Taxation of Chargeable Gains Act 1992 Schedule 5B paragraph 14

Value received by other persons

Schedule 5B paragraph 14 deals with the consequences for EIS reinvestment relief when a company or its subsidiary returns value to shareholders other than the investor during the period of restriction.

• If a company or its subsidiary repays, redeems or repurchases share capital belonging to another member, or pays them for giving up their rights to share capital, the investor's shares may lose their eligible status for EIS reinvestment relief purposes.
• If the return of value occurs on or before the date the investor's shares were issued, those shares are treated as never having been eligible; if it occurs after that date, the shares cease to be eligible on the date the value is returned.
• The rule does not apply where the other member receiving value themselves suffers a qualifying chargeable event or a withdrawal or reduction of their own EIS income tax relief or corporate investment relief as a consequence, or where the amount received is insignificant.
• A special exemption exists for public companies that issued shares at the authorised minimum to obtain their trading certificate: redemption of those initial shares within 12 months of issue does not trigger the loss of eligibility.