EIS: income tax relief: withdrawal or reduction of EIS relief: procedure: HMRC power to require information
See also VCM14210 for a description of the obligations imposed on investors and the company to notify HMRC of circumstances which should result in relief being reduced or withdrawn.
If an HMRC officer has reason to believe that a person has failed to give notice of an event (see VCM14210) which removes the entitlement to relief, that person may be required, by notice in writing, to provide such information relating to any event as may reasonably be required. The time limit allowed for furnishing the information must not be less than 60 days.
ITA07/S242 may not be used to issue speculative notices. Any information required under a notice must be confined to matters that may cause the withdrawal of relief.
In addition to the above, ITA07/S243 allows HMRC to require certain persons to provide information in relation to any scheme or arrangement which the officer has reason to believe may result in EIS relief not being due. The types of arrangement covered by this rule are as follows:
- where the shares are subscribed for tax avoidance purposes (see VCM11040),
- where the company or a subsidiary is put into administration, wound up or liquidated for tax avoidance purposes,
- where shares are subscribed for under the type of arrangements described at VCM11090,
- where there are pre-arranged exit or investment protection arrangements of the type described at VCM12080,
- where there are disqualifying arrangements as described at VCM12100,
- any arrangements which would result in the company failing the control or independence requirements (see VCM13100), or
- any arrangements which would result in either a qualifying 90% subsidiary (see VCM13080) or a qualifying subsidiary (see VCM13130) ceasing to meet the relevant requirements for qualification,
HMRC may seek information from investors, the company, persons connected with or controlling the company, or persons believed to be party to disqualifying arrangements as appropriate to the circumstances and as outlined at ITA07/S243.
Failure to comply with a notice given under ITA07/S242 or S243 may attract penalties under TMA70/S98.
Similar provisions exist at TCGA92/SCH5B/PARA16 in relation to EIS capital gains deferral relief - see VCM23490.
The officer is not precluded by the obligation to secrecy from disclosing to a company, in the course of exercising the power to require information, that relief has been claimed or given in respect of any of its shares.