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(1) In this section—

“chargeable business asset” means an asset, including goodwill but not including shares (other than shares mentioned in paragraph (b)), securities or other assets held as investments, where that asset is acquired at a cost of not less than €10,000 on or after 1 January 2014 but on or before 31 December 2018 and which—

(a) is, or is an interest in, an asset used wholly for the purposes of a new business carried on by a qualifying enterprise, or

(b) is a holding of new ordinary shares, issued on or after 1 January 2014—

(i) in a qualifying company carrying on new business, or

(ii) in a holding company which owns 100 per cent of the ordinary share capital of a qualifying company carrying on new business,

of which an individual claiming relief under this section—

(I) owns not less than 15 per cent of the ordinary share capital of the qualifying company or the holding company, and

(II) is a full-time working director of the qualifying company,

other than an asset on the disposal of which no gain accruing would be a chargeable gain;

“full-time working director”, in relation to a qualifying company, means a director required to devote substantially the whole of his or her time to the service of the company in a managerial or technical capacity;

“holding company” means a company that is not listed on the official list of any stock exchange whose business consists wholly of holding shares in a qualifying company;

“initial risk finance investment” means the funding of the qualifying enterprise for the purpose of new business which funding—

(a) must not exceed a total of €15 million,

(b) is provided in full within 6 months of the commencement of the new business, and

(c) includes equity or investment or both;

“new business” means relevant trading activities carried on—

(a) by a qualifying enterprise (to which paragraph (a) of the definition of ‘qualifying enterprise’ applies) that were not, prior to 1 January 2014, carried on by that qualifying enterprise or by any person connected (within the meaning of section 10) with that qualifying enterprise, or

(b) by a qualifying enterprise (to which paragraph (b) of the definition of ‘qualifying enterprise’ applies) that were not, prior to 1 January 2014, carried on by that qualifying enterprise or by any person connected (within the meaning of section 10) with that qualifying enterprise,

but shall not include any relevant trading activities the products, goods or services of which are substantially the same as products, goods or services previously provided by any individual claiming relief under this section or by any person connected with that individual;

“qualifying company” is a company that is a qualifying enterprise and which, at the time of the making of the initial risk finance investment, is not listed on the official list of any stock exchange;

“qualifying enterprise” means an enterprise which, at the time of the making of the initial risk finance investment, is a micro, small or medium-sized enterprise, as defined in Article 2 of the Annex to Commission Recommendation 2003/361/EC of 6 May 2003¹ and which—

(a) has not been carrying on any business, trade or profession, or

(b) has been carrying on a business, trade or profession for less than 7 years;

“relevant trading activities” has the same meaning as it has in ^[4]>section 488^<[4][4]>section 489^<[4] and includes farming (within the meaning of section 654).

(2) An individual who—

(a) on or after 1 January 2010, has made a disposal of an asset on which capital gains tax has been paid, and

(b) on or after 1 January 2014 but on or before 31 December 2018, applies an amount equal to all or part of the consideration received on that disposal (after deducting any capital gains tax paid on that disposal) as an initial risk finance investment in acquiring chargeable business assets,

shall be entitled to a tax credit against capital gains tax liability arising on a subsequent disposal of, or of an interest in, those chargeable business assets made more than 3 years after they were acquired, in an amount equal to the lower of—

(i) that part of the capital gains tax paid on the disposal of the first-mentioned asset in the proportion that the amount applied as an initial risk finance investment bears to the consideration received on the first-mentioned disposal (after deducting any capital gains tax paid), and

(ii) 50 per cent of the capital gains tax payable on the disposal of the chargeable business asset.

(3) Where on a subsequent disposal of the chargeable business assets referred to in subsection (2), an amount equal to all or part of the consideration (after deducting any capital gains tax paid on that disposal) applied as initial risk finance investment is, in turn, applied as an initial risk finance investment on or after 1 January 2014 but on or before 31 December 2018, in acquiring other chargeable business assets (in this subsection referred to as ‘the new chargeable business assets’), the individual shall similarly be entitled to a tax credit against capital gains tax liability arising on a subsequent disposal of, or of an interest in, those new chargeable business assets made more than 3 years after they were acquired, in an amount equal to the lower of—

(a) that part of the capital gains tax paid on the disposal of the first-mentioned chargeable business asset in the proportion that the amount applied as an initial risk finance investment bears to the consideration received on that disposal (after deducting any capital gains tax paid), and

(b) 50 per cent of the capital gains tax payable on the disposal of the new chargeable business asset.

(4) Where for bona fide commercial reasons, a person making a disposal of a chargeable business asset first transfers that asset to a wholly owned company followed immediately by the disposal of the shares in that company to the person making the acquisition, the tax credit under subsection (2) or (3), as appropriate, shall apply to the disposal of the shares in the company to which the chargeable business asset was transferred as it would have applied if the chargeable business asset had been disposed of directly to the person making the acquisition.

(5) Subsection (4) shall not apply where the transfer of the chargeable business asset to a wholly owned company is an arrangement or part of an arrangement the main purpose or one of the main purposes of which is to secure a tax advantage within the meaning of section 546A.

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(6) Subject to section 597AA(5)—

(a) subsection (2) shall not apply where the subsequent disposal referred to in that subsection is made on or after 1 January 2016, and

(b) subsection (3) shall not apply where the second-mentioned subsequent disposal in that subsection is made on or after 1 January 2016.

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