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HMRC internal manual

Venture Capital Schemes Manual

From
HM Revenue & Customs
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EIS: deferral relief: shares issued on or after 6 April 1998: reinvestment in the same company

TCGA92/SCH5B/PARA10

There are three restrictions that are designed, broadly, to prevent deferral relief being available in circumstances where there is a disposal and acquisition of shares in the same company, or within the same group of companies.

Firstly, expenditure on eligible shares in a qualifying company cannot be set under Schedule 5B against a gain arising on the disposal of any shares or securities of:

  • that company; or
  • any company which is a member of the same group of companies as that company either when the disposal occurs or when the eligible shares are issued.

The second restriction applies if the investor disposes of any shares to which deferral relief is attributable (the ‘relief shares’). If the relief shares are shares in, say, company A, an investment by the investor in shares (the ‘later shares’) which are issued after some or all of the relief shares have been disposed of cannot be a qualifying investment for the purposes of Schedule 5B if the later shares are:

  • shares in company A; or
  • shares in any company which, at any time since the relief shares were issued, was a member of the same group of companies as company A.

The third restriction applies if deferral relief is attributable to any shares (the ‘relief shares’) the investor holds in, say, company A, and the gain in question which had been deferred arose on the disposal of shares (the ‘original shares’) in, say, company B. An investment by the investor in shares (the ‘later shares’) which are issued after the relief shares were issued cannot be a qualifying investment for the purposes of Schedule 5B if the later shares are:

  • shares in company B; or
  • shares in any company which was a member of the same group of companies as company B either when the original shares were disposed of or when the relief shares were issued.