Income Tax Act 2007

Acquisition of issuing company U.K.

247 Continuity of EIS relief where issuing company is acquired by new company U.K.

(1) This section applies if—

(a) a company (“the new company”) in which the only issued shares are subscriber shares acquires all the shares (“old shares) in another company (“the old company”),

(b) the consideration for the old shares consists wholly of the issue of shares (“new shares”) in the new company,

(c) the consideration for the new shares of each description consists wholly of old shares of the corresponding description,

(d) new shares of each description are issued to the holders of old shares of the corresponding description in respect of and in proportion to their holdings,

(e) at some time before the issue of the new shares—

(i) the old company issued shares which meet the requirements of section 173(2), and

(ii) a compliance certificate in respect of those shares was issued by that company for the purposes of subsection (1) of section 203 and in accordance with section 204, and

(f) before the issue of the new shares the Commissioners for Her Majesty's Revenue and Customs have, on the application of the new company or the old company, notified that company that they are satisfied that the exchange of shares—

(i) will be effected for genuine commercial reasons, and

(ii) will not form part of any such scheme or arrangements as are mentioned in section 137(1) of TCGA 1992 (schemes with avoidance purposes).

In this subsection references to shares, except in the expressions “subscriber shares” and “shares which meet the requirements of section 173(2)”, include securities.

(2) Subsection (2) of section 138 of TCGA 1992 (procedure for advance clearance) applies for the purposes of subsection (1)(f) as it applies for the purposes of subsection (1) of that section.

(3) For the purposes of this Part—

(a) the exchange of shares is not regarded as involving any disposal of the old shares or any acquisition of the new shares, and

(b) any EIS relief which is attributable to any old shares is attributable instead to the new shares for which they are exchanged.

[F1 (3A) In section 173AB(2)(a) and in the definition of “the total relevant turnover amount” in section 175A(8), references to a company becoming a 51% subsidiary of the issuing company after the issue date do not include a company becoming such a subsidiary as a result of an exchange of shares as mentioned in subsection (1).]

(4) Nothing in section 185 (the control and independence requirement) applies in relation to such an exchange of shares, or shares and securities, as is mentioned in subsection (1), or arrangements with a view to such an exchange.

(5) For the purposes of this section old shares and new shares are of a corresponding description if, on the assumption that they were shares in the same company, they would be of the same class and carry the same rights.

(6) References in sections 248 and 249 to “old shares”, “new shares”, “the old company” and “the new company” are to be read in accordance with this section.

Textual Amendments

F1 S. 247(3A) inserted (with effect in accordance with Sch. 5 para. 23 of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 5 para. 17

248 Carry over of obligations etc where EIS relief attributed to new shares U.K.

(1) This section applies if, under section 247, any EIS relief which is attributable to any old shares becomes attributable instead to any new shares.

(2) This Part has effect as if anything which, under—

(a) section 203(1) (entitlement to claim),

(b) section 234(3) (relief subsequently found not to be due), or

(c) sections 241 to 244 (information to be provided),

has been done, or is required to be done, by or in relation to the old company had been done, or were required to be done, by or in relation to the new company.

(3) Any appeal brought by the old company against a notice under section 234(3)(b) may be prosecuted by the new company as if it had been brought by that company.

249 Substitution of new shares for old shares U.K.

(1) Subsection (2) applies if, in the case of any new shares held by an individual to which EIS relief becomes attributable under section 247, the old shares for which they were exchanged were subscribed for by and issued to the individual.

(2) This Part[F2 ; (except section 195(7))] has effect as if—

(a) the new shares had been subscribed for by the individual at the time when, and for the amount for which, the old shares were subscribed for by the individual,

(b) the new shares had been issued to the individual by the new company at the time when the old shares were issued to the individual by the old company,

(c) the claim for EIS relief made in respect of the old shares had been made in respect of the new shares, and

(d) the individual's liability to income tax had been reduced in respect of the new shares for the same tax year as that for which the individual's liability was so reduced in respect of the old shares.

(3) Subsection (4) applies if, in the case of any new shares held by an individual to which EIS relief becomes so attributable under section 247, the old shares for which they were exchanged were transferred to the individual as mentioned in section 245.

(4) This Part[F3 ; (except section 195(7))] has effect in relation to any subsequent disposal or other event as if—

(a) the new shares had been subscribed for by the individual at the time when, and for the amount for which, the old shares were subscribed for,

(b) the new shares had been issued by the new company at the time when the old shares were issued by the old company,

(c) the claim for EIS relief made in respect of the old shares had been made in respect of the new shares, and

(d) the individual's liability to income tax had been reduced in respect of the new shares for the same tax year as that for which the liability of the individual who subscribed for the old shares was so reduced in respect of those shares.

Textual Amendments

F2 Words in s. 249(2) inserted (retrospective to 6.4.2007) by Finance Act 2007 (c. 11), Sch. 16 paras. 11(8)(a), 13

F3 Words in s. 249(4) inserted (retrospective to 6.4.2007) by Finance Act 2007 (c. 11), Sch. 16 paras. 11(8)(b), 13