HMRC internal manual

Venture Capital Schemes Manual

VCM15080 - EIS: income tax relief: withdrawal or reduction of EIS relief: value received by the investor: receipt of replacement value


The individual can avoid the consequences of receiving value by returning the whole of the value to the person that gave it. The value may be returned in any of the following ways:

  • by a cash payment, other than a payment listed below, or a payment for shares or securities of the company (unless the receipt of value in question arose from the receipt of those shares or securities),
  • where the receipt of value arose from the waiver or discharge of a liability or debt, by reversing that transaction,
  • where the receipt of value arose from either the transfer of an asset to the individual at an under-value or the transfer any asset to the company at an over-value, by the transfer of any asset in the reverse direction at a corresponding under-value or over-value.

Where the value comes from a person connected with the company it should be returned to that person, and where it is received by a person associated with the individual it should be returned by that person. Note that the value must be wholly returned; returning part of it has no effect.

The replacement value must be given without unreasonable delay. If the amount of the value received was the subject of appeal proceedings it must be given within 60 days after the final determination of the appeal. A payment made before the value was received may be taken into account as replacement value, provided it was not made earlier than one year before the issue of the shares.

If the value is replaced by way of a subscription for shares, no claim to relief (or, if the replacement value is given by a company connected with the individual, investment relief under the CVS) can be made in respect of that subscription.

Replacement in cash

The payments referred to above are payments of the following types:

  • a reasonable payment for goods, services or facilities,
  • a payment of interest on normal commercial terms,
  • a payment of a dividend which does not exceed a normal return on the investment,
  • a payment for an asset not exceeding its market value,
  • a payment of rent on normal commercial terms,
  • a payment to discharge a trade debt.