Finance Act, 1984

Value received from company.

18.—(1) Where an individual who subscribes for eligible shares in a company—

(a) has, before the issue of the shares but within the relevant period, received any value from the company; or

(b) on or after their issue but before the end of the relevant period, receives any such value;

the amount of the relief to which he is entitled in respect of the shares shall be reduced by the value received.

(2) For the purposes of this section an individual receives value from the company if the company—

(a) repays, redeems or repurchases any of its share capital or securities which belongs to the individual or makes any payment to him for giving up his right to any of the company's share capital or any security on its cancellation or extinguishment;

(b) repays any debt owed to the individual other than—

(i) an ordinary trade debt incurred by the company, or

(ii) any other debt which was incurred by the company—

(I) on or after the earliest date on which he subscribed for the shares in respect of which the relief is claimed; and

(II) otherwise than in consideration of the extinguishment of a debt incurred before that date;

(c) makes to the individual any payment for giving up his right to any debt on its extinguishment, other than—

(i) a debt in respect of a payment of the kind mentioned in section 14 (3) (d) or (e), or

(ii) a debt of the kind mentioned in paragraph (b) (i) or (ii);

(d) releases or waives any liability of the individual to the company or discharges, or undertakes to discharge, any liability of his to a third person;

(e) makes a loan or advance to the individual;

(f) provides a benefit or facility for the individual;

(g) transfers an asset to the individual for no consideration or for consideration less than its market value or acquires an asset from him for consideration exceeding its market value; or

(h) makes to him any other payment except a payment of the kind mentioned in section 14 (3) (a), (b), (c), (d) or (e) or a payment in discharge of an ordinary trade debt.

(3) For the purposes of this section an individual also receives value from the company if he receives in respect of ordinary shares held by him any payment or asset in a winding up or in connection with a dissolution of the company, being a winding up or dissolution falling within section 15 (5).

(4) For the purposes of this section an individual also receives value from the company if any person who would, for the purposes of section 14 , be treated as connected with the company—

(a) purchases any of its share capital or securities which belong to the individual; or

(b) makes any payment to him for giving up any right in relation to any of the company's share capital or securities.

(5) The value received by an individual is—

(a) in a case within paragraph (a), (b) or (c) of subsection (2) the amount receivable by the individual or, if greater, the market value of the shares, securities or debt in question;

(b) in a case within paragraph (d) of that subsection, the amount of the liability;

(c) in a case within paragraph (e) of that subsection, the amount of the loan or advance;

(d) in a case within paragraph (f) of that subsection, the cost to the company of providing the benefit or facility less any consideration given for it by the individual;

(e) in a case within paragraph (g) of that subsection, the difference between the market value of the asset and the consideration (if any) given for it;

(f) in a case within paragraph (h) of that subsection, the amount of the payment;

(g) in a case within subsection (3), the amount of the payment or, as the case may be, the market value of the asset; and

(h) in a case within subsection (4), the amount receivable by the individual or, if greater, the market value of the shares or securities in question.

(6) Where by virtue of this section any relief is withheld or withdrawn in the case of an individual to whom ordinary shares in a company have been issued at different times, the relief shall be withheld or withdrawn in respect of shares issued earlier rather than in respect of shares issued later.

(7) For the purposes of subsection (2) (d) a company shall be treated as having released or waived a liability if the liability is not discharged by payment within twelve months of the time when it ought to have been discharged by payment.

(8) For the purposes of subsection (2) (e) there shall be treated as if it were a loan made by the company to the individual—

(a) the amount of any debt (other than an ordinary trade debt) incurred by the individual to the company; and

(b) the amount of any debt due from the individual to a third person which has been assigned to the company.

(9) In this section “an ordinary trade debt” means any debt for goods or services supplied in the ordinary course of a trade or business where the credit given does not exceed six months and is not longer than that normally given to the customers of the person carrying on the trade or business.

(10) In this section—

(a) any reference to a payment or transfer to an individual includes a reference to a payment or transfer made to him indirectly or to his order or for his benefit; and

(b) any reference to an individual includes a reference to an associate of his and any reference to the company includes a reference to any person connected with the company.