CG63610 - Investors’ Relief: Joint Holdings

TCGA92/S169VJ

S169VJ ensures that where a qualifying person disposes of an interest in a relevant holding Investors’ Relief is potentially available where the subscription was made jointly with one or more other individuals.

Where a share is jointly owned then each person will own an interest in that share. S169VJ allows Investors’ Relief to apply when shares are held jointly so that the disposal by an individual investor is of their ‘interest’ in the shares.

Example

Francis, Kim, Joey and David are friends who pool money to make small investments in unquoted companies. They don’t always agree so not all of them may choose to invest in a particular company at a particular time. Assume all other conditions for Investors’ Relief are met.

The following share subscriptions are made in P Ltd -

June 2016 – they all agree it looks a good prospect so subscribe for 500 shares between the four of them.

January 2017 – Francis, Kim and Joey subscribe for another 350 shares together; however David preferred to invest in a higher risk company.

August 2017 – Francis received a small inheritance and used some of it to buy 500 P Ltd shares.

September 2017 – P Ltd makes a rights issue, this time only Francis and Joey feel it is a good investment and jointly buy 150 shares.

Looking at Francis’s holding, he has sole ownership of 500 shares and an interest in another 1000. The proportionate interest in shares varies.

For Investors’ Relief purposes Francis has the following holding–

Initial holding at June 2016 (500/4) 125

Add January 2017 (350/3) 117 (rounded)

Add August 2017 500

Add September 2017 (150/2) 75

Holding at September 2017 817

Partnerships and LLPs

Where a partnership (or an LLP, which is normally treated for tax purposes as a partnership) subscribes for shares, the individual partners are treated as having themselves subscribed (section 59(1)(b)). It is not necessary for the partners to have directly funded the subscription: the new consideration given for the shares may have come out of partnership funds. In cases of “partnership subscriptions”, therefore, each partner is deemed to have subscribed for a fraction of the total shares issued. The fraction is to be the same as the partner’s fractional share in the assets of the partnership at the time the shares are issued.

By way of example, if a partnership of four individuals with asset shares in the ratio 40:30:20:10 subscribes for 1000 shares, the partners are treated as having subscribed for 400, 300, 200 and 100 shares respectively.

If a new partner is admitted and each existing partner transfers 10% of their asset-share to the new member then they are treated as disposing of (40+30+20+10) shares eligible for Investors’ Relief. The new member will not be able to claim Investors’ Relief on the 100 shares as she is treated as acquiring the shares as she did not subscribe for them.

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