EIS: deferral relief: shares issued on or after 6 April 1998: Inspector's power to require information
If an officer of HMRC has reason to believe that a person:
- has failed to give notice of an event which removes the entitlement to relief, or
- has given or received value which, but for the fact that the amount received was insignificant, see VCM23380, would have triggered a requirement to give a notice under TCGA92/SCH5B/PARA16 (1) or (2), see VCM23480, or
- has made or received any payment, repayment, redemption or repurchase falling within TCGA92/SCH5B/PARA14 (1), see VCM23440, which, but for the fact that the amount received was insignificant, see VCM23460, would have triggered a requirement to give a notice under TCGA92/SCH5B/PARA16 (2), see VCM23480,
they may, by notice in writing, require that person to furnish them with such information relating to any event as they may reasonably require. The time limit allowed for furnishing the information must not be less than 60 days. Formal notices should be issued only where informal requests for information have produced no, or an inadequate, response. Speculative notices should not be issued and any information required under a notice must be confined to matters that may cause the withdrawal of relief.
Avoidance - TCGA92/SCH5B/PARA16 (6)
If an Inspector has reason to believe that any investor is claiming relief in circumstances where:
- the shares are subscribed for and issued for tax avoidance purposes, see VCM23020 (d),
- the shares are subscribed for in circumstances where there are arrangements to achieve a pre-arranged exit, see VCM23270,
- the shares are shares in a company which is controlled by another company or which controls another company which is not a qualifying subsidiary, see VCM13130,
- arrangements exist for a subsidiary of the company which issued the shares to cease to meet the conditions for it to be a qualifying subsidiary of that company, see VCM13130.
- Or (in the case of shares issued on or after 17 March 2004) that after the shares are issued:
- there is a scheme or arrangement that could cause the company to cease to be a qualifying subsidiary of a qualifying company,
- the company or its subsidiary takes any of the following actions as part of a scheme or arrangement the main purpose of which or one of the main purposes of which is the avoidance of tax,
- it enters into administration or receivership or carries out actions as a result of being in administration or receivership,
- it is wound up or dissolved without being wound up,
and that as a result:
- the company would not be a qualifying company, (see VCM23060), or
- the requirements of ICTA88/S289(1A) or ITA07/S183(1) would fail to be met (see VCM13080), or
- the requirement that the trade or research and development which is funded by the issue of the shares is carried on for a minimum period of four months would not be met (see VCM12060), or
- a subsidiary which is required to be a qualifying 90% subsidiary of the company would cease to be such a subsidiary (see VCM13080),
There is provision for an officer to request, by notice in writing, information on the precise circumstances of the share issue or the scheme or arrangement. The time limit allowed for furnishing the information must not be less than 60 days.
Notices requesting information can be issued to:
- The claimant (in cases (a), (b), (f) above).
- The company (in cases (a) to (f) above).
- Any person controlling the company (in all cases apart from (b) above).
- Any other company in question, or any person controlling such a company (in cases falling within (f) above).
A report should be made to Capital Gains Tax Technical Group before such a notice is issued.
Shareholdings - TCGA92/SCH5B/PARA16 (9)
Where any relief has been claimed an Inspector may require any person who holds or has held eligible shares in the qualifying company, and any person on whose behalf any such shares are or were held, to state whether these are or were held on behalf of someone else and, if so, to give the name and address of that person.
This provision enables an Inspector to obtain the name and address of the beneficial owner of the eligible shares, not only where they are held in the name of a nominee but also where they are held through a series of nominees. Any notice requiring such information should normally be served by the Inspector dealing with the company’s affairs.
An Inspector is not precluded by the obligation to secrecy from disclosing to a qualifying company, in the course of exercising the power to require information, that relief has been claimed or given in respect of any of its shares. Care should be taken not to disclose whose subscriptions have been the subject of relief.