CITM6031 | Tax Relief: Individual Investors - effect of a claim - investments from 6 April 2013

ITA/S335A

Investors can carry forward any unused relief to be set against later tax years. The carry forward of unused relief must be made within the 5 years starting from which the year in which the particular investment was made. Any unused relief at the end of the 5-year period is lost.

If on reducing their tax liability to zero an individual has been unable to use their full entitlement of 5% of the invested amount, the unused excess may be carried forward and set against later years, where capacity is available.

Example 1

An investor who invested £10,000 in a CDFI and would be entitled to relief of £500 each year, has a reduced tax liability in year 3 of £300. £200 is therefore excess.

In year 4 their tax liability is £2,000 so they are able to use the £500 yearly relief along with the £200 carried forward and reduce the liability to £1,300.

Example 2

An investor who invested £10,000 in a CDFI has no tax liability in year 4 and a tax liability in year 5 of £700. The excess from year 4 can be carried into year 5. The maximum relief due for the year is £700. As this is year 5 and the end of the claim period, the unused excess of £300 is lost.