Income Tax Act 2007 section 247

Continuity of EIS relief where issuing company is acquired by new company

Section 247 preserves Enterprise Investment Scheme (EIS) income tax relief when the company that originally issued the qualifying shares is taken over by a new holding company through a share-for-share exchange, provided certain strict conditions are met.

• EIS relief is not lost when a new company acquires all the shares in the old EIS company, provided the only consideration for the old shares is the issue of new shares in the new company on a like-for-like basis
• HMRC must give advance clearance confirming that the share exchange is for genuine commercial reasons and does not form part of a tax avoidance arrangement
• The share exchange is treated as though no disposal of old shares or acquisition of new shares has occurred, and any existing EIS relief simply transfers from the old shares to the corresponding new shares
• The control and independence requirement that would normally restrict such arrangements is disapplied for qualifying share exchanges under this section