EIS: company and investor procedures: obligation to notify HMRC of disqualifying events
Investor obligations to notify HMRC
If an investor becomes aware of an event which should result in the withdrawal or reduction of relief, he or she is obliged to notify HMRC of that event within 60 days of it occurring. Events which the investor is obliged to notify are any which would result in relief falling to be withdrawn or reduced for any of the following reasons:
- the investor ceases to be a qualifying investor (see VCM11010)
- there is a loan linked to the investment (see VCM11030)
- the shares are disposed of within Period B
- there is a put option or a call option over the shares (see VCM15020)
- the investor or an associate has received value (see VCM15030)
Company obligations to notify HMRC
The company is obliged to notify HMRC within 60 days of any event as a result of which any of the following happens or will happen:
- the monies raised by a share issue will not be employed as required by ITA07/S175 (see VCM12060).
- the company ceases to be a qualifying company (see VCM13010).
- the company or a person connected with the company provides value to the investor or an associate (see VCM15030).
- there are repayments of share capital to non-EIS investors (see VCM15090).
- the company acquires a trade or assets from parties controlling the company (see VCM15110).
- the company acquires share capital from parties controlling the company (see VCM15110).
If an investor or the company fails to provide the required information within the 60 day period, or fraudulently or negligently provides incorrect information, either may be liable to penalties under TMA70/S98.
See VCM15170 for HMRC’s powers to require the production of information in certain circumstances.
Similar provisions exist at TCGA92/SCH5B Paragraph 16 in relation to EIS capital gains deferral relief - see VCM23480.