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HMRC internal manual

Venture Capital Schemes Manual

EIS: income tax relief: withdrawal or reduction of EIS relief: value received by the investor: overview

ITA07/S213, ITA07/S221

Where an individual who has obtained relief, or is entitled to obtain relief, in respect of shares in a company receives any value within Period C (see VCM10540) from the company that relief is to be reduced. For the amount of the reduction, see VCM15040.

This rule is extended by ITA07/S221 to cover cases where:

  • the value comes from any person connected with the company (whether it becomes connected before or after the value leaves it),

and cases where:

  • the recipient is an associate of the individual.

Where the receipt is ‘insignificant’ relief is not affected. See VCM15050 for what is meant by ‘insignificant’.

VCM15060 sets out the circumstances in which value is considered to be received, and explains how the amount of the ‘value’ is to be determined.

How much relief is withdrawn will depend on the amount of the value received. There is scope for relief to be retained if the value received is made good by the investor as soon as is practicable. See VCM15080.

Obligation to report

An individual who receives value is obliged by ITA07/S240 to make a report to HMRC within 60 days. Failure to make such a report attracts a penalty under TMA70/S98.