Chapter 8: Supplementary and general
Overview
756.This Chapter deals with some special cases and definitions.
Section 245: Transfers between spouses or civil partners
757.This section provides for step in shoes treatment where shares are transferred between spouses or civil partners in specified circumstances. It is based on section 304(2) and (3) of ICTA.
758.Subsection (2)(b) and (d) and subsection (3) contain material, not in the source legislation, making clearer how the step in shoes treatment operates. See Change 55 in Annex 1.
Section 246: Identification of shares on a disposal
759.This section gives rules identifying which shares are disposed of. It is based on sections 299 (6) to (6D) and 304(4) of ICTA.
Section 247: Continuity of EIS relief where issuing company is acquired by new company
760.This section allows, in limited circumstances, the issuing company to become a wholly-owned subsidiary of another company without jeopardising EIS relief attributable to shares in the issuing company. It is based on section 304A(1), (2) and (6) to (8) of ICTA.
761.When this section applies, the exchange of shares and the issuing company becoming a subsidiary do not cause a reduction or withdrawal of EIS relief.
762.There is effectively step in shoes treatment given to the shares in the new company (which the shareholder receives in exchange for shares in the issuing company). The following two sections deal with that “step in shoes” treatment.
Section 248: Carry over of obligations etc where EIS relief attributed to new shares
763.This section gives the new company the rights and obligations, in relation to EIS relief, of the issuing company that has been acquired. It is based on section 304A(5) of ICTA.
Section 249: Substitution of new shares for old shares
764.This section treats the shareholder in the new company broadly as if actions etc taken in relation to the issuing company had been taken in relation to the new company. It is based on section 304A(3) and (4) of ICTA.
Section 250: Nominees and bare trustees
765.This section deals with the actions of nominees or bare trustees. It is based on section 311(1) to (2A), (4) and (5) of ICTA.
766.Subsection (2) adopts a different approach from that in section 311 of ICTA. Section 311 begins with the words “where eligible shares are held on a bare trust” and section 289(7) of ICTA defines “eligible shares” in terms of “new” shares. Subsection (2) begins with the words “if shares have been issued to a bare trust” and thereby makes it clear that these “new” shares are issued to bare trustees.
767.Elsewhere in this Part the concept of eligible shares being “new” has been dropped as redundant in the context of a subscription for shares. Subsection (3) reproduces the other conditions of “eligible” shares by applying section 173(2).
Section 251: Approved investment fund as nominee
768.This section removes the minimum subscription requirement for shares in a company and allows the investment to be treated as made earlier than was in fact the case where investment is made through an approved investment fund. It is based on section 311(2A) to (6) of ICTA.
769.The use in subsection (1) of “at a time when” makes it clear that the conditions in paragraphs (a) to (c) all have to be met but not in any prescribed order.
770.The certificate issued to the investor in an approved fund by the manager (see subsection (5)) is commonly known as an EIS 5, the form provided for this purpose by HMRC.
Section 252: Meaning of a company being “in administration” or “in receivership”
771.This section gives the meaning of a company being in administration (or receivership). It is based on section 312(2A) of ICTA.
772.The reference to Northern Ireland legislation in subsection (2)(a) takes into account amendments to the Insolvency (Northern Ireland) Order 1989 by the Insolvency (Northern Ireland) Order 2005. The reference in subsection (2)(b) to the law of a country or territory outside the United Kingdom accords with the insolvency law in force in Great Britain and in Northern Ireland. See Change 56 in Appendix 1.
Section 253: Meaning of “associate”
773.This section gives the meaning of “associate” in relation to a person. It is based on sections 312(1) and 417(3) and (4) of ICTA.
Section 254: Meaning of “disposal of shares”
774.This section extends references to a disposal of shares and treats some matters as if they were disposals of shares. It is based on section 312(3) of ICTA.
775.Section 136 of TCGA may treat the investor, in the case of certain reorganisations, as having exchanged “old shares” even though the investor continues to hold the same “old shares” as were held before the reorganisation (together with some “new shares”). This section treats that reorganisation as a disposal of the “old shares”.
Section 255: Meaning of “issue of shares”
776.This section gives a meaning to (a) an issue of shares and (b) an issue of shares to an individual. It is based on sections 289B(4) and 312(4A) of ICTA.
777.Section 289B(4)of ICTA, on which subsection (1)(b) is based, is subject to the rule in section 289B(5).
778.Section 289B(5) of ICTA has been rewritten in section 201(6) for the purposes of that section and in other sections where that rule is relevant. So subsection (2) makes subsection (1)(b) subject to section 201(6) and also to the other sections where that rule is applied.
779.The exception for section 289A(6) and (7) of ICTA was inserted into section 289B(4) of ICTA by FA 2004 to ensure that the wording of those subsections did not invoke the interpretation in section 289B(4) and instead was linked clearly to the interpretation in section 312(4A) of ICTA. To achieve the same end the formulation in section 176(1) is directly linked to the interpretation in section 255(1)(a), (based on section 312(4A) of ICTA).
Section 256: Meaning of “the termination date”
780.This section gives the meaning of “the termination date”. It is based on section 312(1) and (1ZA) of ICTA.
Section 257: Minor definitions etc
781.This section contains more definitions. It is based on sections 289(9), 291B(10), 293(3A), (6D) and (8AA), 297(5A), 308(2) and 312(1), (2), (4), (4B), (5) and (6) of ICTA.
782.The definitions of “group”, “group company”, “parent company” and “single company” are new.
783.These new labels rely on the way “qualifying subsidiary” is defined in this Part. The definitions of “subsidiary” and “51% subsidiary” in section 312(1) of ICTA have not been reproduced. Instead “qualifying subsidiary” is explained in section 191 and “51% subsidiary” in section 989.
784.The definition of “51% subsidiary” in section 312(1) of ICTA adds a condition that the definition applies for a particular period (period A in the sections). The aim has been to reproduce the same effect of this definition without carrying over the same level of complication. (See the commentary on section 168(5).)
785.In some cases the definition of a term included in the Act-wide index of defined expressions in Schedule 4 is distinguished from the particular use of the term in this Part.
786.For example, the definition of “control” in subsection (3) sets out the references to control which are explained by section 416(2) to (6) of ICTA. The entry in Schedule 4, which refers to the meaning in section 995 has a signpost to the exceptions in this subsection.
787.The two references to the “reduction” of relief in subsection (7)(b) are new: section 312(6) of ICTA refers only to the withdrawal of relief.
788.The word “withdrawal” in EIS is used both for the occasions for a clawback of relief (in particular in the provisions in Chapter 6) and for the procedure for withdrawing relief which is set out in Chapter 7.
789.Although the word “withdrawal” can cover both a full and a partial withdrawal of relief, this is made explicit in sections 307 and 310 of ICTA by section 307(8A) and section 310(9A). These subsections note that “references in this section to the withdrawal of relief include its reduction”. This has been handled in this Part by spelling out, wherever relevant, that the rules encompass both the reduction and withdrawal of relief.
790.Making reference to the reduction as well as the withdrawal of relief in subsection (7) ensures that there is consistency with the language used for the occasion of a clawback and with sections 307 and 310 of ICTA, which are concerned with the procedure for withdrawing relief.
791.Subsection (8) is new. Paragraph 102(7)(a) of Schedule 15 to FA 2000 (corporate venturing scheme) contains a similar provision.
792.The subsection interprets the reference to requirements being met “for the time being” in section 204(1) (compliance certificates) and section 205(1) (compliance statements), derived from section 306 of ICTA. At the time the compliance certificate is issued by the issuing company it cannot be known if all the EIS requirements will be met in the relevant period.
793.The interpretation addresses this by treating conditions that must be met over a period of time as met at times before that period has ended (provided the condition then remains capable of being met). See Change 57 in Annex 1.
