SCHEDULE 7 - AMENDMENT 157
Schedule 7(9), new ITA 2007, s178A(1), leave out 'in
consequence' and insert ', nor any money raised by the issue
employed, in consequence or anticipation'.
SCHEDULE 7 - AMENDMENT 158
Schedule 7(9), new ITA 2007, s178A(2), leave out from beginning to
'and' in subsection (2)(a)(ii) and insert—
'(a) the main purpose, or one of the main purposes, of the
arrangements is to secure—
(i) that a qualifying business activity is or will be
carried on by the issuing company or a qualifying 90%
subsidiary of that company, and
(ii) that one or more persons (whether or not including any
party to the arrangements) may obtain relevant tax relief in
respect of shares issued by the issuing company which raise
money for the purposes of that activity or that such shares may
comprise part of the qualifying holdings of a VCT,
(aa) that activity is the relevant qualifying business
activity,'.
SCHEDULE 7 - AMENDMENT 159
Schedule 7(9), new ITA 2007, s178A(3), leave out from 'amount
raised is' to end of subsection (3) and insert ', in the
course of the arrangements, paid to or for the benefit of a relevant
person or relevant persons.'.
SCHEDULE 7 - AMENDMENT 160
Schedule 7(9), new ITA 2007, s178A(4), after 'expect that'
insert 'the whole or greater part of'.
SCHEDULE 7 - AMENDMENT 161
Schedule 7(9), new ITA 2007, s178A(4), leave out from 'another
business by' to end of subsection (4) and insert 'a relevant
person or relevant persons.'.
SCHEDULE 7 - AMENDMENT 162
Schedule 7(9), new ITA 2007, s178A(6), definition of
"qualifying holdings", at end insert—
'"relevant person" means a person who is a party
to the arrangements or a person connected with such a
party;'.
SCHEDULE 7 - AMENDMENT 163
Schedule 7(30), new TCGA 1992, Sch 5B, para 11A(1), leave out
'in consequence' and insert ', nor any money raised by
the issue employed, in consequence or anticipation'.
SCHEDULE 7 - AMENDMENT 164
Schedule 7(30), new TCGA 1992, Sch 5B, para 11A(2)(a), leave out
from beginning to 'and' in sub-paragraph (2)(a)(ii) and
insert—
'(a) the main purpose, or one of the main purposes, of the
arrangements is to secure—
(i) that a qualifying business activity is or will be
carried on by the company or a qualifying 90% subsidiary of the
company, and
(ii) that one or more persons (whether or not including any
party to the arrangements) may obtain relevant tax relief in
respect of shares issued by the company which raise money for
the purposes of that activity or that such shares may comprise
part of the qualifying holdings of a venture capital trust,
(aa) that activity is the relevant qualifying business
activity,'.
SCHEDULE 7 - AMENDMENT 165
Schedule 7(30), new TCGA 1992, Sch 5B, para 11A(3), leave out from
'amount raised is' to end of sub-paragraph (3) and insert
', in the course of the arrangements, paid to or for the benefit
of a relevant person or relevant persons.'.
SCHEDULE 7 - AMENDMENT 166
Schedule 7(30), new TCGA 1992, Sch 5B, para 11A(4), after
'expect that' insert 'the whole or greater part
of'.
SCHEDULE 7 - AMENDMENT 167
Schedule 7(30), leave out from 'another business by' to
end of sub-paragraph (4) and insert 'a relevant person or
relevant persons.'.
SCHEDULE 7 - AMENDMENT 168
Schedule 7(3), new TCGA 1992, Sch 5B, para 11A(6), definition of
"qualifying 90% subsidiary", at end insert—
'"relevant person" means a person who is a party
to the arrangements or a person connected with such a
party;'.
EXPLANATORY NOTE
CLAUSE 39 SCHEDULE 7: ENTERPRISE
INVESTMENT SCHEME
SUMMARY
1. Clause 39 and Schedule 7 make a number of changes to the
Enterprise Investment Scheme. One of these changes is the
introduction of an anti-abuse provision, intended to ensure that the
scheme remains appropriately targeted.
2. Amendments 157 to 168 make a number of changes to the
anti-abuse provision in the Schedule, to ensure that the provision
has the intended effect.
DETAILS OF THE AMENDMENTS
3. Amendment 157 replaces the words "in consequence" on
page 211, line 14 with the words: "nor any money raised by the
issue spent, in consequence or in anticipation". This is to
ensure that the legislation has effect whether the
"disqualifying arrangements" are entered into before or
after the relevant share issue.
4. Amendment 158 removes reference to the purpose of any person
who is party to the arrangements in question, and replaces it with
reference to the purpose of the arrangements. This is to prevent the
legislation catching "innocent" arrangements merely by
virtue of the fact that an investor in EIS shares will almost always
have the purpose of ensuring that tax relief is available and that
the company can carry on its business. The re-wording is to make it
clear that the intention is to disqualify investment in companies
which would be unlikely to exist in the first place, or would be
unlikely to carry on the proposed activities, were it not for the
disqualifying purpose which is the subject of the test.
5. Amendment 159 changes Condition A of the test to ensure that it
will apply where, in the course of the arrangements in question, the
monies raised by the relevant share issue are paid to a relevant
person or relevant persons. This will prevent a company from failing
to be caught by the legislation by virtue of the fact that payments
are made to more than one party.
6. Amendments 160 and 161 change Condition B of the test to ensure
that the test will apply where it is reasonable to expect that, in
the absence of the arrangements in question, the whole or greater
part of the company's activities would be carried on by a
relevant person or relevant persons.
7. Amendment 162 defines "relevant person" as a person
who is a party to the arrangements, or a person connected with such a
party.
BACKGROUND NOTE
8. The Enterprise Investment Scheme exists to incentivise equity
investment in small, high-risk early stage companies which typically
struggle to raise such financing. Clause 39 makes a number of changes
to the scheme, including: extending the scope to larger companies and
larger amounts of investment; some minor simplifications to the rules
on the definition of connection and of eligible shares; the exclusion
of trades benefiting from feed-in tariffs; preventing companies from
using EIS monies to acquire shares in another company; and
introducing a "no disqualifying arrangements" requirement,
intended to ensure that the scheme remains appropriately
targeted.