Finance Act, 1986

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The relief.

18.—(1) This Chapter has effect for affording relief from income tax where—

(a) an individual who qualifies for the relief subscribes for eligible shares in a qualifying research and development company, and

(b) those shares are issued to him for the purposes of raising money for a qualifying research and development project which is being carried out by the company or which it intends to carry out.

(2) In this Chapter “eligible shares” means new ordinary shares which, throughout the period of five years beginning on the date on which they are issued, carry no present or future preferential right to dividends or to a company's assets on its winding up and no present or future preferential right to be redeemed.

(3) The relief in respect of the amount subscribed by an individual for any eligible shares shall be given as a deduction of that amount from his total income for the year of assessment in which the shares are issued, and references in this Chapter to the amount of the relief are references to the amount of that deduction.

(4) The relief shall be given on a claim and shall not be allowed—

(a) unless and until the company has carried out for a period of not less than four months, or for the project period if that is shorter, the qualifying research and development project for which the money was raised by the issue of the shares in respect of which relief is claimed, and

(b) if the company is not carrying out that qualifying research and development project at the time when the shares are issued, unless the company begins to carry it out within two years after that time.

(5) A claim for the relief may be allowed at any time after the qualifying research and development project has been carried out by the company for the period referred to in subsection (4) (a) if the conditions for the relief are then satisfied; but no claim shall be allowed before the 1st day of January, 1987.

(6) In the case of a claim allowed before the end of the relevant period, the relief shall be withdrawn if by reason of any subsequent event it appears that the claimant was not entitled to the relief allowed.

(7) In this Chapter “the relevant period”, in relation to relief in respect of any eligible shares issued by a qualifying research and development company for the purpose of raising money for a qualifying research and development project, means—

(a) as respects sections 20 and 25 the period beginning on the incorporation of the qualifying sponsoring company on behalf of which the research and development company carries out, or intends to carry out, the qualifying research and development project (or, if the qualifying sponsoring company was incorporated more than two years before the date on which the shares were issued, beginning two years before that date) and ending on the earlier of the following dates, that is to say—

(i) the date which is five years after the issue of the shares, and

(ii) the date on which the project period (hereafter in this subsection referred to as “the relevant project period”) in relation to the qualifying research and development project for which the money raised by the issue of the shares was, or is to be, expended comes to an end,

(b) as respects section 21 the period which corresponds to the relevant project period or to the period beginning on the date on which the shares were issued and ending on the date which is five years after the issue of the shares, whichever period comes to an end first, and

(c) as respects section 22 the period beginning on the date the shares were issued and ending on the later of the following dates, that is to say—

(i) the date which is three years after the commencement of the relevant project period, and

(ii) the date on which the relevant project period comes to an end.

(8) Where by reason of its being wound up, or dissolved without winding up, the company carries out the qualifying research and development project for a period of less than that referred to in subsection (4) (a), the said subsection (4) (a) shall have effect as if it referred to that lesser period but only if it is shown that the winding up or dissolution was for bona fide commercial reasons and not as part of a scheme or arrangement the main purpose or one of the main purposes of which was the avoidance of tax.

(9) All such provisions of the Income Tax Acts as apply in relation to the deductions specified in sections 138 to 143 of the Income Tax Act, 1967 , shall, with any necessary modifications, apply in relation to relief under this Chapter.

(10) Subject to the provisions of section 30 , no account shall be taken of the relief, in so far as it is not withdrawn, in determining whether any sums are excluded by virtue of paragraph 4 of Schedule 1 to the Capital Gains Tax Act, 1975 , from the sums allowable as a deduction in the computation of gains and losses for the purposes of the Capital Gains Tax Acts.

(11) This section applies only where the shares concerned are issued in the year 1986-87 or any of the four years of assessment immediately following that year.