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EIS Relief

Share changes affects the relief ?

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I have a client who wants to change the shares in his Company specifically by increasing the number of shares by subdividing the share capital. 

I don't think that changing 50,000 shares of £1each into 100,000 shares of 50p each will affect the relief but do HMRC need to be advised ?

Replies (20)

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By Paul Crowley
01st Aug 2020 12:00

There is usually a reason for making such a change. Did he tell you why?

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By Paul Crowley
01st Aug 2020 12:27

Edited
Why does duplicate posting happen so often?

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Replying to Paul Crowley:
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By Tax Dragon
01st Aug 2020 12:08

Ooh, I'm intrigued. Does that change the answer to the question?

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Replying to Tax Dragon:
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By Paul Crowley
01st Aug 2020 12:20

Probably not. But as often happens, the more the story and background develops...

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By doorsteps
01st Aug 2020 12:12

Absolutely - quite simply the shares were at a price that individual investors were becoming difficult to attract. Reducing the price of the shares solved the problem.

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Replying to doorsteps:
Psycho
By Wilson Philips
01st Aug 2020 12:57

That makes absolutely no sense whatsoever. Whether you subscribe for 200 £1 shares at £10 each or 400 50p shares at £5 each you are in exactly the same position.

Unless you are dealing with some rather dense investors.

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By doorsteps
01st Aug 2020 13:04

I haven't been clear sorry. It's going to be additional EIS shares that will be offered to investors and these will be at the lower individual price. Granted they will get a smaller piece of the cake but my client can attract a lot more individuals at the lower price.

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Replying to doorsteps:
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By Tax Dragon
01st Aug 2020 13:10

So what's the question?

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Replying to doorsteps:
Psycho
By Wilson Philips
01st Aug 2020 13:14

As I thought then - thick investors.

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Replying to Wilson Philips:
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By Tax Dragon
01st Aug 2020 13:16

Justin? Have you hacked Wilson's account?

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Replying to Tax Dragon:
Psycho
By Wilson Philips
01st Aug 2020 13:46

:-) :-)

It is rather odd, though - in my experience EIS investors tend to be pretty savvy. And they tend to have a fixed investment amount in mind, and not too concerned about the number of shares involved.

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Replying to Wilson Philips:
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By Paul Crowley
01st Aug 2020 13:51

I suggest that client's story is not the full story.

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Replying to Tax Dragon:
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By Paul Crowley
01st Aug 2020 13:49

There is always a defence of true and fair comment.

Side tracking
At a nursery parents social event the owner was doing the rounds trying to get investers in a company renovating a pier, the incentive being getting £1 nominal shares (second hand) at a bargain of 45p. He had lots of comments agreeing a real bargain and he ought to charge a bit more. Never has biting my lip been so painful.
Wife insisted that I do not comment and spoil the event.

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By doorsteps
01st Aug 2020 13:56

The question is we have X number of shares in existence at a certain price and we have EIS assurance on these shares. We now want to change the denomination of those shares. The current share capital will not change as a result - there will just be more shares.

However when new investors come on board they will no longer have to pay X for one share. In the current climate my client is struggling to find investors at the current share price. Yes the new investors will get a smaller piece of the Company if they only subscribe for 1 new share at the new lower price.

Is the EIS relief affected by this change and do we need to tell HMRC.

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Replying to doorsteps:
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By Tax Dragon
01st Aug 2020 14:20

Your muddlement is meeting my befuddlement and creating confusion.

It sounds as if you have advance assurance as regards the company. That'll still be valid. Of course the EIS1s will give details of the shares.

If that's not what's happened, ignore me.

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Replying to Tax Dragon:
Psycho
By Wilson Philips
01st Aug 2020 16:57

I believe that the question is whether sub-division of the existing share capital would cause any issues for existing EIS subscribers.

I vote no.

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Replying to Wilson Philips:
Psycho
By Wilson Philips
01st Aug 2020 17:43

Not a further response - just pushing the spam posts off the page

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Replying to Wilson Philips:
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By Tax Dragon
01st Aug 2020 20:03

Wilson Philips wrote:

I believe that the question is whether sub-division of the existing share capital would cause any issues for existing EIS subscribers.

That's how I read the OP. But I thought the revised question was about attracting further/future investment. I think the question is: advance assurance was obtained, there's been a change, is the assurance still valid?

I vote yes. But I confess... I have read neither the application nor HMRC's approval.

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Replying to Tax Dragon:
Psycho
By Wilson Philips
01st Aug 2020 22:57

It certainly won’t affect advance assurance, since this is all about the company’s eligibility, which has nothing to do with the nominal value of its shares.

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RLI
By lionofludesch
01st Aug 2020 23:38

Can't afford the huge share price?

How many shares are these investors buying?

One?

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