Handicap for golf club owners
HP writes: I am one of five shareholders in a company owning and running a freehold 18-hole golf course with other leisure facilities, including timeshares and fishing lakes. The company needs more money to expand the leisure facilities and improve the course. It has been suggested that we ask members to subscribe for new share capital in return partly for an element of free or discounted membership and use of the facilities. Is it correct that members subscribing for new shares would be entitled to income-tax relief on their investment and possibly also an element of capital-gains tax (CGT) relief by deferring other gains they may have realised?
It is unlikely the relief will be given in your case. We assume you refer to the Enterprise Investment Scheme. Under certain circumstances these provide for income-tax relief at 20% on investments in qualifying unquoted companies (up to a £150,000 maximum) and may enable individuals with chargeable gains to reinvest them, so postponing their tax liability. Gains from one year after and three years before the date of the investment can be reinvested up to the amount of the investment made. The provisions to get such relief are complex. The relief is also unlikely to be available - or at least will be greatly reduced - in cases where the person subscribing for new shares is granted a benefit in kind such as free or cheap membership or use of facilities. Before any proposals are put to members, take professional advice relating to your company´s specific circumstances. You should also take care when inviting any members to subscribe for new shares as such an invitation may risk infringing the regulations relating to offers of shares to the public and/or financial advertisements.