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HMRC internal manual

Venture Capital Schemes Manual

HM Revenue & Customs
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Share Loss Relief: individual and corporate claimants: individual claimants: types of qualifying share

Shares to which EIS relief is attributable

This is one sub-set of qualifying shares. For the purposes of Share Loss Relief, EIS relief is relief given under either of two heads. It is either income tax relief under Part 5 of ITA 2007 or (in relation to shares issued after 31 December 1993 and before 6 April 2007) it is relief under ICTA88/CH3/PT7. It is not the same as relief under the Business Expansion Scheme, which was available in respect of shares issued before 1 January 1994. For guidance on income tax relief under the Enterprise Investment Scheme, see VCM10500+.

Shares in a qualifying trading company

Shares in a qualifying trading company which were subscribed for by the individual claimant comprise the second sub-set of qualifying shares. For the meaning of ‘subscribed for’, see VCM74060.

The definition of a qualifying trading company is complex and has been amended from time to time over the years. It is considered in detail later in this guidance. In summary, section 134 ITA 2007 imposes four ‘high level’ conditions (A - D) each of which must be met. Each of these high level conditions has two or more subsidiary requirements some or all of which must be met in order for the high level condition to be met. The following table introduces the high level conditions and their subsidiary requirements and provides links to more detailed guidance.

High level condition A: subsidiary requirements to be met at time of, or prior to, disposal of shares

All four subsidiary requirements must be met.  

Subsidiary requirement Statute  
(ITA 2007) Guidance  
The trading requirement S137 VCM74610 to VCM74790
The control and independence requirement S139 VCM74900 to VCM74910
The qualifying subsidiaries requirement S140 VCM74920 to VCM74940
The property managing subsidiaries requirement S141 VCM74950 to VCM74970

High level condition B: subsidiary requirements in A also to be met throughout a specified period

Subsidiary requirements are alternative to one another

Subsidiary requirement Statute  
(ITA 2007) Guidance  
subsidiary requirements in A to be met for continuous period of six years S134(3)(a) VCM75000
subsidiary requirements in A to be met for less than six years providing previous activities are limited S134(3)(b) VCM75000

High level condition C: Upper limit on size of company issuing shares

Both subsidiary requirements must be met

Subsidiary requirement Statute  
(ITA 2007) Guidance  
Gross assets requirement met before and after share issue S134(4)(a) & S142  VCM75100
Unquoted status requirement met at the relevant time S134(4)(b) & S143  VCM75110

High level condition D: UK Business

Originally a requirement that the company be UK resident

Subsidiary requirement Statute    
(ITA 2007) Guidance    
Company must carry on its business wholly or mainly in UK throughout a specified period S134(5) VCM75120