ANNEX 1:: MINOR CHANGES IN THE LAW MADE BY THE BILL This change is in taxpayers’ favour in principle. But it is expected to have no practical effect as it is in line with current practice.
Change 51: EIS: repaying share capital of nominal value equal to the authorised minimum if eligible shares are issued before registrar’s certificate: section 230
This change extends the exception from reduction of EIS relief in certain cases where other persons receive value on the repayment of subscriber shares.
Section 303(9) of ICTA and paragraph 58(5) and (6) of Schedule 15 to FA 2000 (corporate venturing scheme) (CVS) provide nearly identical exceptions from section 303 of ICTA and paragraph 56 of that Schedule.
Both exceptions apply in the context of the repayment within a year of issue of shares which were issued to meet certain requirements of company law (the requirements in section 117 of the Companies Act 1985). But there is a minor difference between these two provisions relating to when eligible shares have to be issued.
Section 303(9)(b) of ICTA says (emphasis added):
“after the registrar has issued the company with a certificate under section 117, it issues eligible shares.”
Paragraph 58(5)(b) of Schedule 15 to FA 2000 says:
“the registrar of companies issues the company with a certificate under section 117.”
So paragraph 58(5)(b) can be met even if eligible shares are not issued after the registrar has issued a certificate whereas section 303(9)(b) cannot be satisfied in such a case.
There is no reason why the conditions in section 303(9)(b) of ICTA should be more restrictive than paragraph 58(5)(b) of Schedule 15 to FA 2000 (CVS). Section 230(1)(b) of this Act omits the additional requirement in section 303(1)(b) of ICTA that eligible shares be issued after the registrar issues the company with a certificate under section 117 of the Companies Act 1985. That marginally widens the scope of the exception in section 303(9)(b) of ICTA and brings EIS into closer alignment with CVS.