Taxation of Chargeable Gains Act 1992 Schedule 5B paragraph 11A

Disqualifying arrangements

Paragraph 11A prevents shares from qualifying for EIS deferral relief where they are issued in connection with arrangements designed to secure venture capital tax reliefs, and where those arrangements involve funds being channelled back to connected parties or amount to the repackaging of an existing business.

• Shares issued in connection with disqualifying arrangements are treated as not being eligible shares for the purposes of EIS re-investment relief under Schedule 5B.
• Arrangements are disqualifying if their main purpose is to secure venture capital tax reliefs for shares raising money for a qualifying business activity, and either of two anti-avoidance conditions is met.
• Condition A catches arrangements where all or most of the money raised ends up being paid to parties to the arrangements or their connected persons; Condition B catches arrangements that effectively repackage activities that would otherwise have been carried on as part of an existing business of such persons.
• The relevant tax reliefs caught include EIS deferral relief, EIS and SEIS income tax relief, SEIS re-investment relief, share loss relief, and inclusion in a VCT's qualifying holdings.