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VCM23410 | EIS: deferral relief: shares issued on or after 6 April 1998: replacement value: meaning of qualifying receipt

From HM Revenue & Customs · Venture Capital Schemes Manual

TCGA92/SCH5B/PARA13B (4) & (5)

A receipt of replacement value is a qualifying receipt if it arises:

  1. by reason of the original recipient:

  2. making a payment to the original supplier, see VCM23400, (but see the exceptions below); and/or

  3. acquiring any asset from the original supplier for a consideration which exceeds the market value of the asset; and/or

  4. disposing of any asset to the original supplier for no consideration or for a consideration which is less than the market value of the asset;

  5. where the original value was within (d) of VCM23320, by reason of an event which reverses the event which constituted the receipt of the original value;

  6. where the original value was within TCGA92/SCH5B/PARA13 (5) (see VCM23320) by reason of the original recipient (see VCM23400)

  • repurchasing the share capital or securities in question, or

  • reacquiring the right in question

  • for a consideration which is not less than the amount of the original value.

Exceptions to (a)(i) above

The following payments do not fall within (a)(i) above:

  • payments within (c) above;

  • payments for any goods, services or facilities provided (whether in the course of a trade or otherwise) by:

  1. the original supplier, or

  2. any other person, who at any time in the period of restriction relating to the shares for which the investor subscribed, see VCM23400, is an associate of or is connected with that supplier (whether or not that person is an associate or is connected at the time of the payment),

  • which is reasonable in relation to the market value of those goods, services or facilities;

  • any payment of any interest which represents no more than a reasonable commercial return on money lent to:

  1. the original recipient, or

  2. any person who, at any time in the period of restriction relating to the shares for which the investor subscribed, is an associate of the original recipient (whether or not he is such an associate at the time of the payment);

  • any payment for the acquisition of an asset which does not exceed its market value;

  • any payment, as rent for any property occupied by:

  1. the original recipient, or

  2. any person who, at any time in the period of restriction relating to the shares for which the investor subscribed, is an associate of the original recipient (whether or not he is such an associate at the time of the payment),

  • of an amount not exceeding a reasonable and commercial rent for the property;

  • any payment in discharge of an ordinary trade debt (see VCM23330);

  • any payment for shares in or securities of any company in circumstances that do not fall within (a)(2) above.