Taxes Consolidation Act 1997 section 508O

Anti-avoidance: disposals of a qualifying subsidiary

Section 508O provides that where a qualifying company disposes of a qualifying subsidiary before the end of the relevant period, the EIIS investors are treated as having partially disposed of their shares in the qualifying company.

• The section applies where a qualifying company disposes of a qualifying subsidiary (including on a winding up or dissolution) before the end of the relevant period, and the amounts raised from the qualifying investment had been invested in eligible shares of that subsidiary.
• The section is triggered only where the proceeds of that disposal were not returned to the qualifying investors without undue delay.
• The qualifying investors are deemed to have partially disposed of their eligible shares in the qualifying company on the date of the subsidiary's disposal.
• The deemed disposal proceeds are equal to the investors' proportionate share (based on their eligible shareholding) of the market value of the qualifying subsidiary on the disposal date, or the actual disposal consideration if that is higher.