VCM91270 | CVS: investors and reliefs: reduction of relief on disposal

FA00/SCH15/PARA46 (3) & (4)

Where investment relief has to be reduced following a disposal of shares, the amount of the reduction is the smaller of:

• the amount of relief attributable to the shares, and

• 20% of the amount or value of the consideration received.

But where the amount of relief attributable to the shares is less than 20% of the amount subscribed (for example, because there was insufficient liability to corporation tax to enable the subscription to be fully relieved), the amount of the reduction is to be restricted in the same proportion. For example, if for a subscription of £100,000 a company obtained relief of only £2,000, then on a sale of the shares for £10,000 it would lose loss relief of only £200.

As regards the procedure for withdrawing relief see VCM91370.