Capital Gains Tax Freedom
If an investor has received income tax relief on the cost of the shares, and the If an investor has received income tax relief on the cost of the shares, and the shares are sold after they have been held for at least 3 years, any profit is free from Capital Gains Tax. If no claim to income tax relief is made, then any other sale of the shares will not qualify for exemption from Capital Gains Tax.
If EIS shares are disposed of at any time at a loss (after taking into account income tax relief), such loss can be set against the investor’s capital gains, or his/her income in the year of disposal or the previous year. In computing the loss, you must reduce the cost of your shares by the amount of any Income Tax relief given and not withdrawn. If you want to set the loss against your income you must claim Loss Relief within 1 year from the 31 January following the tax year in which the loss was made.
Inheritance Tax Relief
Inheritance Tax Relief
Inheritance Tax Relief – Shares in EIS qualifying companies will generally qualify for Business Property Relief for Inheritance Tax purposes at rates of up to 100% after two years of holding such investment, so that any liability for Inheritance Tax is reduced or eliminated in respect of such shares.
|Type of relief||Maximum Rate||Maximum Annual Investment||Maximum Tax you can save|
|EIS Income Tax Relief||30%||£1m single person||£300,000 single person|
|EIS Capital Gains Deferral Relief||28%||No upper limit||Capital Gains Tax Deferral of up to 28% of the amount invested|
The amount of income tax relief cannot exceed an individual’s tax liability before other reliefs given by way of discharge of tax. Relief is normally given in the tax year in which the individual invests, although the amount invested (or part thereof) may be regarded as invested in the previous tax year if a claim is made. If you have no liability to Income Tax before taking account of your subscription for EIS shares, you will receive no Income Tax relief and any gain on the disposal of the EIS shares will be chargeable.
|Amount Invested||Tax Relief||Initial net cost to investor|
|Investors claiming EIS Income Tax Relief||£50,000||£15,000||£35,000|
|Investors claiming EIS CGT deferral at 28%||£50,000||£14,000||£36,000|
|Investors claiming both EIS Income Tax Relief and CGT deferral||£50,000||£29,000||£21,000|