CG63641 - Investors’ Relief: Meaning of receiving value
TCGA92/Sch 7ZB/Para 2
The rules at Paragraph 2 of Schedule 7ZB mirror those for the Enterprise Investment Scheme (EIS) for which detailed guidance can be found at VCM23300 onwards.
An investor receives value from the company if the company:
- Repays, redeems or repurchases any of the investor’s shares or securities in the company, or if it makes any payment to them for giving up their right to any shares or securities. Paragraph 2(1)(a) and 2(3).
- Repays a pre-existing debt to the investor as part of the arrangements to issue shares. Paragraph 2(1)(b).
- Makes any payment to the investor for giving up a right to any debt. Paragraph 2(1)(c).
- Releases or waives any liability of the investor to the company or discharges, or undertakes to discharge, any liability of the investor to a third party. A release or waiver is treated as occurring if the liability is not discharged within 12 months of the time when it ought to have been discharged. Paragraph 2(1)(d).
- Makes a loan or advance to the investor which has not been repaid in full before the issue of the shares. This includes any debt (other than an ordinary trade debt, see VCM23330) incurred by the investor to the company and the amount of any debt due from the investor to a third party which has been assigned to the company. Paragraph 2(1)(e).
- Provides a benefit or facility for the individual. Paragraph 2(1)(f).
- Disposes of an asset to the investor at less than market value. Paragraph 2(1)(g).
- Acquires an asset from the investor at more than market value. Paragraph 2(1)(h).
- Makes any payment to the investor which is not a qualifying payment, see VCM23340. Paragraph 2(1)(i) with qualifying payments described at paragraph 2(4).
To count as a receipt of value, the value does not have to pass directly to the investor themselves. Value received indirectly may also be included. Value received by someone connected with the investor will count, as will any amounts paid to discharge debts of the investor, or paid at the direction of the investor. Paragraph 2(7).
TCGA92/SCH7ZB/PARA3
Amount of value received
The value received by an investor is quantified as shown below.
| Paragraph describing type of value | How to quantify the value received |
|---|---|
| (a), (b) or (c) or paragraph 2(3) | the amount received or, if greater, the market value of the shares, securities or debt in question. |
| (d) | The amount of the liability. |
| (e) | The amount of the loan or advance reduced by the amount of any repayment made before the issue of the shares. |
| (f) | The cost to the company of providing the benefit or facility less any consideration given for it by the individual. |
| (g) or (h) | The difference between the market value of the asset and the consideration (if any) given for it. |
| (i) | The amount of the payment. |
See CG63500 for a general description of the relief and the layout of the guidance.