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HMRC internal manual

Capital Gains Manual

Investors’ Relief: meaning of subscribe

TCGA1992/S169VU

 

The intention of Investors’ Relief is to give relief to individuals who have injected new cash into qualifying companies in return for shares.  To do this an individual has to subscribe for shares.

 

To subscribe for a qualifying share for Investors’ Relief purposes:

  • An individual must subscribe for the shares themselves
  • The share must be issued by the company for consideration consisting wholly of cash
  • The share must be fully paid up at the time of issue

Where these conditions are not met, a share can never become a qualifying share for Investors’ Relief purposes.

S169VU(1)(d) contains anti-avoidance measures which require the shares to be subscribed and issued for genuine commercial reasons and not as part of arrangements where the main purpose, or one of the main purposes, is to secure a tax advantage to any person.  S169VU(1)(e) also requires the shares to be subscribed for and issued by way of a bargain at arm’s length.  

 

Subscription in cash

The subscription price must be paid wholly in cash (which includes payment by cheque and payment in foreign currency), and  it must be paid in full by the time the shares are issued.

 

Date of issue of shares

Where the date of issue is in question, this should be ascertained in accordance with company law (see National Westminster Bank Plc v CIR, 67TC1).  Shares are issued to a person when that person’s title to them has become complete.  When that happens will depend on the circumstances of the particular case, but normally it will be when the shareholding is entered in the company’s Register of Members.

 

Transfers between spouses/civil partners

S169VU (3)-(5) ensures that where an individual who has subscribed for shares, transfers the shares to their spouse/civil partner, the spouse/civil partner ‘stands in their shoes’ for Investors’ Relief purposes and is treated as having subscribed for those shares at the original time of issue.

 

Nominee shareholder

Where an investor subscribes and disposes of shares through a nominee TCGA92/s60 applies and the subscription conditions at s169VU(1)(a) are considered met even though the nominee has subscribed for the shares on the investor’s behalf.   

See CG63500 for a general description of the relief and the layout of the guidance.