Income Tax Act 2007

216 When value is received U.K.

(1) This section applies for the purposes of sections 213 (value received by the investor) and 218 (value received where there is more than one issue of shares).

(2) The investor receives value from the issuing company at any time when the issuing company—

(a) repays, redeems or repurchases any of its share capital or securities which belong to the investor or makes any payment to the investor for giving up the investor's right to any of the issuing company's share capital or any security on its cancellation or extinguishment,

(b) repays, in pursuance of any arrangements for or in connection with the acquisition of the shares in respect of which EIS relief is claimed, any debt owed to the investor other than a debt which was incurred by the company—

(i) on or after the date of issue of those shares, and

(ii) otherwise than in consideration of the extinguishment of a debt incurred before that date,

(c) makes to the investor any payment for giving up on its extinguishment the investor's right to any debt, other than a debt in respect of a repayment of the kind mentioned in section 168(2)(a) or (f) (ignoring of certain expenses or remuneration) or an ordinary trade debt,

(d) releases or waives any liability of the investor to the issuing company or discharges or undertakes to discharge any liability of the investor to a third person,

(e) makes a loan or advance to the investor which has not been repaid in full before the issue of the shares in respect of which EIS relief is claimed,

(f) provides a benefit or facility for the investor,

(g) transfers an asset to the investor for no consideration or for consideration less than its market value or acquires an asset from the investor for consideration greater than its market value, or

(h) makes to the investor any other payment except—

(i) a payment of a kind mentioned in any of the provisions of section 168(2) (ignoring of certain payments), or

(ii) a payment in discharge of an ordinary trade debt.

(3) For the purposes of subsection (2)(d) the issuing company is to be treated as having released or waived a liability if the liability is not discharged within 12 months of the time when it ought to have been discharged.

(4) For the purposes of subsection (2)(e) the following is to be treated as if it were a loan made by the issuing company to the investor—

(a) the amount of any debt (other than an ordinary trade debt) incurred by the investor to the issuing company, and

(b) the amount of any debt due from the investor to a third party which has been assigned to the issuing company.

(5) The investor also receives value from the issuing company if—

(a) in respect of ordinary shares held by the investor any payment or asset is received in a winding up or in connection with a dissolution of the company, and

(b) the winding up or dissolution falls within section 182(4) (no tax avoidance).

(6) The investor also receives value from the issuing company if any person who would, for the purposes of section 163, be treated as connected with the company—

(a) purchases any of its share capital or securities which belong to the investor, or

(b) makes any payment to the investor for giving up any right in relation to any of the company's share capital or securities.

(7) If because of the investor's disposal of shares in a company any EIS relief attributable to those shares is withdrawn or reduced under section 209, the investor is not to be treated as receiving value from the company in respect of the disposal.

(8) The investor is not to be treated as receiving value from the issuing company merely because of the payment to the investor, or any associate of the investor, of any remuneration for services rendered to that company as a director if the remuneration is reasonable remuneration.

(9) Section 167(3) (director also an employee) applies for the purposes of subsection (8) as it applies for the purposes of section 167, and the reference in that subsection to the payment of remuneration includes the provision of any benefit or facility.

(10) In this section “ordinary trade debt” means any debt for goods or services supplied in the ordinary course of a trade or business if any credit given—

(a) is for not more than 6 months, and

(b) is not longer than that normally given to customers of the person carrying on the trade or business.