Income Tax Act 2007 section 257RC

Put options

Section 257RC deals with the withdrawal of Social Investment (SI) tax relief where the investor is granted a put option — that is, an option that would oblige someone to buy back all or part of the investment.

• If at any time during the longer applicable period a person grants the investor a put option over all or part of the investment, SI relief must be withdrawn
• A put option is one which, if exercised, would bind the grantor to purchase the whole or part of the investment from the investor
• Where the option covers only part of the investment, the affected portion is determined by reference to what would be treated as disposed of under the disposal rules if the option were exercised immediately after grant
• Any investments made by the investor in the social enterprise after the option was granted are disregarded when identifying the affected portion, as they are treated as disposed of immediately after being made