Revenue Note for Guidance
(2) An individual qualifies for relief if he/she subscribes on his/her own behalf (except where the investment is made through an investment fund as provided for in Chapter 7) for eligible shares in a qualifying company and is not at any time in the compliance period (defined in S488) connected with the company, or with its qualifying subsidiaries.
(2)(a)(b) An individual cannot be a qualifying investor if at any stage in the compliance period that individual is connected with the company. If the individual or an associate of the individual is a partner of the company, or any company in the RICT group, has an interest in the capital of the company, or any company in the RICT group or, in certain circumstances is a director or employee of the qualifying company or of another company which is a partner of that company, they will be connected with the company.
(3) An individual is not connected with a company by virtue only of the fact that, the individual or an associate of the individual is a director or employee of the company in which his/her investment is made or of another company which is a partner of that company unless the individual or his/her associate receives or is entitled to receive payment from the company during the relevant period. However, for this purpose certain payments are disregarded, these are -
(4) Those payments referred to above shall apply to payments which an individual is entitled to receive in respect of the relevant period (defined in S488) in the same way it applies to payments actually made in that period, or payments made to an individual indirectly or under the individuals instruction and to that individuals’ benefit.
(5)(a) In addition, an individual is connected with a company in a RICT group if he/she, or an associate of the individual, directly or indirectly possesses or is entitled to acquire any of the -
(5)(b) The loan capital of a company shall be treated as including any debt incurred by the company-
The inclusion of borrowed money in the loan capital of a company does not extend to bank overdrafts if the debt arises in the ordinary course of that business.
(5)(c) An individual is connected with a company if he/she, or an associate of the individual, directly or indirectly possesses or is entitled to acquire such rights as would, in the event of a winding up or in any other circumstances, entitle him/her to receive any of the assets of the company available for distribution to equity holders. Whether a person is an “equity holder” is determined in accordance with section 413, and the percentage of assets to which the individual is entitled at any time is defined in accordance with section 415.
(6)(a) An individual is connected with a qualifying company if he/she can control it in the manner set out in section 11. An individual is connected with a qualifying company if he/she within the compliance period had control of another company which has since that time and before the end of the relevant period become a subsidiary of the company.
In determining whether an individual is so connected with a qualifying company, no account shall be taken of shares in that company, held by the individual or an associate of that individual where, that individual or associate was entitled to relief under Part 16 for those shares and the individual or a person connected with that individual, at any time in the compliance period, does not control the company.
(6)(b) In addition, no account shall be taken of shares subscribed to the individual concerned where those shares were issued on the formation of the company and no other shares have been issued and that company has not yet started to trade or made preparations to begin to trade.
(7) An individual shall be treated as entitled to acquire anything, which he/she is entitled to acquire at a future date or will acquire at a future date. Any rights or powers which an associate of that individual holds, will be attributed to that individual.
An individual will be treated as connected with a company, if they subscribe for shares in a company as part of a scheme or arrangement which allows another individual to subscribe for shares in a company which the first mentioned individual is connected with.
Relevant Date: Finance Act 2021