EIS: income tax relief: company and investor procedures: company procedures: overview
In outline, the statutory procedure for obtaining relief in respect of a subscription for shares is as follows:
- The company that has issued the shares supplies a statement to HMRC on form EIS1, listing the subscribers who have requested certificates and giving information about such matters as the company’s trade and capital structure. Form EIS1 is available from HMRC’s website at http://www.hmrc.gov.uk/forms/eis1.pdf
- If on examining the statement HMRC is satisfied that it should do so, it will send the company the appropriate number of blank forms EIS3, using form EIS2 to authorise it to issue certificates.
- The company completes the certificates and sends them to the subscribers.
- Each subscriber - or, where the subscriber is a nominee, the beneficial owner of the shares - can then claim relief (see VCM14160 regarding claims to income tax relief and VCM22180 regarding claims to CGT deferral relief for shares issued before 6 April 1998 and VCM23200 for shares issued on or after 6 April 1998).
It is essential that the company submits the correct information on the EIS1 as the EIS3 certificate issued to the investor is based on this information. In case of Ashley v Revenue & Customs Commissioners (SpC 633)the investor was unable to claim relief as the EIS1 and the subsequent EIS3 referred to the incorrect date for the share issue. The onus is on the investor to check the EIS3 certificate and, if necessary, request that the company correct the position. If the company refuses to correct the position the investor should inform HMRC.
In cases where the subscription is made through an approved investment fund (see VCM16050) the company will send a form EIS3 to the manager of the fund, who will use it as his authority to send each participant in the fund form EIS5. Those participants can then claim relief.