| | |
Share

EIS tax reliefs

Income Tax relief
An investor who subscribes in cash for ordinary shares in an EIS qualifying company can obtain income tax relief of up to 20 per cent of the subscription. For the full EIS reliefs, the maximum subscription for each tax year is £500,000, so a husband and wife could claim relief on subscriptions totalling £1m.
CGT deferral relief
In addition, a UK resident investor who makes a capital gain from the disposal of any asset can defer that gain to the extent of the EIS investment, thereby increasing the effective relief on £500,000 to 60 per cent. Gains can also be deferred where income tax relief is not available.
Exemption from Capital Gains Tax
If an investor holds EIS shares for at least three years, any capital gain realised on the disposal of the shares will be both income tax and capital gains tax free, provided income tax relief has been given and has not been withdrawn.
Loss relief
If a loss is made on the disposal of the EIS shares at any time, that loss may be offset against either the investor’s income or capital gains in the year of disposal. In computing a loss on EIS shares, the sale proceeds, if any, are reduced by the net acquisition cost, which is the amount subscribed, reduced by the income tax relief attributable to the shares.
Inheritance Tax
Provided a shareholder has owned shares in a qualifying unquoted trading company for at least two years and certain conditions are met at the time of transfer, inheritance tax business property relief of 100 per cent is available, which reduces the inheritance tax liability on the transfer to nil.

Accountants and Business Advisers © 2012 BDO LLP. All rights reserved. BDO LLP, a UK limited liability partnership registered in England and Wales under number OC305127, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. A list of members' names is open to inspection at our registered office, 55 Baker Street, London W1U 7EU. BDO LLP is authorised and regulated by the Financial Services Authority to conduct investment business. BDO is the brand name for the BDO network and for each of the BDO Member Firms.