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With regard to the enterprise investment scheme, HMRC’s interpretation of how ITA 2007, s 183 applies to companies where the relevant trade is carried on in partnership or by a limited liability partnership and the implications for new investment through the scheme is explained in Revenue & Customs Brief 77/09.
The Revenue now considers that s 183 disqualifies a company where the relevant trade, preparation work or research and development, is carried on by the company in partnership or by a limited liability partnership of which the company is a member. Not all investments will be affected.
The department confirms that where, on or before 9 December 2009, shares and the certificate of compliance following receipt of an EIS1 have been issued, investors’ ability to claim relief will not be affected.
However, where shares have not been issued by that date then, irrespective of whether the company has had an advance assurance, HMRC will apply their revised understanding of the law.
If shares are subsequently issued, the certificate of compliance for the shares where the relevant trade, preparation work or research and development, is carried on by the company in partnership or by a limited liability partnership of which the company is a member, will not be authorised.
Finally, where shares have been issued on or before 9 December 2009 but the certificate of compliance has not yet been authorised, the Revenue will authorise its issue only where they have given an advance assurance in accordance with of the Venture Capital Manual, para VCM21010.
Recognising that this change of view may cause problems for those who had intended carrying out a trade in partnership, HMRC will consult on how to ensure that the enterprise investment scheme is targeted at small businesses.
