Share Loss Relief: how to use the guidance: when were the shares subscribed for?
You will need to be certain that the shares disposed of were subscribed for, or may be treated as though they were subscribed for, by the claimant (rather than bought from a third party). You will also need to know the date or dates on which the shares were issued, as this determines the applicable statute and hence the exact rules which determine whether the shares are qualifying shares, and the period during which the necessary conditions must be met.
The date when shares were issued may also be significant for Share Loss Relief purposes if it results in the shares qualifying for another form of relief or investment incentive - see VCM72050.
Shares issued before 6 April 1998
The shares must be of a ‘qualifying trading company’ and the necessary conditions were at ICTA88/S576(4). Following the Tax Law Rewrite the conditions are at ITA07/S134 and S137 to S143 but you should note that some currently-relevant conditions do not apply at all to shares issued before 6 April 1998, and others - the trading and control and independence requirements - apply with modifications.
Shares issued on or after 6 April 1998
The shares must still be of a ‘qualifying trading company’ but the conditions are more complex, in order to align them with the EIS rules. The necessary conditions were at section 576(4), (4A) and (4B), and they prayed into the corresponding conditions for EIS relief at section 293, with modifications. Following the Tax Law Rewrite the conditions came to be found at ITA07/S134 and S137 to S143, but again you should be aware that some conditions apply with modifications to shares issued before certain dates.
Shares issued on or after 7 March 2001
Where the Share Loss Relief rules pray into the rules and conditions for another relief, and the relevant terms of that other relief are amended, there may be consequential changes to Share Loss Relief. So when Finance Act 2001 changed the nature of the unquoted share requirement for EIS purposes the corresponding requirement for Share Loss Relief therefore also changed, as ICTA88/S576 prayed directly into section 293. The changes are effective for all shares issued on or after 7 March 2001, and in respect of shares issued after 5 April 1998 but before 7 March 2001 they apply to any part of a relevant period falling on or after 7 March 2001. (In other words, the ‘old’ unquoted share requirement should be applied to any period or part of a period ended before 7 March 2001 and the ‘new’ requirements applied to any period or part of a period ending after 6 March. Thus a share issued in 1999 and disposed of in 2002 will have to satisfy both requirements at separate times.) When the Tax Law Rewrite transferred the ‘unquoted status requirement’ to ITA07/S143 the nature of the old and new requirements and the periods during which they must be satisfied were not changed: see ITA07/SCH2/PARA46(1). Shares issued before 6 April 1998 remain subject to the simpler criteria for being a ‘qualifying trading company’, which are independent of the EIS rules.
Shares issued on or after 17 March 2004
Finance Act 2004 introduced a new requirement for shares to be eligible for EIS relief: the ‘property managing subsidiaries’ requirement (at ICTA88/S293(6ZA)). Share Loss Relief adopts the same conditions and requirements for eligibility, and so it became necessary for a company to meet the property managing subsidiaries requirement in order for its shares to be eligible for Share Loss Relief. It would be unfair to make this requirement retrospective, so it applies only to shares issued on or after 17 March 2004. The property managing subsidiaries requirement is now at ITA07/S141.