Taxes Consolidation Act 1997 section 495

Anti-avoidance eligible shares

Section 495 denies employment investment incentive scheme (EIIS) relief where arrangements exist that substantially reduce the investor's risk in relation to eligible shares.

• Where any agreement, arrangement or understanding exists that could reasonably be considered to substantially reduce the risk that the beneficial owner of shares (or a connected person) might be unable to realise an amount in money or money's worth, or might not receive expected distributions, income tax relief under the EIIS is denied in respect of the amount subscribed for those shares.
• Such arrangements include rights attached to the shares under the company's constitution (other than those permitted by section 494(3)), the terms of any shareholders' agreement, or any other arrangement with a RICT group member or connected person — for example, personal guarantees that the investor can dispose of the shares after the relevant period, or rights over company or subsidiary assets if disposal is not possible.
• The section also applies to shares carrying preferential rights to dividends or to repayment of capital on a winding up, unless the shares are issued to the managers of a qualifying investment fund.
• For the purposes of the section, an amount specified or implied includes an amount in a foreign currency, and "distribution" has the same meaning as in the Corporation Tax Acts.