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HMRC internal manual

Venture Capital Schemes Manual

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Share Loss Relief: individual and corporate claimants: individual claimants: deemed time of issue of shares transferred in certain circumstances and corresponding bonus shares

ITA07/S150 contains provisions which determine the time at which shares are treated as having been issued in particular circumstances and for certain purposes. The purposes are those of the ‘relevant provisions’, which are

ITA07/S134(5)(a) Condition D in the definition of a qualifying trading company (the relationship of the issuing company to the UK during a period determined by reference to the date of issue of the shares) See VCM75120   
       
ITA07/S142(1)(a) and (2)(a) the gross assets requirement which must be met immediately before the shares are issued See VCM75100   
ITA07/S143(1) the unquoted status requirement which must be met at the time the shares are issued See VCM75110   
ITA07/S146(2)(b) new shares acquired by an individual in exchange for old shares are, subject to certain conditions, be treated as issued at the time the old shares were issued See VCM75360   

The circumstances in which this treatment applies are where

  • shares were issued to an individual (A) (or are treated as having been issued to A because they are corresponding bonus shares or because A acquired them from his or her spouse by a transfer during their lives) at a particular time and 
  • the shares are transferred by A to another individual (B) during their lives and 
  • A was B’s spouse or civil partner at the time of the transfer.

The effect of this treatment is that for the purposes of the relevant provisions the shares are treated as having been issued to B at the same time as they were (or are treated as having been) issued to A. Notice that this can apply more than once to a sequence of transfers: if shares were issued to A on 12 March 2010, and A transfers them to his spouse B on 30 September 2011 then the shares are treated as having been issued to B on 12 March 2010. If A and B later divorce and B subsequently transfers the same shares to her civil partner C on 1 May 2015 then the shares are treated as having been issued to C on 12 March 2010.

The same treatment also applies to corresponding bonus shares where the shares in respect of which the bonus shares were issued (the original shares) were issued to an individual (or are treated as having been issued to an individual) at a particular time and corresponding bonus shares are subsequently issued to the individual. Where this is the case, the bonus shares are treated for the purposes of the relevant provisions as having been issued at the same time as the original shares were issued or are treated as having been issued. So if in the above example there was an issue of corresponding bonus shares to A on 1 August 2011 they are treated as having been issued on 12 March 2010. If there is a second issue of corresponding bonus shares to B on 30 April 2014 the new shares are treated as having been issued on 12 March 2010.