ANNEX 1:: MINOR CHANGES IN THE LAW MADE BY THE BILL This change is in taxpayers’ favour in principle and may benefit some in practice. But the numbers affected and the amounts involved are likely to be small. Change 57: EIS: conditions to be met over a period: section 257
This change makes it explicit that EIS relief can be obtained even though future events could mean that the relief is not due. That is consistent with practice and the corporate venturing scheme (CVS).
Whether an individual is eligible for EIS relief in respect of an issue of shares normally depends on certain conditions being met for at least three years after the issue has taken place.
The framework of the EIS scheme indicates, in various places, that claims for the relief may be made even though the relief may ultimately not be available because of future events, so on a provisional basis. One example is that section 307(1) of ICTA contemplates an assessment being made to withdraw:
“relief … which is subsequently found not to have been due…”
Predecessors to the EIS scheme were more explicit about the existence of a provisional basis. Thus for the business expansion scheme (BES), section 289(9) and (10) of ICTA (prior to any later amendments) read:
“(9)A claim for relief may be allowed … if the conditions for relief are then satisfied.(10)In the case of a claim allowed before the end of the relevant period, the relief shall be withdrawn if by reason of any subsequent event it appears that the claimant was not entitled to the relief allowed.”
CVS addresses this aspect by referring, where appropriate, to requirements “being met for the time being” and paragraph 102(7)(a) of Schedule 15 to FA 2000 (CVS) says:
“In the case of a requirement that cannot be met until a future date—(a)references…to a requirement being met for the time being are to nothing having occurred to prevent its being met.”
Section 257(8) of this Act is based on this extract from paragraph 102(7)(a) of Schedule 15 to FA 2000 (CVS). The wording of section 204(1)(b) (compliance certificates) and section 205(1)(a) (compliance statements) has been adapted so that section 257(8) applies: the references to requirements for EIS relief being “for the time being met”. This makes explicit the operation of the provisional basis for EIS.