Revenue Note for Guidance
508V(2) Where an event occurs which results in the withdrawal of relief already granted, the withdrawal is to be made by means of a Schedule D Case IV assessment for the tax year for which the relief has been given. Assessments withdrawing relief may be made up to 4 years after the end of the tax year in which the event giving rise to the withdrawal occurs, although extended time limits apply in the case of fraud or neglect.
508T(1) An assessment which is required because of an event occurring after the date of the claim may be made within 4 years after the end of the year of assessment in which that event occurred.
508T(2) No assessment is to be raised by reason of an event occurring after the subscriber’s death. This is to apply despite the fact that this event takes place within the appropriate relevant period following the issue of shares. This provision would not, however, preclude the withdrawal of relief where an event occurs before the death or disposal but only comes to light subsequently, or when it is later shown that there was a scheme or arrangement for the avoidance of tax within the meaning of section 508L.
508V(1)
508T(3) Where the claimant disposes of all ordinary shares issued to him/her by a company, and the relief has been reduced under section 508M(1)(b), there is to be no further withdrawal of relief by reason of events taking place subsequent to the disposal date, unless the event occurs at a time when the individual is connected with the company (as defined in section 500). This connection would entail total denial or withdrawal of relief.
508U(1) Where a company issues an incorrect statement of qualification and as a result of which an individual claims relief in excess of that amount that would have been claimed had a correct statement of qualification been issued, that excess relief will be withdrawn. This will be withdrawn by means of a Schedule D Case IV assessment for corporation tax on the qualifying company, in the year of assessment for which relief was given. This will be in an amount equal to 1.2 times the amount in section 508A(3)(a)(vii), or such part of that amount that does not qualify for the relief.
508U(2) Where relief has been claimed as a result of the conditions of Chapter 4 of this Part and it is no longer due, the excess amount claimed will be withdrawn by the making of a Schedule D Case IV assessment to corporation tax on the qualifying company, in the year for which relief was given. This will be in an amount equal to 1.2 times the amount in section 508A(3)(a)(vi), or such part of that amount that does not qualify for the relief. This is the case where, within the relevant period, the company has ceased to be a qualifying company, an investment has ceased or partially ceased, to be a qualifying investment (within the meaning of section 496), or the amount of relief available is to be reduced by section 508R.
508U(3) Where a company issues an incorrect statement of qualification (second stage relief) and as a result of which an individual claims relief in excess of that amount that would have been claimed had a correct statement of qualification been issued, that excess relief will be withdrawn. This will be withdrawn by means of a Schedule D Case IV assessment for corporation tax on a qualifying company, in the year of assessment for which relief was given. This will be in an amount equal to 0.4 times the amount in section 508B(3)(a)(vi), or such part of that amount that does not qualify for the relief.
508U(3A) Where relief is to be withdrawn as a result of section 502(5), that relief will be withdrawn by the making of an assessment on the qualifying company to corporation tax under Case IV of Schedule D for the year of assessment following the year of assessment in which the subsequent period ends in an amount equal to 0.4 times the amount referred to in section 502(5).
508U(4) Specific rules apply for determining the date from which interest on overdue tax (charged under section 1080) starts to run where a Case IV assessment is made to withdraw relief by reason of an event occurring after the date of a claim. Such interest is to be charged from -
508V(1) Where an amount is chargeable to tax under section 508U, that amount will be treated as income against which no loss, deficit, expense or allowance may be set off, and as not forming part of the income of the company when calculating a surcharge under section 440.
Where relief has been claimed under Chapter 4 and is subsequently found not to have been due, except where section 508U applies, or is no longer due because within the relevant period -
The investor ceases to be a qualifying investor.
508V(2) If an event occurs which results in the withdrawal of relief which has been given, the withdrawal is to be achieved by the making of an assessment under Case IV of Schedule D for the year of assessment in which the relief was given (and not for the year in which the event leading to the withdrawal occurred).
508V(3) Specific rules apply for determining the date from which interest on overdue tax (charged under section 1080) starts to run where a Case IV assessment is made to withdraw relief by reason of an event occurring after the date of the claim. Such interest is to be charged from -
508V(4) The date on which relief is granted is the date on which the claimant received a repayment of tax or the date on which the inspector issued a notice to the claimant showing that his/her tax liability has been reduced by the relief, as appropriate.
508V(5) Where a husband and wife/civil partners cease to be jointly assessed to tax, any assessment for withdrawing relief which arises on a disposal of shares is to be made on the person who made the disposal. The amount of the assessment will comprise the reduction flowing from the relief granted disregarding both the allocation of that relief between the spouses/civil partners under separate assessment and any repayment of tax under the marriage/registration of civil partnership provisions. In other words, the relief is to be recovered from the individual making the disposal irrespective of where in the pool of a family’s finances the tax flowing from the relief is gone.
508V(6) Where by virtue of Section 503, an individual claimed relief and an assessment is made on the company pursuant to section 508U, the tax payable under that assessment remains unpaid, and it is reasonable to consider that there were arrangements in place the main purpose, or one of the main purposes, of which was to avoid paying any tax arising on such an assessment, then notwithstanding subsection (1)(a) and section 508U, that relief will be withdrawn in accordance with subsection (2).
Relevant Date: Finance Act 2021