Seed Enterprise Investment Scheme (SEIS): SEIS disposal relief: share exchanges
When a SEIS company is taken over, the acquiring company may issue its own shares in exchange for the original shares; that is the shares which have attracted SEIS Income Tax relief. This remains a disposal of the original shares for CGT purposes even though new shares are issued in exchange (i.e. TCGA92/S135 - 137 is disapplied) unless:
- All the SEIS Income Tax relief given on the original shares has been withdrawn.
This may occur as a consequence of the take-over itself, see VCM37030 onwards, or
Not all the income tax relief is withdrawn but:
- the new shares are issued on or after the third anniversary of the date on which the original shares were issued and meet the conditions set out in TCGA92/S150E (10) and (11), see below, or
- the share exchange falls within TCGA92/S150E (13), see below.
TCGA92/S150E (10) and (11)
- one SEIS qualifying company, that is a company which has issued one or more compliance certificates (SEIS3) takes over a second SEIS qualifying company, and
- the new holding, see CG51730, consists of new ordinary shares issued by the acquiring SEIS company after the anniversary date referred to above that carry no present or future preferential rights to dividends or to assets on a winding up and no present or future rights to be redeemed
TCGA92/S135 may apply resulting in no disposal of the original shares if its conditions are met and the anti-avoidance provisions of TCGA92/S137 do not operate, see CG52500 onwards.
See example 2 at VCM40180.
TCGA92/S150E (13), ITA07/S257HB
TCGA92/S150A (13) effectively applies the provisions of ITA07/S257HB for CGT purposes.
- a company, having issued only subscriber shares, acquires all the shares (and securities) in a SEIS company in exchange only for the proportionate issue of its own shares (and securities) of a corresponding description, see below, and
- before the issue of the new shares (and securities) HMRC has notified the new company or the old company that they are satisfied that the share exchange will take place for bona fide commercial reasons and will not form part of any such scheme or arrangements as are mentioned in TCGA92/S137(1), seeCG52505,
the share exchange is not treated as a disposal of the original shares and the new shares stand in the place of the old shares in all respects and attract the same relief, see example 4 at VCM40180.
Anti-Avoidance provisions of TCGA92/S137
The Anti Avoidance Group Clearance and Counteraction Team only consider matters that relate to the anti-avoidance provisions of TCGA92/S137. All other matters must be considered by the HMRC officer dealing with the company in the first instance with reference to Capital Gains Technical Group if the problem relates to SEIS deferral or disposal relief or CTIAA (Structure, Incentives & Reliefs team) if the problem relates to income tax relief.
Corresponding description means that if the new shares (and securities) were shares (and securities) in the old company they would be of the same class and carry the same rights as the original shares (and securities). Shares (and securities) would be of the same class if they would be so treated if dealt with on the Stock Exchange.