What happens to EIS relief when an investor receives value from the issuing company during period C?

Under section 213 of the Income Tax Act 2007, EIS relief must be reduced or withdrawn. The value received is multiplied by the EIS original rate (currently 30%). If existing relief exceeds this figure, relief is reduced by that amount. Otherwise, the relief is withdrawn entirely, meaning the investor loses the full tax benefit.

How is the EIS relief reduction calculated under section 213?

The formula multiplies the value received (R) by the EIS original rate (EISR), currently 30%. If the investor's EIS relief exceeds R × EISR, relief is reduced by that amount. If relief equals or is less than R × EISR, it is withdrawn altogether. A small receipt trims the relief while a large receipt can eliminate it completely.

What modifying rules apply to the value received provisions in section 213?

Several rules modify section 213's effect, including provisions for insignificant value receipts, apportionment across multiple share issues, cases where maximum EIS relief was not obtained, value passing between connected persons, and situations where replacement value is later provided to the company. Sections 218 to 220 must be applied in statutory order.

How does section 213 treat EIS shares transferred between spouses or civil partners?

When EIS shares are transferred between spouses or civil partners under inter-spouse transfer rules, the recipient steps into the shoes of the original investor for value received purposes. Additionally, any value already accounted for through a previous withdrawal or reduction is ignored, preventing double counting of the same receipt of value.

Income Tax Act 2007 section 213

Value received by the investor

Section 213 deals with the consequences for EIS income tax relief when an investor receives value back from the company that issued the shares during the relevant compliance period.

If an investor receives value from the issuing company during period C, their EIS relief must be reduced or withdrawn
The reduction amount is calculated as the value received multiplied by the EIS original rate; if existing relief exceeds this figure it is reduced by that amount, otherwise relief is withdrawn entirely
Several modifying provisions apply, including rules for insignificant receipts, multiple share issues, incomplete relief claims, connected persons, and replacement value
Value already accounted for through a previous withdrawal or reduction is ignored, and a spouse or civil partner who acquires shares by inter-spouse transfer is treated as the original investor

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