Revenue Note for Guidance

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Revenue Note for Guidance

600H Qualifying investor

Summary

Section 600H sets out a definition of qualifying investor.

Details

(1)A qualifying investor is an individual who subscribed for eligible shares on his or her own behalf in a qualifying company and complies with this section.

(2)An individual shall not be a qualifying investor in certain circumstances.

(2)(a)An individual shall not be a qualifying investor if he or she is connected with the company on the date of the investment. This is determined by reference to this section and section 600I.

(2)(b)An individual will be connected with the company where that individual, or an associate (i.e., a relative) of the individual—

  1. (b)(i)is a partner of the company, or of any company that is a member of the relief group of which the company is a member,
  2. (b)(ii)is a director or employee of the company, or of any company that is a member of the relief group of which the company is a member, or
  3. (b)(iii)subject to subsection (3), has an interest in the capital of the company, or of any company that is a member of the relief group of which the company is a member.

(3)An individual shall be considered to have an interest in the capital of the company that is a member of the relief group in certain circumstances.

(3)(a)An individual or his/her associate shall have an interest in the capital of a company that is a member of the relief group if that individual, or his/her associate directly or indirectly possesses or is entitled to acquire—

  1. (a)(i)any of the issued share capital,
  2. (a)(ii)any of the loan capital,
  3. (a)(iii)any of the voting power, or
  4. (a)(iv)rights to the assets on a winding up,

(3)(b)of any such company.

For the purposes of paragraph (a)(ii), which relate to the loan capital of a company, the loan capital shall include any debt incurred by the company—

  1. (b)(i)for any money borrowed or capital assets acquired by the company,
  2. (b)(ii)for any right to receive income created in favour of the company, or
  3. (b)(iii)for consideration the value of which to the company was at the time when the debt was incurred, substantially less than the amount of the debt. This includes any premium on the debt.

Excluded from this is any debt incurred by the company by overdrawing a bank account, where that overdraft arises in the ordinary course of business.

(3)(c)Subsection (3)(c) provides rules for the purposes of paragraph (a)(iv), which applies for determining the rights that an individual (or an associate) has in respect of the assets on a winding up of a company that is a member of the relief group.

  1. (c)(i)For the purposes of paragraph (a)(iv), an individual shall have a right to the assets on a winding up of a company, if that individual or an associate of the individual, has rights as would, in the event of a winding up of the company, entitle the individual to receive any assets of the company which would be available at that time for a distribution to the equity holders of the company. For the purposes of this subsection—
    1. (c)(i)(I)the persons who are equity holders of the company, and
    2. (c)(i)(II)the percentage of the assets of the company to which the individual would be entitled,
    are to be determined in accordance with sections 413 and 415 TCA 1997. References in section 415 to the first company shall be construed as references to an equity holders and references to a winding up shall include references to any other circumstances in which assets of the company are available for the distribution to equity holders.
  2. (c)(ii)In applying sections 413 and 415 in determining the percentage of the share capital or other amounts which a shareholder beneficially owns or is beneficially entitled to under subparagraph (i), the provisions of section 411(1)(c) shall be disregarded.

(3)(d)An individual shall be treated as having an interest in the capital of the company in certain circumstances.

  1. (d)(i)An individual shall be treated as having an interest in the capital of the company if the individual has control of the company.
  2. (d)(ii)For the purposes of this section, an individual shall be treated as having an interest in the capital of the company if the individual has, at the date of investment, control of another company which is a subsidiary of the company.

(4)For the purposes of subsection (3) no account shall be taken of shares in a company that are held by the individual, or that individuals associate, where—

  1. (4)(a)that individual or the individuals associate may be entitled to relief under section 600M on a future disposal, and
  2. (4)(b)neither the individual nor a person connected with that individual had control of the company concerned at the date of the investment.

(5)An individual shall be treated as entitled to acquire anything which that individual or an associate of that individual is entitled to acquire at a future date or will acquire at a future date.

(6)An individual will not be treated as connected with a company where an associate of that individual—

  1. (6)(a)has an interest in the share capital of that company, and
  2. (6)(b)is a partner of that individual solely due to them being partners in a qualifying investment fund within section 508IA TCA 1997 or a qualifying partnership under section 600N.

Relevant Date: Finance Act 2024