CITM7130 | Withdrawal of relief: Value received where there is more than one investment

CTA2010/Part 7/Chapter 5/S251; ITA/s368

Where

• an investor has more than one investment in a community development finance institution (CDFI) for which the investor has obtained relief under the CITR scheme, and

• value is received within the periods of restriction of more than one investment

then the amount of value received is allocated across the various investments in a manner that reflects the relative sizes of those investments.

The amount of value received that is attributable to each investment is calculated by multiplying the total amount of value received by the fraction

A ÷ B

where

A is the “appropriate amount” of the investment, and

B is the aggregate of the appropriate amounts of the other investment(s)

The appropriate amount for each type of investment is determined as follows.

Loans

Value received in first two years of period of restriction - Average capital balance of loan for second year of period of restriction

Value received in third or later year of period of restriction - Average capital balance of loan for year of receipt

Shares or Securities

Value received in first year of period of restriction - Amount subscribed for shares or securities

Value received in second or later year of period of - Amount subscribed for those shares or securities that are still held at
restriction the time the value is received

Example

An investor makes two investments in a CDFI -

• a loan for £10,000 made on 1 January 2016. No amounts are repaid during the first five years of the loan

• £30,000 is subscribed for shares in the CDFI on 1 July 2016

On 1 January 2016 the investor acquires a car from the CDFI for £1,000. At the time is acquired the market value of the car is £5,000.

At the time the car is acquired the investor is treated as receiving value of £4,000 (the difference between the market value of the car and the consideration given for it). This is allocated across the two investments as follows:

• Loan £1,000 (£4000 x £10,000/(£10,000 + £30,000)

• Shares £3,000 (£4000 x £30,000/(£10,000 + £30,000))

Where the value received directly relates to a repayment, repurchase or redemption of shares or securities no allocation is required.