(1) In this Part “associate”, in relation to a person, means—
(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 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.
(2) In subsection (1)(a) and (b) “relative” means spouse or civil partner, ancestor or lineal descendant.
(1) In this Part references to a disposal of shares include references to a disposal of an interest or right in or over shares.
(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.
(1) In this Part—
(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 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).
(1) In this Part “the termination date”, in relation to any shares issued by a 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 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 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.
(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.
256B Meaning of “specified Northern Ireland company”
For the purposes of this Part, a “specified Northern Ireland company” means a company that—
(a) has its registered office in Northern Ireland, and
(b) carries on a trade involving—
(i) a trade in goods, or
(ii) the generation, transmission, distribution, supply, wholesale trade or cross-border exchange of electricity.
(1) In this Part—
“arrangements” includes any scheme, agreement, understanding, transaction or series of transactions (whether or not legally enforceable);
“bonus shares” means shares which are issued otherwise than for payment (whether in cash or otherwise),
“director” is read in accordance with section 452 of CTA 2010,
“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 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
“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—
section 185(1)(a),
section 199(3)(a) and (b)(ii),
section 232(3),
section 233(2), and
section 243(4),
and in those provisions “control” is to be read in accordance with sections 450 and 451 of CTA 2010.
(4) In this Part—
(a) references in any provision to the reduction of any EIS relief attributable to any shares include a reference—
(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, 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 a recognised stock exchange.
(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—
(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 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 occurred to prevent their being met.
(1) This Part provides for SEIS income tax relief (“SEIS relief”), that is, entitlement to tax reductions in respect of amounts subscribed by individuals for shares in companies carrying on new businesses.
(2) In this Part “SEIS” stands for the seed enterprise investment scheme.
(3) This Part has effect in relation to shares issued on or after 6 April 2012 only.
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
An individual (“the investor”) is eligible for SEIS relief in respect of an amount subscribed by the investor on the investor's own behalf for an issue of shares in a company (“the issuing company”) if—
(za) the risk-to-capital condition is met (see section 257AAA),
(a) the shares (“the relevant shares”) are issued to the investor,
(b) the investor is a qualifying investor in relation to the relevant shares (see Chapter 2),
(c) the general requirements (including requirements as to the purpose of the issue of shares and the use of money raised) are met in respect of the relevant shares (see Chapter 3), and
(d) the issuing company is a qualifying company in relation to the relevant shares (see Chapter 4).
(1) The risk-to-capital condition is met if, having regard to all the circumstances existing at the time of the issue of the shares, it would be reasonable to conclude that—
(a) the issuing company has objectives to grow and develop its trade in the long-term, and
(b) there is a significant risk that there will be a loss of capital of an amount greater than the net investment return.
(2) For the purposes of subsection (1)(b)—
(a) the risk is to be determined by reference to a loss of capital, and the net investment return, for the investors generally,
(b) the reference to a loss of capital is to a loss of some or all of the amounts subscribed for the shares by the investors, and
(c) the reference to the net investment return is to the net investment return to the investors (whether by way of income or capital growth) taking into account the value of SEIS relief.
(3) For the purposes of subsection (1) the circumstances to which regard may be had include—
(a) the extent to which the company's objectives include increasing the number of its employees or the turnover of its trade,
(b) the nature of the company's sources of income, including the extent to which there is a significant risk of the company not receiving some or all of the income,
(c) the extent to which the company has or is likely to have assets, or is or could become a party to arrangements for acquiring assets, that could be used to secure financing from any person,
(d) the extent to which the activities of the company are sub-contracted to persons who are not connected with it,
(e) the nature of the company's ownership structure or management structure, including the extent to which others participate in or devise the structure,
(f) how any opportunity for investment in the company is marketed, and
(g) the extent to which arrangements are in place under which opportunities for investments in the company are or may be marketed with, or otherwise associated with, opportunities for investments in other companies or entities.
(4) If the issuing company is a parent company—
(a) any reference in this section to the company's trade is to what would be the trade of the group if the activities of the group companies taken together were regarded as one trade, and
(b) any reference in subsection (3)(a) to (e) to the company is to any group company.
(1) If an individual—
(a) is eligible for SEIS relief in respect of any amount subscribed for shares, and
(b) makes a claim in respect of all or some of the shares included in the issue,
the individual is entitled to a tax reduction for the tax year in which the shares were issued (“the current tax year”).
This is subject to the provisions of this Part.
(2) The amount of the tax reduction to which the individual is entitled is the amount equal to tax at the SEIS rate for the current tax year on—
(a) the amount or, as the case may be, the sum of the amounts subscribed for shares issued in that year in respect of which the individual is eligible for and claims SEIS relief, or
(b) if less, £200,000.
(3) In this Part “the SEIS rate” means 50%.
(4) The tax reduction is given effect at Step 6 of the calculation in section 23.
(5) If in the case of any issue of shares—
(a) which are issued in the current tax year, and
(b) in respect of the amount subscribed for which the individual is eligible for SEIS relief,
the individual so claims, subsections (1) and (2) apply as if, in respect of such part of that issue as may be specified in the claim, the shares had been issued in the preceding tax year, and the individual's liability to tax for both tax years is determined accordingly.
(1) This section applies for the purposes of this Part in relation to any shares issued by a company.
(2) “Period A” means the period—
(a) beginning with the incorporation of the company, and
(b) ending immediately before the termination date relating to the shares.
(3) “Period B” means the period—
(a) beginning with the issue of the shares, and
(b) ending immediately before the termination date relating to the shares.
(4) In this section “the termination date”, in relation to the shares, means the third anniversary of the date on which the shares are issued.
In this Part—
(a) Chapter 5 provides for the attribution of SEIS relief to shares and the making of claims for such relief,
(b) Chapter 6 provides for SEIS relief to be withdrawn or reduced in the circumstances mentioned in that Chapter,
(c) Chapter 7 makes provision with respect to the procedure for the withdrawal or reduction of SEIS relief, and
(d) Chapter 8 contains supplementary and general provisions.
(1) Section 150E of TCGA 1992 makes provision about gains or losses on the disposal of shares to which SEIS relief is attributable.
(2) Schedule 5BB to that Act provides relief in respect of the re-investment under SEIS of the proceeds of assets disposed of in circumstances where there would otherwise be a chargeable gain.
The investor is a qualifying investor in relation to the relevant shares if the requirements of this Chapter are met as to—
(a) no employee investors (see section 257BA),
(b) no substantial interest in the issuing company (see section 257BB),
(c) no related investment arrangements (see section 257BC),
(d) no linked loans (see section 257BD), and
(e) no tax avoidance (see section 257BE).
(1) Neither the investor nor an associate of the investor may, at any time during period B, be an employee of the issuing company or of any qualifying subsidiary of that company.
(2) For this purpose a person is not to be treated as an employee of the issuing company, or of any qualifying subsidiary of that company, at any time when the person is a director of that company.
257BC The no related investment arrangements requirement
The investor (“P”) must not subscribe for the relevant shares as part of an arrangement which provides for another person to subscribe for shares in another company in which P, or any other individual who is party to the arrangement, has a substantial interest.
(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
(b) would not have been made on the same terms,
if the investor had not subscribed for the relevant shares, or had not been proposing to do so.
(3) References in this section to the making by any person of a loan to the investor or an associate of the investor include a reference—
(a) to the giving by that person of any credit to the investor or any associate of the investor, and
(b) to the assignment to that person of a debt due from the investor or any associate of the investor.
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.
257BF Persons with a substantial interest in a company
(1) An individual has a substantial interest in a 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 company,
(b) the issued share capital of the company or any such subsidiary, or
(c) the voting power in the company or any such subsidiary.
(2) An individual has a substantial interest in a company if the individual directly or indirectly possesses or is entitled to acquire such rights as would—
(a) in the event of the winding up of the company or any subsidiary of the company, or
(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 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,
are determined in accordance with Chapter 6 of Part 5 of CTA 2010.
(4) In making that determination—
(a) references in section 166 of that Act to company A are to be read as references to an equity holder, and
(b) references in that section to a winding up are to be read as including a reference to any other circumstances in which assets of the company in question are available for distribution to its equity holders.
(5) An individual does not have a substantial interest in 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—
(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 trade or business.
(6) An individual has a substantial interest in a company if the individual has control of the company or any subsidiary of that company.
(7) 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 person who is an associate of the individual.
(8) In this section “subsidiary”, in relation to a company, means a company which at any time in period A is a 51% subsidiary of the 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.
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 257CA),
(b) the purpose of the issue (see section 257CB),
(c) the spending of the money raised (see section 257CC),
(d) no pre-arranged exits (see section 257CD),
(e) no tax avoidance (see section 257CE), and
(f) no disqualifying arrangements (see section 257CF).
(1) The relevant shares must meet—
(a) the requirements of subsection (2), and
(b) unless they are bonus shares, the requirements of subsection (4).
(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 that is within subsection (3),
(b) any present or future preferential right to a company's assets on its winding up, or
(c) any present or future right to be redeemed.
(3) A preferential right to dividends carried by a share in a company is within this subsection if—
(a) the amount of any dividends payable pursuant to the right, or the date or dates on which they are payable, depend to any extent on a decision of the company, the holder of the share or any other person, or
(b) the amount of any dividends that become payable at any time pursuant to the right includes any amount that became payable at any earlier time pursuant to the right but has not been paid.
(4) 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.
(5) Shares are not fully paid up for the purposes of subsection (4)(b) if there is any undertaking to pay cash to any person at a future date in respect of the acquisition of the shares.
(1) The relevant shares (other than any of them which are bonus shares) must be issued in order to raise money for the purposes of a qualifying business activity carried on, or to be carried on, by the issuing company or a qualifying 90% subsidiary of that company.
(2) For the meaning of “qualifying business activity” see section 257HG.
257CC The spending of the money raised requirement
(1) The requirement of this section is that before the end of period B all of the money raised by the issue of the relevant shares (other than any of them which are bonus shares) is spent for the purposes of the qualifying business activity for which it was raised.
(2) Spending money on the acquisition of shares or stock in a company does not of itself amount to spending the money for the purposes of a qualifying business activity.
(3) This requirement does not fail to be met merely because an amount of money which is not significant is spent for another purpose or remains unspent at the end of period B.
(1) The issuing arrangements for the relevant shares must not include—
(a) arrangements with a view to the subsequent repurchase, exchange or other disposal of those shares or of other shares in or securities of the issuing company,
(b) arrangements for or with a view to the cessation of any trade which is being or is to be or may be carried on by the issuing company or a person connected with that company,
(c) arrangements for the disposal of, or of a substantial amount (in terms of value) of, the assets of the issuing company or of a person connected with that company, or
(d) arrangements the main purpose of which, or one of the main purposes of which, is (by means of any insurance, indemnity or guarantee or otherwise) to provide partial or complete protection for persons investing in shares in the issuing company against what would otherwise be the risks attached to making the investment.
(2) The arrangements referred to in subsection (1)(a) do not include—
(a) any arrangements with a view to such an exchange of shares, or shares and securities, as is mentioned in section 257HB(1), or
(b) any arrangements with a view to any shares in the issuing company being exchanged for, or converted into, shares in that company of a different class.
(3) The arrangements referred to in subsection (1)(b) and (c) do not include any arrangements applicable only on the winding up of a company except in a case where—
(a) the issuing arrangements include arrangements for the company to be wound up, or
(b) the arrangements are applicable to the winding up of the company otherwise than for genuine commercial reasons.
(4) The arrangements referred to in subsection (1)(d) do not include any arrangements which are confined to the provision—
(a) for the issuing company itself, or
(b) if the issuing company is a parent company that meets the trading requirement in section 257DA(2)(b), for the issuing company itself, for the issuing company itself and one or more of its subsidiaries or for one or more of its subsidiaries,
of any such protection against risks arising in the course of carrying on its business as might reasonably be expected to be provided in normal commercial circumstances.
(5) In this section “the issuing arrangements” means—
(a) the arrangements under which the shares are issued to the individual,
(b) any arrangements made, before the shares were issued, in relation to or in connection with the issue, and
(c) if before the shares were issued information on pre-arranged exits was made available to any prospective subscribers for shares in the issuing company, any arrangements made during period B.
(6) For the purposes of subsection (5)(c) “information on pre-arranged exits” means any information indicating the possibility of making, during period B, arrangements of the kind described in paragraph (a), (b), (c) or (d) of subsection (1).
The relevant shares must be issued 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.
257CF The no disqualifying arrangements requirement
(1) The relevant shares must not be issued, nor any money raised by the issue spent, in consequence or anticipation of, or otherwise in connection with, disqualifying arrangements.
(2) Arrangements are “disqualifying arrangements” if—
(a) the main purpose, or one of the main purposes, of the arrangements is to secure—
(i) that a qualifying business activity is or will be carried on by the issuing company or a qualifying 90% subsidiary of that company, and
(ii) that one or more persons (whether or not including any party to the arrangements) may obtain relevant tax relief in respect of shares issued by the issuing company which raise money for the purposes of that activity or that such shares may comprise part of the qualifying holdings of a VCT,
(b) that activity is the relevant qualifying business activity, and
(c) one or both of conditions A and B are met.
(3) Condition A is that, as a (direct or indirect) result of the money raised by the issue of the relevant shares being spent as required by section 257CC, an amount representing the whole or the majority of the amount raised is, in the course of the arrangements, paid to or for the benefit of a relevant person or relevant persons.
(4) Condition B is that, in the absence of the arrangements, it would have been reasonable to expect that the whole or greater part of the component activities of the relevant qualifying business activity would have been carried on as part of another business by a relevant person or relevant persons.
(5) For the purposes of this section it is immaterial whether the issuing company is a party to the arrangements.
(6) In this section—
“component activities” means—
if the relevant qualifying business activity is activity A (see section 257HG(2)), the carrying on of a qualifying trade, or preparing to carry on such a trade, which constitutes that activity, and
if the relevant qualifying business activity is activity B (see section 257HG(4)), the carrying on of research and development which constitutes that activity;
“qualifying holdings”, in relation to the issuing company, is to be construed in accordance with section 286 (VCTs: qualifying holdings);
“relevant person” means a person who is a party to the arrangements or a person connected with such a party;
“relevant qualifying business activity” means the activity for the purposes of which the issue of the relevant shares raised money;
“relevant tax relief”, in respect of shares, means one or more of the following—
SEIS relief in respect of the shares;
EIS relief in respect of the shares;
SI relief under Part 5B in respect of the shares;
relief under Chapter 6 of Part 4 (losses on disposal of shares) in respect of the shares;
relief under section 150A or 150E of TCGA 1992 (enterprise investment scheme) in respect of the shares;
relief under Schedule 5B to that Act (enterprise investment scheme: re-investment) in consequence of which deferral relief is attributable to the shares (see paragraph 19(2) of that Schedule);
relief under Schedule 5BB to that Act (seed enterprise investment scheme: re-investment) in consequence of which SEIS re-investment relief is attributable to the shares (see paragraph 4 of that Schedule).
The issuing company is a qualifying company in relation to the relevant shares if the requirements of this Chapter are met as to—
(a) trading (see section 257DA),
(b) the issuing company's carrying on of the qualifying business activity (see section 257DC),
(c) UK permanent establishment (see section 257DD),
(d) financial health (see section 257DE),
(e) unquoted status (see section 257DF),
(f) control and independence (see 257DG),
(g) no partnerships (see section 257DH),
(h) gross assets (see section 257DI),
(i) number of employees (see section 257DJ),
(j) no previous other risk capital scheme investments (see section 257DK),
(k) the amount raised through the SEIS (see section 257DL),
(l) qualifying subsidiaries (see section 257DM), and
(m) property managing subsidiaries (see section 257DN).
(1) The issuing company must meet the trading requirement throughout period B.
(2) The trading requirement is that—
(a) the company, ignoring any incidental purposes, exists wholly for the purpose of carrying on one or more new qualifying trades (see section 257HF), or
(b) the company is a parent company and the business of the group does not consist wholly or as to a substantial part in the carrying on of non-qualifying activities.
(3) If the company intends that one or more other companies should become its qualifying subsidiaries with a view to their carrying on one or more new qualifying trades—
(a) the company is treated as a parent company for the purposes of subsection (2)(b), and
(b) the reference in subsection (2)(b) to the group includes the company and any existing or future company that will be its qualifying subsidiary after the intention in question is carried into effect.
This subsection does not apply at any time after the abandonment of that intention.
(4) For the purpose of subsection (2)(b) the business of the group means what would be the business of the group if the activities of the group companies taken together were regarded as one business.
(5) For the purpose of determining the business of a group, activities are ignored so far as they are activities carried on by a mainly trading subsidiary otherwise than for its main purpose.
(6) For the purposes of determining the business of a group, activities of a group company are ignored so far as they consist in—
(a) the holding of shares in or securities of a qualifying subsidiary of the parent company,
(b) the making of loans to another group company,
(c) the holding and managing of property used by a group company for the purpose of one or more qualifying trades carried on by a group company, or
(d) the holding and managing of property used by a group company for the purpose of research and development from which it is intended—
(i) that a qualifying trade to be carried on by a group company will be derived, or
(ii) that a qualifying trade carried on or to be carried on by a group company will benefit.
(7) Any reference in subsection (6)(d)(i) or (ii) to a group company includes a reference to any existing or future company which will be a group company at any future time.
(8) Where period B begins after the incorporation of the company, the requirement of subsection (2) must have been complied with since its incorporation; but for the purposes of that subsection any interval between the incorporation of the company and the time when it commenced business is to be ignored.
(9) In this section—
“incidental purposes” means purposes having no significant effect (other than in relation to incidental matters) on the extent of the activities of the company in question;
“mainly trading subsidiary” means a qualifying subsidiary which, apart from incidental purposes, exists wholly for the purpose of carrying on one or more qualifying trades, and any reference to the main purpose of such a subsidiary is to be read accordingly;
“non-qualifying activities” means—
excluded activities (within the meaning of sections 192 to 199), and
activities (other than research and development) carried on otherwise than in the course of a trade;
“qualifying trade” has the same meaning as in Part 5 (see sections 189 and 192 to 200).
257DB Ceasing to meet trading requirement: administration etc
(1) A company is not regarded as ceasing to meet the trading requirement merely because of anything done in consequence of the company or any of its subsidiaries being in administration or receivership.
This is subject to subsections (2) and (3).
(2) Subsection (1) applies only if—
(a) the entry into administration or receivership, and
(b) everything done as a result of the company concerned being in administration or receivership,
is for genuine commercial reasons, and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.
(3) A company ceases to meet the trading requirement if before the end of period B—
(a) a resolution is passed, or an order is made, for the winding up of the company or any of its subsidiaries (or, in the case of a winding up otherwise than under the Insolvency Act 1986 or the Insolvency (Northern Ireland) Order 1989, any other act is done for the like purpose), or
(b) the company or any of its subsidiaries is dissolved without winding up.
This is subject to subsection (4).
(4) Subsection (3) does not apply if the winding up or dissolution is for genuine commercial reasons, and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.
257DC The issuing company to carry on the qualifying business activity
(1) The requirement of this section is met in relation to the issuing company if, at no time in period B, is any of the following—
(a) the relevant new qualifying trade,
(b) relevant preparation work (if any), and
(c) relevant research and development (if any),
carried on by a person other than the issuing company or a qualifying 90% subsidiary of that company.
(2) Subsection (3) has effect for the purpose of determining whether the requirement of this section is met in relation to the issuing company in a case where relevant preparation work is carried out by that company or a qualifying 90% subsidiary of that company.
(3) The carrying on of the relevant new qualifying trade by a company other than the issuing company or a subsidiary of that company is to be ignored if it takes place at any time in period B before the issuing company or any qualifying 90% subsidiary of that company begins to carry on that trade.
(4) The requirement of this section is not regarded as failing to be met in relation to the issuing company if, merely because of any act or event within subsection (5), the relevant new qualifying trade—
(a) ceases to be carried on in period B by the issuing company or any qualifying 90% subsidiary of that company, and
(b) is subsequently carried on in that period by a person who is not at any time in period A connected with the issuing company.
(5) The following are acts and events within this subsection—
(a) anything done as a consequence of the issuing company or any other company being in administration or receivership, and
(b) the issuing company or any other company being wound up, or dissolved without being wound up.
(6) Subsection (4) applies only if—
(a) the entry into administration or receivership, and everything done as a consequence of the company concerned being in administration or receivership, or
(b) the winding up or dissolution,
is for genuine commercial reasons, and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.
(7) In this section—
“the relevant new qualifying trade” means the new qualifying trade which is the subject of that qualifying business activity;
“relevant preparation work” means preparations within section 257HG(2)(b) which are the subject of the qualifying business activity mentioned in section 257CB;
“relevant research and development” means—
research and development within section 257HG(3) which is the subject of that qualifying business activity, and
any other preparations for the carrying on of the new qualifying trade which is the subject of that activity.
(1) The issuing company must meet the UK permanent establishment requirement throughout period B.
(2) The UK permanent establishment requirement is that the issuing company has a permanent establishment in the United Kingdom.
(1) The issuing company must meet the financial health requirement at the beginning of period B.
(2) The financial health requirement is that the issuing company is not in difficulty.
(3) The issuing company is “in difficulty” if it is reasonable to assume that it would be regarded as a firm in difficulty for the purposes of the Community Guidelines on State Aid for Rescuing and Restructuring Firms in Difficulty (2004/C 244/02) as those guidelines had effect in the United Kingdom immediately before IP completion day.
(1) At the beginning of period B—
(a) the issuing company must be an unquoted company,
(b) there must be no arrangements in existence for the issuing company to cease to be an unquoted company, and
(c) there must be no arrangements in existence for the issuing company to become a subsidiary of another company (“the new company”) by virtue of an exchange of shares, or shares and securities, if—
(i) section 257HB applies in relation to the exchange, and
(ii) arrangements have been made with a view to the new company ceasing to be an unquoted company.
(2) In this section “unquoted company” means a company none of whose shares, stocks, debentures or other securities are marketed to the general public.
(3) For the purposes of subsection (2), shares, stock, debentures or other securities are marketed to the general public if they are—
(a) listed on a recognised stock exchange,
(b) listed on a designated exchange in a country outside the United Kingdom, or
(c) dealt in outside the United Kingdom by such means as may be designated.
(4) In subsection (3)(b) and (c) “designated” means designated by an order made by the Commissioners for Her Majesty's Revenue and Customs for the purposes of that provision.
(5) An order made for the purposes of subsection (3)(b) may designate an exchange by name, or by reference to any class or description of exchanges, including a class or description framed by reference to any authority or approval given in a country outside the United Kingdom.
(6) The arrangements referred to in subsection (1)(b) and (c)(ii) do not include arrangements in consequence of which any shares, stocks, debentures or other securities of the company are at any subsequent time—
(a) listed on a stock exchange that is a recognised stock exchange by virtue of an order made under section 1005(1)(b), or
(b) listed on an exchange, or dealt in by any means, designated by an order made for the purposes of subsection (3)(b) or (c),
if the order was made after the beginning of period B.
(1) The control element of the requirement is that—
(a) the issuing company must not at any time in period A control (whether on its own or together with any person connected with it) any company which is not a qualifying subsidiary of the issuing company, and
(b) no arrangements must be in existence at any time in that period by virtue of which the issuing company could fail to meet paragraph (a) (whether during that period or otherwise).
(2) The independence element of the requirement is that—
(a) the issuing company must not at any time in period A (ignoring any on-the-shelf period) be within subsection (2A), and
(b) no arrangements must be in existence at any time in period A by virtue of which the issuing company could be within that subsection (whether during period A or otherwise).
(2A) The issuing company is within this subsection at any time if it is under the control of any other company (or of another company and any other person connected with that other company).
(2B) In subsection (2)(a) “on-the-shelf period” means a period during which the issuing company—
(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 trade or business.
(3) This section is subject to section 257HB(4) (exchange of shares).
(1) Neither the issuing company nor any qualifying 90% subsidiary of that company may, at any time during period A, be a member of a partnership.
(2) “Partnership” includes—
(a) a limited liability partnership, and
(b) an entity established under the law of a territory outside the United Kingdom of a similar character to a partnership,
and “member”, in relation to a partnership, is to be read accordingly.
(1) In the case of relevant shares issued by a single company, the value of the company's assets must not exceed £350,000 immediately before the relevant shares are issued.
(2) In the case of relevant shares issued by a parent company, the value of the group assets must not exceed £350,000 immediately before the relevant shares are issued.
(3) For the purposes of this section the value of the group assets is the sum of the values of the gross assets of each of the members of the group, ignoring any that consist in rights against, or shares in or securities of, another member of the group.
(1) If the issuing company is a single company, the full-time equivalent employee number for it must be less than 25 when the relevant shares are issued.
(2) If the issuing company is a parent company, the sum of—
(a) the full-time equivalent employee number for it, and
(b) the full-time equivalent employee numbers for each of its qualifying subsidiaries,
must be less than 25 when the relevant shares are issued.
(3) The full-time equivalent employee number for a company is calculated as follows—
Step 1 Find the number of full-time employees of the company.
Step 2 Add, for each employee of the company who is not a full-time employee, such fraction as is just and reasonable. The result is the full-time equivalent employee number.
(4) In this section references to an employee—
(a) include a director, but
(b) do not include—
(i) an employee on maternity , paternity , shared parental , parental bereavement or neonatal care leave, or
(ii) a student on vocational training.
257DK No previous other risk capital scheme investments
(1) The requirement of this section is that—
(a) no EIS investment or VCT investment is or has been made in the issuing company on or before the day on which the relevant shares are issued, and
(b) no EIS investment or VCT investment has been made on or before that day in a company which at the time the relevant shares are issued is a qualifying subsidiary of the issuing company.
(2) An “EIS investment” is made in the company if the company—
(a) issues shares (money having been subscribed for them), and
(b) (at any time) provides a compliance statement under section 205 in respect of the shares;
and the EIS investment is regarded as made when the shares are issued.
(3) A “VCT investment” is made in the company if an investment (of any kind) in the company is made by a VCT.