Income Tax Act 2007 (c. 3)

[F1 PART 5B U.K. Tax relief for social investments

Textual Amendments

F1 Pt. 5B inserted (17.7.2014) by Finance Act 2014 (c. 26), Sch. 11 para. 1

CHAPTER 7 U.K. Withdrawal or reduction of SI relief

Disposals U.K.

257R Disposal of whole or part of the investment U.K.

(1) This section applies if—

(a) the investor disposes of the whole or part of the investment,

(b) the disposal takes place before the shorter applicable period ends,

(c) SI relief is attributable to the shares, or qualifying debt investments, disposed of,

(d) the disposal is not to an individual who—

(i) is the spouse, or civil partner, of the investor, and

(ii) is living together with the investor at the time of the disposal, and

(e) the disposal does not occur as a result of the investor's death.

(2) If the disposal is not made by way of a bargain at arm's length, the SI relief attributable to those shares, or qualifying debt investments, must be withdrawn.

(3) If the disposal is made by way of a bargain at arm's length, the SI relief attributable to those shares or qualifying debt investments must—

(a) if it is greater than the amount given by the formula set out in subsection (4), be reduced by that amount, and

(b) in any other case, be withdrawn.

(4) The formula is—

where—

C is the amount or value of the consideration received by the investor for the shares or qualifying debt investments, and

R is the SI rate for the tax year for which the SI relief was given.

257RA Cases where maximum relief not obtained U.K.

(1) Subsection (2) applies if the investor's liability to income tax for any tax year is reduced under this Part in respect of the investment and—

(a) the amount of the reduction (“D”), is less than

(b) the amount given by—

where—

A is the amount on which the investor claims SI relief in respect of the investment, and

R is the SI rate for that tax year.

(2) Section 257R(3) and (4) have effect as if the amount or value referred to as C were reduced by multiplying it by the fraction—

(3) If section 257JA(1) and (2) apply in the case of the investment as if part of it had been made in a previous tax year, subsections (1) and (2) of this section have effect as if that part and the remainder had been invested by separate investments (and that part had been invested by an investment made on a day in the previous tax year).

(4) If the amount of SI relief attributable to the investment or any part of it has been reduced before SI relief was obtained, the amount referred to in subsections (1) and (2) as D is to be treated for the purposes of those subsections as the amount that it would have been without that reduction.

(5) Subsection (4) does not apply to a reduction of SI relief by virtue of section 257N(5) (attribution of SI relief if there is a corresponding issue of bonus shares).

257RB Call options U.K.

(1) This section applies if the investor grants an option which, if exercised, would bind the investor to sell the whole or part of investment.

(2) The grant of the option is treated for the purposes of section 257R as a disposal—

(a) of the investment, or

(b) (as the case may be) of the part of the investment to which the option relates.

(3) Nothing in this section prejudices section 257LB (no pre-arranged exits).

257RC Put options U.K.

(1) This section applies if, at any time in the longer applicable period, a person grants the investor an option which, if exercised, would bind the grantor to purchase the whole or part of the investment.

(2) Any SI relief—

(a) attributable to the investment, or

(b) (as the case may be) attributable to the part of the investment to which the option relates,

must be withdrawn.

(3) For the purposes of subsection (2)(b), the part of the investment to which an option relates is the part which, if—

(a) the option were exercised immediately after the grant, and

(b) any investments made in the social enterprise by the investor after the grant were disposed of immediately after being made,

would be treated for the purposes of section 257R as disposed of in pursuance of the option.]