670.This Chapter deals with cases in which EIS relief, otherwise available to the investor in relation to a share issue, is reduced or withdrawn.
671.This section provides a signpost to the various ways in which EIS relief may be withdrawn or reduced. It is new.
672.This section withdraws or reduces EIS relief if the investor disposes of relevant shares before the end of period A relating to those shares. It is based on sections 299(1), (2) and (8) and 304(1) of ICTA.
673.EIS relief is only reduced to the extent that the relief is attributable to the shares which are the subject of the disposal.
674.Subsection (4) provides an exception in the case of certain disposals between spouses or civil partners.
675.Section 299(3) of ICTA is not rewritten. It is not needed because other provisions identify the shares that are disposed of and calculate the appropriate proportion of the relief attributable to those shares.
676.This section deals with the case where EIS relief on a subscription for shares was effectively obtained for a tax year at a rate that is below the savings rate of tax for the tax year concerned. It is based on sections 289B(5) and 299(4) of ICTA.
677.Subsection (1) effectively reduces the rate at which section 209(3)(a) recovers EIS relief on the proceeds from a disposal of the shares concerned. The rate of recovery is reduced, from the savings rate of tax for the year in which the shares were issued, to the rate at which EIS relief was effectively obtained.
678.The subsection also caters for cases where an individual claims EIS relief in respect of some, but not all, of the shares in relation to which the individual is eligible for relief. See the commentary on section 158 and Change 36 in Annex 1.
679.Subsection (2) deals with the complication that arises where the investor has obtained relief on some of the shares as if they were issued in the previous tax year. Subsection (1) is then applied as if there were two separate issues. That is necessary because the investor may have obtained EIS relief at different effective rates in the two years concerned (and one or both of these effective rates could be less than the savings rate for the tax year concerned).
680.Subsections (3) and (4) are new and correspond to provisions in paragraph 46(5) and (6) of Schedule 15 to FA 2000 (corporate venturing scheme - disposal of shares). See Change 48 in Annex 1.
681.This section treats the grant of a call option by the investor as if it were a disposal of shares for the purpose of section 209 (disposal of shares). It is based on section 299(8) of ICTA.
682.This section deals with put options granted to the investor during period A relating to the relevant shares concerned. It is based on section 299(5), (5A) and (8) of ICTA.
683.The grant of the put option to the investor leads to the withdrawal of any EIS relief attributable to the shares to which the put option relates.
684.This section sets out what happens if the investor receives value from the issuing company at any time during period C relating to an issue of shares. It is based on sections 300(1) to (1B), 301(4A), 301A(5) and 312(1) of ICTA.
685.Any EIS relief attributable to the issue of shares is either withdrawn or reduced. The amount of value received by the investor is taken into account in determining whether there is a withdrawal or reduction of relief (and the size of any reduction).
686.Subsection (3) makes explicit the order in which to apply sections 218 to 220.
687.This section prevents section 213 applying to insignificant amounts of value received by the investor. But such amounts are not ignored if, taken together with certain other receipts of value by the investor, the total amount received is not insignificant. It is based on section 300(1) and (1BC) and section 312(1) of ICTA.
688.This section gives the meaning of “receipts of insignificant value” for the purpose of section 214. It is based on section 301A(1) to (4) and section 312(1) of ICTA.
689.This section sets out the time at which, and circumstances in which, the investor is treated as receiving value from the issuing company. It is based on sections 300(1D) to (3), (5) and (6) and 301(3), (4) and (5) of ICTA.
690.Subsection (3) refers, for clarity, to “the issuing company” where the source legislation refers to “a company”.
691.This section contains a table which sets out the amount of value received by the investor in cases where section 216 treats value as received by the investor. It is based on section 300(4) and (5) of ICTA.
692.This section deals with cases where the investor receives value but there is more than one issue of shares from which section 213 reduces or withdraws EIS relief. It is based on section 300(1BA) and (1BB) and section 312(1) of ICTA.
693.Subsection (2) apportions the value received between the different share issues before the calculation in section 213(2) takes place. Without such a provision the value received might be counted two, or more, times for reducing or withdrawing EIS relief.
694.By referring to the amount on which the investor obtains relief the subsection also caters for the case where an individual claims EIS relief on some, but not all, of the shares in respect of which the individual is eligible for relief. See the commentary on section 158 and Change 36 in Annex 1.
695.This section deals with a complication that can arise where section 213(2) applies to an issue of shares. The complication occurs where the investor has obtained relief on part of that share issue as if that part of the share issue had taken place in the previous tax year. It is based on sections 289B(5), 299(4) and 300(1B) of ICTA.
696.If that complication occurs,subsection (2) sets out the steps by which to arrive at the amount referred to in section 213(2)(a). Setting out these steps is a change because the source legislation is not explicit on this aspect. See Change 49 in Annex 1.
697.By referring to the amount on which the investor obtains relief Step 1 also caters for the case where an individual claims EIS relief on some, but not all, of the shares in respect of which the individual is eligible for relief. See the commentary on section 158 and Change 36 in Annex 1.
698.Step 2 includes a deeming of two separate issues of shares and apportionment of the value received between those two deemed issues. That is necessary because there may be a different savings rate of tax in each of the tax years.
699.Step 2 also requires the application of section 220, where appropriate, to deal with cases where the investor has not obtained EIS relief at the savings rate for one or both of the two years concerned in Step 2.
700.This section deals with the case where EIS relief on a subscription for shares was obtained for a tax year at a rate which is less than the savings rate of tax for that tax year. It is based on sections 299(4) and 300(1B) of ICTA.
701.Subsection (1) effectively lowers the rate at which section 213(2) recovers EIS relief on value received by the investor. The rate of recovery is reduced to the rate at which EIS relief was effectively obtained. The subsection also caters for the case where an individual claims EIS relief on some, but not all, of the shares in respect of which the individual is eligible for relief. See the commentary on section 158 and Change 36 in Annex 1.
702.Subsections (2) and (3) are new and correspond to provisions in paragraph 52(2) and (3) of Schedule 15 to FA 2000 (corporate venturing scheme - cases where maximum relief not obtained). See Change 48 in Annex 1.
703.This section extends the meaning of terms used in some of the preceding sections. It is based on sections 300(1C) and 301(6) and (6A) of ICTA.
704.Without this extension the rules in preceding sections about reduction or withdrawal of EIS relief might be avoided in various ways.
705.This section prevents section 213 reducing or withdrawing EIS relief in certain cases. It is based on sections 300A(1) to (6) and (11), 301(5) and 312(1) of ICTA.
706.This section applies to certain cases where the person who received value effectively repays all of it to the person who gave that value.
707.This section supplements section 222. It is based on section 300A(1), (2) and (7) to (11) and section 312(1) of ICTA.
708.Subsections (1) and (2) contain limitations on the application of section 222.
709.There is a new reference in subsection (2)(c) to “the day” on which the amount of relief is determined. This is in line with the interpretation that the provision disqualifies restitution if it happens on the 61st day after the day of the determination.
710.Subsections (3) and (4) set out, for one particular case, the consequences of section 222 applying. Subsection (4) combines part of the provision in section 300A(10) of ICTA with material from paragraph 13C(4) of Schedule 5B to TCGA. A consequential amendment to that paragraph completes the picture (see the commentary in Part 2 of Schedule 1 to this Act on paragraph 13C of Schedule 5B to TCGA).
711.This section reduces or withdraws EIS relief in certain cases where, broadly, the issuing company (group) repays some of its share capital within period C relating to the issue of shares in question. It is based on sections 303(1) to (1C), (9A) and (9B), 303AA(2), 303A(2) and 312(1) of ICTA.
712.Subsection (2) sets out the calculation of the withdrawal or reduction in the simplest case where the repayment affects only a single issue of shares and only a single subscriber to that issue.
713.Subsection (3) provides a signpost to other sections that, depending on the particular combination of circumstances present, may modify (or remove the need for) the calculation in subsection (2). Subsection (3) makes explicit the order in which to apply sections 226 to 229.
714.Subsections (4) and (5) prevent this section applying in two cases. First, where the repayment causes a withdrawal or reduction of EIS relief (under other sections) or of relief under Schedule 15 to FA 2000 (the corporate venturing scheme) or precipitates a qualifying chargeable event for the purposes of Schedule 5B to TCGA (enterprise investment scheme: reinvestment). Second, where there would be a withdrawal etc in these cases if the repayment were not treated as insignificant.
715.The references in subsections (4)(b) and (c) to “that person’s shares in the issuing company” are more explicit than in the source legislation and are consistent with section 303(IB)(a) of ICTA.
716.Subsection (6) is new and corresponds to paragraph 58(1) of Schedule 15 to FA 2000 (corporate venturing scheme - supplementary to value received). See Change 50 in Annex 1.
717.This section provides an exception to section 224 in certain cases where the repayment is insignificant. It is based on section 303AA(1) to (5) and section 312(1) of ICTA.
718.This section apportions the repayment for cases where that repayment results in relief being reduced or withdrawn, under section 224(2), in relation to two or more issues of shares. It is based on section 303(2) and (2A) of ICTA.
719.By referring to the relief which the individuals obtain subsection (2) caters for the case where an individual claims EIS relief on some, but not all, of the shares in respect of which the individual is eligible for relief. See the commentary on section 158 and Change 36 in Annex 1.
720.This section apportions the repayment for cases where, in relation to a single issue of shares affected by that repayment, there is more than one individual that has shares to which EIS relief is attributable. It is based on section 303(1C) and (1D) of ICTA.
721.By referring to the relief which the individual obtains, subsection (2) caters for the case where an individual claims EIS relief on some, but not all, of the shares in respect of which the individual is eligible for relief. See the commentary on section 158 and Change 36 in Annex 1.
722.This section deals with a complication that can arise where section 224(2) applies to an issue of shares. The investor may obtain relief as if part of that share issue had taken place in the previous tax year; a different savings rate may apply in the previous tax year. It is based on sections 289B(5), 299(4) and 303(1C) of ICTA.
723.Setting out steps, involving apportionment of the repayment, in subsection (2) is a change because the source legislation is not explicit on how to deal with such a complication. See Change 49 in Annex 1.
724.By referring to the amount on which the individual obtains relief the subsection also caters for the case where an individual claims EIS relief on some, but not all, of the shares in respect of which the individual is eligible for relief. See the commentary on section 158 and Change 36 in Annex 1.
725.This section deals with the case where EIS relief on a subscription for shares was obtained for a tax year at a rate that is less than the savings rate for that tax year. It is based on sections 299(4) and 303(1C) of ICTA.
726.Subsection (1) caters for the case where an individual claims EIS relief on some, but not all, of the shares in respect of which the individual is eligible for relief. See the commentary on section 158 and Change 36 in Annex 1.
727.Subsection (2) lowers the rate at which section 224(2) recovers EIS relief on the repayment. The rate of recovery is reduced to the rate at which EIS relief was effectively obtained.
728.Subsections (3) and (4) are new and correspond to provisions in paragraph 56(7) and (8) of Schedule 15 to FA 2000 (corporate venturing scheme - value received by other persons). See Change 48 in Annex 1.
729.This section provides an exception to section 224 for certain repayments. It is based on section 303(9) of ICTA.
730.Subsection (1)(b) widens the exception in the source legislation and corresponds to paragraph 58(5)(b) of Schedule 15 to FA 2000 (corporate venturing scheme - repayment of authorised minimum within 12 months). See Change 51 in Annex 1.
731.This section provides for section 224 to apply as if the repayment were a reduced, or zero, amount in cases where the repayment has led to a reduction of relief under Schedule 15 to FA 2000 (corporate venturing scheme). It is based on section 303A(1), (3) to (7) and (9) of ICTA.
732.This section withdraws relief from an individual in the circumstances set out in the section. It is based on section 302(1), (2) and (4) to (5) of ICTA.
733.The definition of “subsidiary” in section 302(5) of ICTA is not needed in sections 232 and 233 because they refer to “any qualifying subsidiary” and apply to period A.
734.Subsection (7) differs from the source legislation by not referring to a vocation. That is on the footing that an incorporated company cannot carry on a vocation.
735.This section withdraws relief from an individual in the circumstances set out in the section. It is based on section 302(3), (4A), (4B) and (5) of ICTA.
736.This section withdraws EIS relief in cases where the conditions for EIS relief, having been satisfied at the time it was obtained, cease to be satisfied. It is based on section 307(1) and (1A) of ICTA.