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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: insignificant amounts

TCGA92/SCH5B/PARA14AA

A repayment, redemption, repurchase or payment received by another person, see VCM23440, will not cause the shares to be treated as never having been eligible shares or as ceasing to be eligible shares if:

  • the shares were issued on or after 7 March 2001 or, where the shares were issued before 7 March 2001, the repayment, redemption, repurchase or payment was made on or after 7 March 2001, and
  • the repayment, redemption, repurchase or payment is insignificant.

A repayment, redemption, repurchase or payment is insignificant if the greater of:

  • the market value of the shares to which it relates (the target shares) immediately before the event, and
  • the amount received by the other person,

is insignificant in relation to the market value of the remaining issued share capital of the company (or, as the case may be, the subsidiary in question of that company) immediately after the repayment, redemption, repurchase or payment occurs.

‘Insignificant’ should be given its dictionary meaning of ‘trifling, or completely unimportant’.

For the purposes of this test the target shares are treated as having been cancelled at the time the repayment, redemption, repurchase or payment occurs.

But, a repayment, redemption, repurchase or payment cannot be treated as insignificant if any arrangements exist in the period starting 1 year before the shares for which the investor subscribed were issued and ending at the end of the issue date, which provide for:

  • a repayment, redemption, repurchase or payment, or
  • for anyone to be entitled to such a repayment, redemption, repurchase or payment,

    by

  • the company, or
  • any subsidiary of the company (whether or not it is a subsidiary at the time the arrangements are made),

at any time in the period of restriction, see VCM23310, in relation to the eligible shares.

‘Subsidiary’ has the meaning in TCGA92/SCH5B/PARA14 (7), see VCM23440.