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HMRC internal manual

Venture Capital Schemes Manual

Share Loss Relief: individual and corporate claimants: individual claimants: subscription for shares

If EIS relief is attributable to the shares disposed of then the individual claiming EIS relief need not have subscribed for those shares themselves. Otherwise it is a requirement that they must have subscribed for the shares.

When does an individual subscribe for shares?

Section 135 ITA 2007 explains this requirement in detail. An individual subscribes for shares in a company if they are issued to the individual by the company in consideration of money or money’s worth. Shares that are purchased from another owner, acquired by gift, inherited, or acquired on the death of a person by a personal representative of that deceased person will not have been subscribed for and so Share Loss Relief is not due in respect of losses incurred on those shares. The House of Lords considered the meaning of the word ‘issue’ in connection with shares in National Westminster Bank plc v CIR (67TC1) and decided that a share was only issued when the necessary statutory process had been completed and the shareholder was registered as such in the company’s register of members in connection with the shares in question.

Joint subscriptions and subscriptions through a nominee

Where shares are subscribed for jointly by more than one individual, you may accept that each individual subscribes for an appropriate number of those shares. Typically, each individual should be treated as holding shares in proportion to their contribution to the total price of all the shares issued. You should confirm any allocation of shares with the colleagues responsible for the other subscribers in order to prevent any possible over- or under- claim to Share Loss Relief in total.

Where shares are subscribed for by a nominee on behalf of an individual you may accept that the individual has subscribed for the shares for the purposes of Share Loss Relief.

Note that this does not enable investors to obtain income tax relief if they invest in a partnership which in turn invests in shares (including a limited partnership and a limited liability partnership). This is because rather than having individual ownership of the shares, the individual will instead own a proportion of all the assets, including shares, owned by the partnership (as will all the other partners in the partnership).

Special cases

There are two special cases in which an individual may be treated as having subscribed for shares, even though he or she did not give consideration for them to the issuing company.

The first case is where an individual subscribed for shares, or is treated as having subscribed for shares (see below) and then transferred the shares to a spouse or civil partner during their lifetimes. The recipient of the shares is treated as having subscribed for them themselves. This is at ITA07/S135(3). This treatment also applies where there is a series of transfers between spouses or civil partners, if the recipient later transfers the same shares to a different spouse or civil partner.

The second case relates to bonus issues, see VCM75330. Where shares are issued by way of a bonus issue, they are received by an existing shareholder but they are not issued for consideration. Bonus shares do not therefore meet the principal requirement in section 135(2) that the individual has subscribed for the shares in consideration of money or money’s worth.

However, section 135(4) provides that where an individual has subscribed for, or is treated as having subscribed for, shares in a qualifying trading company and is issued with ‘corresponding bonus shares’, the individual is treated as having also subscribed for those ‘corresponding bonus shares’. Not all bonus shares are ‘corresponding’ bonus shares: broadly the new shares must be of the same type and same class as the shares originally subscribed for in order for them to be corresponding bonus shares. For the full definition, see ITA07/S151 and VCM71030 (Definitions of terms used in the guidance) above.

Section 135(4) applies only to disposals after 5 April 2007, but it represents an earlier practice which had the same effect.


Mrs Lovelace subscribes £10,000 for 10,000 £1 ordinary shares of a company on 5 June 2003. Two years later there is a bonus issue and she receives an additional 1,000 shares of the same class. In December 2007 she gives all 11,000 shares to her husband. Mrs Lovelace is treated as having subscribed for the bonus shares in consideration of money or money’s worth, and so is her husband. (This is because of ITA07/S135(4) and (3) respectively). All 11,000 shares are capable of being qualifying shares, provided that the other necessary conditions are met, and so if Mr Lovelace realises a loss on a later disposal of his shares, Share Loss Relief may be available.

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Company claimants

The requirement that shares be subscribed for is the same for company claimants to Share Loss Relief. The relevant statute is at CTA10/S73 (and previously at ICTA88/S573(6)). The treatment (and meaning of) corresponding bonus shares is also the same. There is no provision analogous to that made for transfers between spouses or civil partners.