Income Tax Act 2007

[F1 257QE When value is received U.K.

(1) This section applies for the purposes of sections 257Q and 257QB.

(2) The investor receives value from the social enterprise at any time when the social enterprise—

(a) repays, redeems or repurchases any investments in the social enterprise which belong to the investor, or makes any payment to the investor for giving up the investor's right to investments in the social enterprise on their cancellation or extinguishment,

(b) repays, in pursuance of any arrangements for or in connection with the making of the investment, any debt owed to the investor other than a debt which was incurred by the social enterprise—

(i) on or after the investment date, 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—

(i) a debt in respect of a repayment of the kind mentioned in section 257LF(5)(a) or (f), or

(ii) an ordinary trade debt,

(d) releases or waives any liability of the investor to the social enterprise 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 investment is made,

(f) provides a benefit or facility for the investor by providing, at a price less than the arm's-length price or free of charge, goods or services for whose provision the social enterprise ordinarily makes a charge,

(g) otherwise provides any benefit or facility for the investor,

(h) 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

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

(i) a payment of a kind mentioned in section 257LF(5), or

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

(3) For the purposes of subsection (2)(d), the social enterprise is 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), each of the following is treated as a loan made by the social enterprise to the investor—

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

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

(5) The investor also receives value from the social enterprise if—

(a) in respect of ordinary shares, or qualifying debt investments, held by the investor any payment or asset is received in a winding-up or dissolution of the social enterprise, and

(b) the winding-up or dissolution is for genuine commercial reasons, and is not part of any arrangements the main purpose or one of the main purposes of which is the avoidance of tax.

(6) The investor also receives value from the social enterprise if—

(a) a person—

(i) purchases any investments in the social enterprise which belong to the investor, or

(ii) makes any payment to the investor for giving up any right in relation to any investments in the social enterprise, and

(b) that person is an individual in relation to whom not all of the requirements in sections 257LF and 257LG would be met if references in those sections to the investor were read as references to that person.

(7) If, because of the investor's disposal of investments in the social enterprise, any SI relief attributable to those investments is withdrawn or reduced under section 257R, the investor is not to be treated as receiving value from the social enterprise in respect of the disposal.

(8) If the investor is a director of the social enterprise, the investor is not to be treated as receiving value from the social enterprise merely because of the payment to the investor of reasonable remuneration (including any benefit or facility) for any services rendered to the social enterprise as a director or employee.

(9) 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 for longer than that normally given to customers of the person carrying on the trade or business.]

Textual Amendments

F1 Pt. 5B inserted (17.7.2014) by Finance Act 2014 (c. 26), Sch. 11 para. 1