VCM12150 - The investment process: subscriptions for shares: avoidance schemes

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

For the EIS and the CVS, the subscription for the shares of the company must not form part of a scheme or arrangement the main purpose, or one of the main purposes, of which is the avoidance of tax.

The reduction of an investor's tax liability which flows from the schemes in the circumstances intended by Parliament is obviously not a tax advantage at which this rule is aimed. We therefore do not have to judge whether a subscription for eligible shares would have been made if it had not attracted relief.

The scope of the provision cannot be described precisely, but it may apply in any situation where there are grounds for thinking that the circumstances are not ones in which Parliament intended the relief to be available.

Before any case is challenged solely on these grounds a report should be made to CT&VAT (Technical). A report should also be made before any notice requiring information regarding any suspected scheme or arrangement is issued under ICTA/S310 (5) or ITA/S243.