VCM20040 - EIS: disposal relief: Income Tax relief restricted

TCGA92/S150A (3)

The CGT exemption will be restricted if:

  • the investor does not receive full Income Tax relief on their subscription, see VCM10500
    unless
  • the only reason full Income Tax relief cannot be given is because the claim reduces the investor바카라 사이트™s Income Tax liability to nil, see VCM20060.

The restriction will usually apply when an investor subscribes more than the amount on which Income Tax relief is available. From 6 April 2008 the amount was £500,000. From 6 April 2012 it increased to £1 million. The amounts for other years are given in VCM10530. For example, on 1 July 2011 an individual may have subscribed £600,000 for 100,000 shares in an EIS company. Income Tax relief will only be given on £500,000 of the subscription. The CGT exemption only applies to a proportion of the gain on the disposal or part disposal of the 100,000 shares. You calculate the proportion of the exempt gain using the fraction A/B where:

A = the amount by which the individual바카라 사이트™s Income Tax liability is actually reduced, and

B = the amount of the subscription x the lower rate of tax for the year of subscription.

This restriction only applies if the shares are sold at a gain, see VCM20100 for the treatment of losses.