VCM20080 | EIS: disposal relief: TCGA92/S150B(2): example

In this example TCGA92/S150A(2) applies but TCGA92/S150A(3) does not.

• July 2015 investor subscribes £1,000,000 for 100,000 shares in an EIS company. Maximum Income Tax relief of £300,000 is given in the tax year 2015-16.

• August 2017 the investor receives value from the company and as a consequence the Income Tax relief is reduced by £60,000 by making an assessment.

• January 2020 all the shares are sold for £1,150,000.

The chargeable gain is calculated as below.

Disposal proceeds £1,150,000

less cost £1,000,000

Chargeable gain £150,000

The exemption is reduced by the following amount:

Chargeable gain X Reduction in relief

Relief attributable to shares before the reduction

£150,000 X £60,000 = £30,000

£300,000

£120,000 of the gain is exempt and £30,000 is chargeable.