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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: replacement value: receipt of

TCGA92/SCH5B/PARA13 (1A), TCGA92/SCH5B/PARA13B (1)-(3) and TCGA92/SCH5B/PARA13C (1) - (4)

A receipt of value (the original value) during the period of restriction relating to an issue of shares, see VCM23310, is disregarded and, consequently, will not cause the shares to be treated as never having been eligible shares or as ceasing to be eligible shares where all the following conditions are satisfied:

  • the shares were issued on or after 7 March 2001 or, where the shares were issued before that date, the original value was received on or after 7 March 2001, and
  • the original value was received in any of the circumstances described in VCM23320, except for value received in connection with the repayment of a debt within (b) of TCGA92/Sch5B/Para 13(2), as described in the second bullet of VCM23320, and
  • the person from whom the original value was received (the original supplier) receives replacement value in the form of a qualifying receipt, see VCM23410, from the person who received the original value (the original recipient), and
  • the amount of the replacement value is not less than the amount of the original value, and
  • the receipt of replacement value is not disregarded (see below).

TCGA92/SCH5B/PARA13C (1)-(3)

The replacement value does not have to be received after the receipt of the original value. But, the receipt of replacement value is disregarded to the extent to which it has been used on a previous occasion to disregard an amount of value received by the investor in relation to any shares subscribed for by him.

In addition, the receipt of replacement value is disregarded in the following circumstances:

  • where the receipt of replacement value occurs before the start of the period of restriction relating to the shares, or
  • where the receipt of replacement value occurs after the receipt of the original value but does not take place as soon after that time as is reasonably practicable in the circumstances of the case, or
  • where an appeal has been made against an assessment made to revive a gain by reason of a receipt of value and the receipt of replacement value occurs more than 60 days after that appeal has been finally determined.

TCGA92/SCH5B/PARA13C (3) & (4)

Where the event which gives rise to the receipt of replacement value is or includes a subscription for shares by:

  • the investor, or
  • a person who, at any time in the period of restriction is an associate of the investor, see VCM23370, whether or not he is an associate at the time of the receipt of that replacement value,

the person who subscribes for the shares shall not be:

  • eligible for EIS income tax relief, or
  • treated as making a qualifying investment for the purposes of EIS deferral relief,

in relation to those shares or any other shares in the same issue.