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HMRC internal manual

Venture Capital Schemes Manual

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EIS: deferral relief: shares issued before 6 April 1998: share reorganisation

TCGA92/SCH5B

There are two common types of share reorganisation, bonus issues and rights issues.

The taxpayer may hold different categories of shares issued before 6 April 1998, shares which have attracted no EIS reliefs, shares which have attracted EIS Income Tax relief and shares which have attracted both EIS Income Tax relief and deferral relief. Shares issued on or after 6 April 1998 may attract deferral relief only. When there is a bonus issue each category of share is treated separately and where the shares have attracted deferral relief this continues and is apportioned between the original shares and the bonus issue shares.

Where there is a rights issue the reorganisation provisions of TCGA92/S127 - S130 will only apply to shares to which no EIS Income Tax relief or deferral relief is attributable immediately after the rights issue. The taxpayer holding shares which attract EIS relief is treated as having acquired the new shares at the date of the rights issue and for the amount they paid for the new shares. Any shares acquired on a rights issue may qualify for EIS Income Tax relief and deferral relief, but a separate claim will need to be made.