<p>Dear all,</p>

<p>During our call earlier, I undertook to look at how the EIS rules might impact some of the options&nbsp;we considered.&nbsp; &nbsp;I have duly waded through part 5 ITA 2007, over 100 sections, which comprise the EIS rule book as regards income tax.&nbsp; I also had a brief skirmish with part 4 chapter 6 of the same act, which deals with income tax relief for&nbsp;capital&nbsp;losses on the sale of shares in unquoted trading companies.</p>

<p>Key points emerging:</p>

<p>We can be directors, but in broad terms cannot get paid for it.&nbsp; I don&#39;t think it matter where&nbsp;we have one person or six fulfilling this role (at least, not from&nbsp;a tax or HMRC perception point of view).</p>

<p>The three year period, essentially in our case starting&nbsp;from date of share issue, is crucial&nbsp;to many things, including</p>

<ul>
	<li>any money (or value) we get back in this period reduces the initial&nbsp;EIS tax relief&nbsp;pretty much &pound; for &pound;.&nbsp; It doesn&#39;t really matter through what means&nbsp;(share sale, liquidation, dividend etc) we get it.&nbsp;</li>
	<li>administration/winding up does not necessarily&nbsp;invalidate EIS if it is commercially driven, but note comment above re value being obtained.</li>
	<li>so on administration/winding up, we could&nbsp;set up a newco to acquire the pub assets ourselves</li>
	<li>but, the pub &quot;trade&quot; can only be carried on by the original&nbsp;company and not by any successor party., eg our newco could not continue the trading activity during the balance of the three year period (unless ownership was sufficiently different that transferor and successor were not under common control).</li>
</ul>

<p>If we lose all or some of our initial EIS relief, or fail to get it at all eg Hero, and in due course dispose of our shares at a loss, the lack/withdrawal of EIS will not prevent us claiming income tax relief for that loss.&nbsp; Provided the various qualifying conditions are met (and I would think they are likely to be) income tax relief is still available.&nbsp;</p>

<p>All this legislation is written in a special, impenetrable form of the English language understandable by virtually no-one, so if we find ourselves pushing the boundaries in due course eg by selling the pubs to ourselves, we&#39;ll most likely want to sense check our exact plans with leading advisers that work in the EIS arena.&nbsp; (I and others amongst the investors are well connected here).</p>

<p>If anyone wants to ask specific EIS questions of me esp having read this, please go ahead and I&#39;ll attempt to answer.&nbsp;</p>

<p>&nbsp;</p>