Income Tax Act 2007 section 257FN

Receipt of replacement value

Section 257FN provides a mechanism to preserve SEIS income tax relief where value has been received by the investor, provided that equivalent replacement value is returned to the original supplier.

• Where SEIS relief would otherwise be reduced or withdrawn because the investor received value from the issuing company, the relief can be preserved if replacement value of at least the same amount is provided back to the original supplier
• The replacement value must be a "qualifying receipt", which can take the form of direct payments, overpaying for assets purchased from the original supplier, disposing of assets to the original supplier at undervalue, reversing the original transaction, or repurchasing share capital or securities at full value
• Certain routine commercial payments are excluded from counting as replacement value, including payments at market value for goods, services or facilities, reasonable commercial interest, market value asset purchases, commercial rents, ordinary trade debts, and payments for shares or securities at or below market value
• The amount of replacement value is calculated according to the type of qualifying receipt: for payments and asset transactions it is the sum of payments plus any excess over market value; for reversal events it equals the original value; and for repurchases of shares or securities it is the consideration received by the original supplier