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HMRC internal manual

Venture Capital Schemes Manual

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HM Revenue & Customs
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EIS: deferral relief: shares issued on or after 6 April 1998: share reorganisation

TCGA92/SCH5B/PARA7 and TCGA92/S150A

It is possible for an investor to own shares which attract different types of tax relief or no tax relief at all. For share reorganisations TCGA92/SCH5B/PARA7 (1) divides the shares into three categories but does not deal with shares which attract only EIS Income Tax relief. TCGA92/S150A (6) divides the shares into three categories but does not deal with shares which attract only deferral relief. The combined effect of these provisions is to separate four categories of shares

  Shares attracting EIS IT relief Shares attracting deferral relief
     
(a) X X
(b) X Y
(c) Y X
(d) Y Y

X indicates that the shares do not attract the relief.

Y indicates that the shares do attract the relief.

Bonus issues

TCGA92/SCH5B/PARA7 (1) and TCGA92/S150A (6)

Where a taxpayer holds shares which fall within more than one of the categories (a)-(d) above and there is a bonus issue, the share reorganisation provisions apply separately to each category. The bonus issue shares are allocated pro-rata among the various categories.

Rights issues

TCGA92/SCH5B/PARA7 (2) and TCGA92/S150A (7)

The normal share reorganisation rules on rights issues are disapplied if the original shares fall within categories (b), (c) or (d) or if the new shares fall within categories (b), (c) or (d) and the original shares did not. The taxpayer is treated as having acquired the new shares at the date of the rights issue and for the amount paid for the new shares. Any shares acquired on a rights issue may qualify for EIS Income Tax relief and/or deferral relief, but a separate claim will need to be made.