How is the reduction of EIS relief calculated under section 224?

The reduction is calculated as R × EISR, where R is the amount the other member receives and EISR is the EIS original rate. If the investor's remaining EIS relief is less than or equal to this calculated amount, the relief is withdrawn entirely rather than merely reduced by that amount.

When does section 224 not apply to a repayment of share capital?

Section 224 does not apply where the repayment already triggers consequences for the recipient member, including withdrawal or reduction of their own EIS, SEIS, or corporate venturing scheme relief, or a qualifying chargeable event under the EIS deferral relief rules in Schedule 5B to TCGA 1992. Insignificant repayments may also be disregarded under section 225.

What does 'repayment' mean for the purposes of section 224?

For section 224 and sections 225 to 231, repayment covers any repayment, redemption, or repurchase of share capital, as well as any payment made to a member in exchange for giving up rights to share capital on its cancellation or extinguishment. A subsidiary includes any company that was a 51% subsidiary during period A.

Income Tax Act 2007 section 224

Q: What does section 224 of the Income Tax Act 2007 do?

Section 224 provides for the withdrawal or reduction of an investor's EIS income tax relief when the issuing company or any of its subsidiaries repays, redeems, or repurchases share capital belonging to other members during the relevant compliance period known as period C. The reduction is calculated using the formula R multiplied by the EIS original rate.

Repayments etc. of share capital to other persons

Section 224 deals with the withdrawal or reduction of EIS income tax relief when the issuing company or its subsidiary repays, redeems, or repurchases share capital belonging to members other than the EIS investor during the relevant compliance period.

If the issuing company or any subsidiary repays, redeems, or repurchases share capital belonging to another member during period C, the investor's EIS relief may be reduced or withdrawn entirely
The reduction is calculated as R × EISR, where R is the amount received by the other member and EISR is the EIS original rate; if the relief is less than or equal to this amount, it is withdrawn completely
Repayments are excluded from this rule where they already trigger a withdrawal or reduction of the other member's own EIS, SEIS, corporate venturing scheme relief, or a qualifying chargeable event under the EIS deferral relief rules
A repayment is ignored to the extent that EIS relief attributable to any shares has already been withdrawn or reduced on account of that same repayment

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