VCM26520 - EIS: income tax relief: withdrawal or reduction of relief: disputed cases

ICTA/S307 (1A); ITA/S234 (2) & (3)

In some cases it may be that the officer forms the opinion that relief falls to be withdrawn even though no notification has been given under ICTA/S310, ITA/S240 or ITA/S241. Where in such a case the reason for the officer’s opinion is that:

• the company is not a qualifying company,

or

• the shares were not issued to raise money for the purpose of a qualifying business activity,

or

• the company using the money raised does not satisfy the conditions applying to it,

or

• the money raised was not employed for the purpose of a qualifying business activity within the time allowed,

the officer must give notice to the company before relief can be withdrawn. The notice should specify the date of the relevant share issue, state the grounds for the decision, and set out the company's right of appeal against it (which is to the General Commissioners or, if the company so elects, the Special Commissioners).

The purpose of this procedure is to allow the party to appeal proceedings to be the company itself in cases where most of the relevant evidence lies within its own power, and to simplify the withdrawal process in cases where there is a large number of investors. But neither the failure of a company to appeal nor any decision by Commissioners in favour of HMRC in any appeal prohibits a shareholder from making his own appeal against a withdrawal assessment subsequently.

Once the officer has given a notice under Section 307 (1A) or ITA/S234 it is not necessary to await determination of any appeal by the company before making a withdrawal assessment. But if such assessments are made the officer should ensure that all individuals assessed are aware of the fact and that the company's appeal is heard first.