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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: value received by another person

TCGA92/SCH5B/PARA14

If value is received by another person, the shares are treated as never having been eligible shares or, if the value is received after the shares are issued, as ceasing to be eligible at the later date.

Value is received by another person if, within a certain period, see VCM23400, the company or any subsidiary:

  1. repays, redeems or repurchases any of its share capital which belongs to any member other than:
* the investor, or
* another investor who, because of the repayment, redemption, repurchase, or payment within (b) below, has a qualifying chargeable event or has any EIS Income Tax relief withdrawn by virtue of ICTA88/S299 or ITA07/S209, see [VCM15015](https://www.gov.uk/hmrc-internal-manuals/venture-capital-schemes-manual/vcm15015), or ICTA88/S300(2)(a) or ITA07/S216(2)(a), see [VCM15050](https://www.gov.uk/hmrc-internal-manuals/venture-capital-schemes-manual/vcm15050) (i), (or who would have had a qualifying chargeable event or have had any EIS Income Tax relief withdrawn on account of the repayment, redemption, repurchase or payment in question but did not because it constituted a receipt of insignificant value for deferral relief purposes, see [VCM23380](https://www.gov.uk/hmrc-internal-manuals/venture-capital-schemes-manual/vcm23380), or Income Tax relief purposes, see [VCM15040](https://www.gov.uk/hmrc-internal-manuals/venture-capital-schemes-manual/vcm15040)), or
* (for shares issued on or after 1 April 2000), a company which, because of a disposal of shares or repayment, redemption, repurchase or payment within (b) below, has any investment relief withdrawn by virtue of FA00/SCH15/PARA46 or PARA49 (1)(a) (or which would have had any investment relief withdrawn on account of the repayment, redemption, repurchase or payment in question but did not because it constituted a receipt of insignificant value for the purposes of FA00/SCH15/PARA47).
  1. makes any payment (directly or indirectly) to any such member, or to his or her order or for his or her benefit, for the giving up of his right to any of the share capital in the company or subsidiary on its cancellation or extinguishment.

In certain circumstances, see VCM23460, an amount of value received by another person is disregarded if the amount received is insignificant.

Exception - TCGA92/SCH5B/PARA14 (5)

The rules in paragraph 14 do not apply where a company issues share capital of £50,000 (the minimum amount permitted under the Companies Act) and any of it is redeemed within 12 months of the date of its issue. (Where a holder of shares which are redeemed in these circumstances has obtained relief on other shares, this exception does not prevent the loss of that relief by virtue of TCGA92/SCH5B/PARA13 (1)(b) and (2)(a)).

Meaning of qualifying chargeable event - TCGA92/SCH5B/PARA14 (4)

A repayment, redemption or repurchase of share capital to another investor gives rise to a qualifying chargeable event in respect of him if it causes a gain that has been deferred under the EIS to accrue to him.

Meaning of subsidiary - TCGA92/SCH5B/PARA14 (7)

References in paragraph 14 to a subsidiary of a company are references to a company which at any time in the relevant period is a 51% subsidiary of the first mentioned company, whether or not it is such a subsidiary at the time of the repayment, redemption, repurchase or payment in question.