Income Tax Act 2007 section 361

Disposal of securities or shares during 5 year period

Section 361 deals with the withdrawal or reduction of community investment tax relief (CITR) when an investor disposes of all or part of an investment in securities or shares within the five-year holding period.

• If an investor disposes of securities or shares within five years and the disposal is not a qualifying disposal (i.e. not at arm's length or a permitted disposal), all CITR attributable to that investment is fully withdrawn
• Where the disposal is a qualifying disposal, the CITR withdrawal depends on a comparison between the total CITR claimed and an amount "A" equal to 5% of the disposal consideration received
• If the total CITR does not exceed "A", all of it must be withdrawn; if it exceeds "A", the total is reduced by "A", with relief given in later years being reduced first
• Where the total CITR claimed is less than 5% of the invested amount for the relevant tax year, "A" is scaled down proportionally using the fraction B/C