H3: Income tax

Withdrawal/reduction of EIS relief

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Relief may not withdrawn on certain grounds unless notice given by or to company within 6 years of relevant event

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“(2)EIS relief obtained by the investor in respect of the relevant shares may not be withdrawn on the ground:
that the requirements of section 174 and 175 (the purpose of the issue and use of money raised requirements) are not met in respect of the shares, or
that the issuing company is not a qualifying company in relation to the shares (see Chapter 4),
unless the requirements of subsection (3) are met.
(3) The requirements of this subsection are met if either – 
the issuing company has given notice under section 241, or paragraph 16(2) or (4) of Schedule 5B to TCGA 1992, (information to be provided by issuing company etc) in relation to the relevant issue of shares, or
an officer of Revenue of Customs has given notice to that company stating the officer’s opinion that, because of the ground in question, the whole or any part of the EIS relief obtained by any individual in respect of shares included in the relevant issues of shares was not due.” (ITA 2007, ss.234(2) and (3)).

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“(1) An officer of Revenue and Customs may…
(b) give a notice under section 234(3)(b),
at any time not more than 6 years after the end of the relevant tax year. 
(2) In subsection (1) “the relevant tax year” means – 
the tax year in which the time mentioned in section 175(3) (the use of money raised requirement) falls, or
the tax year in which the event which causes the EIS relief to be withdrawn or reduced occurs,
whichever is later.” (ITA 2007, s.237).

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Validity of notice not affected by wrong reason

 

“The company could have challenged this by appealing against the s 234(3)(b) ITA 2007 notice.  However, despite the defect in that notice, it chose not to do so.  This may very well have been because the company knew that it ceased to qualify even though the reason was not the one stated in the notice.  Whatever the reason, it does not allow the appellants to challenge the validity of the notices of assessment if, as we have found, the company ceased to qualify.” (Finn v. HMRC [2015] UKFTT 144 (TC), §81).

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Appeal by company against notice by HMRC

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“(1) For the purposes of the provisions of TMA 1970 relating to appeals, the giving of notice by an officer of Revenue and Customs under section 234(3)(b) is taken to be a decision disallowing a claim by the issuing company.” (ITA 2007, s.236(1)).

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CGT appeals conclusive for income tax purposes

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“(2) If any issue has been determined on an appeal brought by virtue of paragraph 1A(6) of Schedule 5B to TCGA 1992 (appeal against notice that shares never have been, or have ceased to be, eligible shares), the determination is conclusive for the purposes of any appeal brought by virtue of subsection (1) on which that issue arises.” (ITA 2007, s.236(2)).

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Withdrawal or reduction to be effected by assessment within 6 years of relevant event (or 20 years for deliberate behaviour)

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“If any EIS relief which has been obtained falls to be withdrawn or reduced under Chapter 6, it must be withdrawn or reduced by the making of an assessment to income tax for the tax year for which the relief was obtained.” (ITA 2007, s.235).

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“(1) An officer of Revenue and Customs may
(a) make an assessment for withdrawing or reducing EIS relief attributable to any of the relevant shares…
at any time not more than 6 years after the end of the relevant tax year.” 
(2) In subsection (1) “the relevant tax year” means – 
the tax year in which the time mentioned in section 175(3) (the use of money raised requirement) falls, or
the tax year in which the event which causes the EIS relief to be withdrawn or reduced occurs,
whichever is later.
(3) Subsection (1) is without prejudice to section 36(1)(a) of TMA 1970 (loss of tax brought about deliberately etc).” (ITA 2007, s.237).

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No withdrawal or reduction by virtue of event after death

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“(1) No assessment for withdrawing or reducing EIS relief in respect of shares issued to an individual may be made because of an event occurring after the individual’s death.” (ITA 2007, s.238(1)).

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No further withdrawal or reduction following disposal of all EIS shares (unless still connected with the company)

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s.238(2).
 

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