Income Tax Act 2007 section 257RA

Cases where maximum relief not obtained

Section 257RA explains how to calculate the withdrawal or reduction of social investment (SI) relief when an investor did not receive the full amount of relief they were entitled to on the original investment.

• Where the actual income tax reduction (D) is less than the amount invested multiplied by the SI rate (A × R), the disposal proceeds used to calculate withdrawn relief under section 257R must be scaled down by the fraction D ÷ (A × R)
• If part of the investment is treated as having been made in an earlier tax year under section 257JA, each part is treated as a separate investment for the purposes of this adjustment
• If SI relief was reduced before it was actually obtained (for example, because the investor's tax liability was too low), D is calculated as if that earlier reduction had not happened
• The adjustment for prior reductions does not apply where the reduction arose because of a corresponding issue of bonus shares under section 257N(5)