VCM34100 - SEIS: income tax relief: issuing company: gross assets requirement
ITA07/S257DI
Immediately before the shares are issued, the total value of the company’s assets (or of the group assets where the company is a parent company), must not exceed £350,000 (£200,000 for shares issued on or before 5 April 2023).
Where the company is the parent of a group of companies, the limit applies to the aggregate value of gross assets of all the companies in the group, and for this purpose, no account is taken of:
- any assets which consist in rights against another company in the group, or
- any shares in, or securities of, another such company.
Valuation of assets
HMRC’s general approach is that the value of a company’s gross assets at any time is the aggregate of the values of the company’s gross assets as shown in its balance sheet if the company were to draw one up at that time. ‘Gross assets’, means all the assets which would be shown on that balance sheet, without any deduction in respect of liabilities. This approach is subject to the proviso that the balance sheet would be drawn up on a basis consistent with that used in the accounts for preceding periods (if any), and in accordance with generally accepted accounting practice.
If a company has chosen to use IFRS then IFRS 16 will apply from January 2019, to determine the amount of assets shown on the balance sheet.
So if the shares in question were issued immediately after the date to which the company’s accounts were drawn up, the value of the company’s gross assets immediately before the issue would be the value shown in the balance sheet. And if the shares were issued immediately before the date to which the company’s accounts were drawn up, the value of the company’s gross assets immediately after the issue would be the value shown in the balance sheet.
Where shares are issued at other times, the values will, in the first instance, be based on the values given in the company’s latest available balance sheet. However, these values should be updated as precisely as is practicable, taking into account all the relevant information available to the company (and, where applicable, to its subsidiaries). For example, where a company is able to ascertain the amount of trade debts owed to it at any given time, it would be reasonable to take the aggregate amount of such debts outstanding at the time of the issue or grant.
When accounts covering —
- the accounting period in which the issue was made,
- and if they were not available at the time of the issue, those for the immediately preceding accounting period,
become available, the values arrived at in the way described above may need to be reviewed in the light of the information contained in those accounts.
Payments in respect of shares
HMRC will not regard the assets of a company immediately before the issue of the shares in question as including any advance payment received by the company in respect of that issue.
Where shares or securities are issued partly paid, the right to the unpaid portion will be regarded as an asset of the company. That asset will be taken into account for the purpose of deciding whether the relevant gross assets rule is satisfied, whether it is shown in the company’s balance sheet or not.