6
Venture capital trusts
Chapter 1
Introduction
20
258
Overview of Part
In this Part—
(a)
Chapter 2 provides for VCT income tax relief (“VCT relief”), that is,
entitlement to tax reductions in respect of amounts subscribed by
individuals for shares issued to them by venture capital trusts,
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(b)
Chapter 3 provides for VCT approvals,
(c)
Chapter 4 makes provision as to the meaning of “qualifying holding”
for the purposes of Chapter 3,
(d)
Chapter 5 confers power for regulations to make provision in relation
to the winding up and merger of venture capital trusts, and
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(e)
Chapter 6 makes supplementary and general provision.
259
Venture capital trusts and VCT approvals
(1)
In this Part “venture capital trust” means a company which—
(a)
is not a close company, and
(b)
is for the time being approved for the purposes of this Part by the
35
Commissioners for Her Majesty’s Revenue and Customs (see Chapter
3),

and “VCT” means a venture capital trust.
(2)
In this Part “VCT approval” means an approval of a company for the purposes
of this Part.
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