VCM12140 - The investment process: subscriptions for shares: commerciality

ICTA/S289 (6); ITA/S178; TCGA92/SCH5B/PARA1 (2)(d); FA00/SCH15/PARA14

For the EIS and CVS, an investor in a company is not eligible for relief unless the subscription is made for genuine commercial reasons. This rules out any subscription which is motivated by considerations of benevolence. This could be the case if, for example, the company were the proprietor of an unsuccessful professional football club and a supporter of the club paid a large premium for shares in the company; that may well not be a commercial subscription. Similarly, if the company is owned by a person whom the investor wishes to benefit, and the investor pays a large premium for the shares with the object of increasing the value of the other person's shares, that too would not be a commercial subscription.

Deathbed investments are unlikely to be made for genuine commercial reasons.