2(1)Chapter III of Part VII of the Taxes Act 1988 is amended as follows.U.K.
(2)In section 303 of the Taxes Act 1988 (value received by persons other than claimants)—
(a)after subsection (1A) insert—
“(1AA)This section is subject to section 303A.”;
and
(b)in subsection (1B) (receipts which result in withdrawal of person’s EIS relief or EIS deferral relief not relevant), after paragraph (b) insert “; or
(c)causes any investment relief (within the meaning of Schedule 15 to the Finance Act 2000) to be withdrawn or reduced by virtue of paragraph 46 (disposal of shares) or 49(1)(a) (repayment etc. of share capital or securities) of that Schedule.”
(3)After that section insert—
“303A Restriction on withdrawal of relief under section 303.
(1)Subsections (4) and (7) below apply where, by reason of a repayment, any investment relief which is attributable under Schedule 15 to the Finance Act 2000 to any shares is withdrawn under paragraph 56(2) of that Schedule.
(2)For the purposes of this section “repayment” means a repayment, redemption, repurchase or payment mentioned in paragraph 56(1) of that Schedule (repayments etc. which cause withdrawal of investment relief).
(3)For the purposes of this section “the relevant amount” is the amount determined by the formula—
Where—
X is the amount of the repayment, and
Y is the aggregate amount of investment relief withdrawn by reason of the repayment.
(4)Where the relevant amount does not exceed £1,000 the repayment shall be disregarded for the purposes of section 303(1), unless repayment arrangements are in existence at any time in the period—
(a)beginning one year before the shares mentioned in subsection (1) above are issued, and
(b)expiring at the end of the issue date of those shares.
(5)For this purpose “repayment arrangements” means arrangements which provide—
(a)for a repayment by the company that issued the shares (“the issuing company”) or any subsidiary of that company, or
(b)for anyone to be entitled to such a repayment,
at any time.
(6)Subsection (5)(a) above applies in relation to a subsidiary of the issuing company whether or not it is such a subsidiary—
(a)at the time of the repayment mentioned in subsection (1) above, or
(b)when the arrangements were made.
(7)Where the repayment is not disregarded by virtue of subsection (4) above, the amount receivable by reason of the repayment shall be treated for the purposes of section 303(1C)(a) as an amount equal to the relevant amount.
(8)Where, but for the existence of paragraph 57(1) of Schedule 15 to the Finance Act 2000 (repayments causing insignificant changes to share capital to be disregarded), any investment relief would be withdrawn by reason of a repayment, the repayment shall be disregarded for the purposes of section 303(1).
(9)In this section—
(a)“investment relief” has the same meaning as in that Schedule; and
(b)references to the withdrawal of investment relief include its reduction.”