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HMRC internal manual

Venture Capital Schemes Manual

HM Revenue & Customs
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CVS: investors and reliefs: receipt of value: replacement value


The investing company can avoid the consequences of receiving value if it returns the whole of the value to the company that gave it. The value may be returned in any of the following ways:

  • by a cash payment, other than a qualifying payment (see VCM91320) or a payment for shares or securities of the company (unless the receipt of value in question arose from the receipt of those shares or securities),
  • where the receipt of value arose from the waiver or discharge of a liability or debt, by reversing that transaction,
  • where the receipt of value arose from either the transfer of an asset to the investing company at an under-value or the transfer any asset to the issuing company at an over-value, by the transfer of any asset in the reverse direction at a corresponding under-value or over-value.

Where the value comes from a person connected with the issuing company it should be returned to that person, and where it is received by a person connected with the investing company it should be returned by that person. Note that the value must be wholly returned; returning part of it has no effect.

The replacement value must be given without unreasonable delay. If the amount of the value received was the subject of appeal proceedings it must be given within 60 days after the final determination of the appeal. A payment made before the value was received may be taken into account as replacement value, provided it was not made before the start of the period of restriction (see VCM91300).

If the value is replaced by way of a subscription for shares, no claim to investment relief (or, if the replacement value is given by an individual connected with the investing company, relief under the EIS) can be made in respect of that subscription.