VCM26300 - EIS: income tax relief: value received: outline

ICTA/S300; ICTA/S301 (6); ITA/S213; ITA/S221

Where an individual who has obtained relief, or is entitled to obtain relief, in respect of shares in a company receives any value within the period of restriction (ICTA)/ Period C (ITA) –(see VCM20600) from the company that relief is to be reduced. For the amount of the reduction, see VCM26360.

This rule is extended to cover cases where:

• the value comes from any person connected with the company (whether it becomes connected before or after the value leaves it),

and cases where:

• the recipient is an associate of the individual.

Example

Graham and Mark own Gramark Consultants Ltd. They each subscribe for a 30% holding in a new company, Ecofriendly Umbrellas Ltd, and obtain relief. Shortly afterwards Mark receives value from Gramark Consultants Ltd.

Because Graham and Mark are a group that controls each company the two companies are connected under ICTAITA/S993(5)(d). So, by virtue of Section 301(6) and ITA/S221(c), Mark has received value from a company connected with Ecofriendly Umbrellas Ltd and his relief must be reduced.