Commentary

C3.1327 Investors' relief—Value received and replacement value

Capital gains tax
Capital gains tax | Commentary

C3.1327 Investors' relief—Value received and replacement value

Capital gains tax | Commentary

C3.1327 Investors' relief—Value received and replacement value

If an investor receives value, other than insignificant value, from the issuing company at any time in the period beginning one year before the date the shares were issued and ending immediately before the third anniversary of the issue date (the period of restriction), the qualifying and potentially qualifying shares are instead treated as excluded shares1 (see C3.1320), and hence disqualified from relief. This ensures that the cash subscribed for the shares genuinely increases the funds available to the company and does not represent a recycling of the company's existing resources. These rules mirror the restriction that applies to shares issued under the enterprise Investment scheme (see E3.1110).

Any reference to an investor includes an associate of his and associate for this purpose has the meaning in CTA 2010, s 448 except that it does not include a brother or sister2. Receipt of value from a company includes receipt from any person connected with the company, whether or not that person was so connected at the time of receipt of the value. This will include receipt of value from a subsidiary company, and value received indirectly is also included3.

When value is received

Value is received in the following circumstances:

  1.  

    (1)     The company repays, redeems or repurchases any shares or securities belonging to the investor or makes a payment for giving up rights to share capital or security on its cancellation or extinguishment4.

  2.  

    (2)     The company repays a debt to the investor in pursuance of

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