Income Tax Act 2007

Shares to which EIS relief is not attributable

134 Qualifying trading companies

(1) In relation to shares to which EIS relief is not attributable (see section 131(2)(b)), a qualifying trading company is a company which meets each of conditions A to D.

(2) Condition A is that the company either—

(a) meets each of the following requirements on the date of the disposal—

(i) the trading requirement (see section 137),

(ii) the control and independence requirement (see section 139),

(iii) the qualifying subsidiaries requirement (see section 140), and

(iv) the property managing subsidiaries requirement (see section 141), or

(b) has ceased to meet any of those requirements at a time which is not more than 3 years before that date and has not since that time been an excluded company, an investment company or a trading company.

(3) Condition B is that the company either—

(a) has met each of the requirements mentioned in condition A for a continuous period of 6 years ending on that date or at that time, or

(b) has met each of those requirements for a shorter continuous period ending on that date or at that time and has not before the beginning of that period been an excluded company, an investment company or a trading company.

(4) Condition C is that the company—

(a) met the gross assets requirement (see section 142) both immediately before and immediately after the issue of the shares in respect of which the share loss relief is claimed, and

(b) met the unquoted status requirement (see section 143) at the relevant time within the meaning of that section.

(5) Condition D is that the company has carried on its business wholly or mainly in the United Kingdom throughout the period—

(a) beginning with the incorporation of the company or, if later, 12 months before the shares in question were issued, and

(b) ending with the date of the disposal.

135 Subscriptions for shares

(1) This section has effect in relation to shares to which EIS relief is not attributable.

(2) An individual subscribes for shares in a company if they are issued to the individual by the company in consideration of money or money’s worth.

(3) If—

(a) an individual (“A”) subscribed for, or is treated under subsection (4) or this subsection as having subscribed for, any shares,

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

(c) A was B’s spouse or civil partner at the time of the transfer,

B is treated as having subscribed for the shares.

(4) If—

(a) an individual has subscribed for, or is treated under subsection (3) or this subsection as having subscribed for, any shares, and

(b) any corresponding bonus shares are subsequently issued to the individual,

the individual is treated as having subscribed for the bonus shares.

136 Disposals of new shares

(1) This section has effect in relation to shares to which EIS relief is not attributable.

(2) If—

(a) an individual disposes of shares (“the new shares”), and

(b) the new shares are, by virtue of section 127 of TCGA 1992 (reorganisation etc treated as not involving disposal), identified with other shares (“the old shares”) previously held by the individual,

the individual is not eligible for share loss relief on the disposal of the new shares unless one of conditions A and B is met.

This is subject to section 145(3).

(3) Condition A is that the individual would have been eligible for share loss relief on a disposal of the old shares—

(a) if the individual had incurred an allowable loss in disposing of them by way of a bargain made at arm’s length on the occasion of the disposal that would have occurred but for section 127 of TCGA 1992, and

(b) where applicable, if this Chapter had then been in force.

(4) Condition B is that the individual gave for the new shares consideration in money or money’s worth other than consideration of the kind mentioned in paragraph (a) or (b) of section 128(2) of TCGA 1992 (“new consideration”).

(5) If the individual relies on condition B, the amount of share loss relief on the disposal of the new shares must not exceed the amount or value of the new consideration taken into account as a deduction in calculating the amount of the loss incurred on the disposal.