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HMRC internal manual

Venture Capital Schemes Manual

Introduction to EIS income tax relief: form and amount of EIS relief


The relief takes the form of a reduction in the individual’s Income Tax liability. Except where it is restricted, as explained below, the amount of the reduction is equal to tax at the EIS rate, currently 30% (20% for shares issued before 6 April 2011) on the amount of the subscription (this excludes any costs incidental to the subscription) or, if that would exceed the liability for the year, whatever amount will reduce that liability to nil.

ITA07/Ss22 - 32

The relief reduces tax liability in accordance with the steps explained in Chapter 3 of Part 2 ITA07. First of all, total income chargeable to income tax is calculated. Then personal allowances and other reliefs (such as loss relief) are deducted. Income tax liability is then calculated by applying the appropriate income tax rates to the result. Finally EIS relief is used to reduce that tax liability.

To decide whether a reduction equal to tax at the EIS rate would eliminate the tax liability, it may be necessary to decide in which order reliefs taking the form of reductions in liability should be taken. ITA07/S27 provides that reliefs are to be deducted in the following order: first of all, VCT relief, then EIS relief, then SEIS relief, then various others as listed in S27.

The circumstances in which the amount of the reduction may be restricted are:

  • where the individual has received value from the company (see VCM16030+), and
  • where the aggregate amounts on which the individual has claimed relief exceed the limit for the year (see below).

In the first case the amount on which the reduction is calculated is the amount of the subscription less the amount of the value, and in the second case it is the amount of the limit for the year.

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Limit on relief

There is a limit on the amount on which relief can be obtained for any year of assessment.

  • The maximum amount for 2012-13 onwards is £1 million.
  • The maximum amount for 2008-09 to 2011-12 is £500,000.
  • The maximum amount for 2006-07 and 2007-08 is £400,000.
  • The maximum amount for 2004-05 and 2005-06 is £200,000.
  • The maximum amount for years up to and including 2003-04 is £150,000.

An individual who would, but for this restriction, be able to claim relief on more than that amount cannot carry forward the excess. But it may be possible for the claimant to treat some or all of the shares as having been issued in the previous year, as explained below.

For details of how relief can be attributed to shares when this restriction applies see VCM14020.

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Year for which relief is due, ITA07/S158

The relief is available for the year of assessment in which the shares are issued (the claimant can find the date of issue recorded on the company’s certificate on form EIS3 - see VCM14090). However, there are two situations in which shares may be treated as issued on some earlier date. The rules relating to the carry back of relief changed with effect from 2009/10.

  • In certain cases where the subscription is made through the medium of an approved investment fund (see VCM16050), the shares are treated as issued on the date when the fund closes.

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For shares issued in tax year 2009/10 and later years

  • The investor may claim to have some or all of the relief in the year preceding that in which the shares were issued. There is no limit on the amount which may be carried back, but the relief available in the earlier tax year will be subject to the overriding limit for relief for that year.


Mr Shah subscribes £750,000 for shares issued on 10 October 2009. He has already had relief of £100,000 in 2008/09, and the maximum relief available for that year is £500,000, so he elects to carry back £400,000 to 2008/09. He uses the balance of £350,000 in 2009/10.

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For shares issued up to and including tax year 2008/09

  • Where the shares are issued before 6 October in any year of assessment, the individual can treat up to half of those shares as having been issued in the previous year. But the total amount which can be treated in this way for any year is limited to:

    • £25,000 for years up to and including 2005-06,
    • £50,000 for 2006-07 and later years.

Any repayment supplement (‘RPS’) relating to a repayment arising from such a carry-back of relief will run from the year of assessment in point, rather than from the year of assessment in which the shares were subscribed for.


Mrs Higgins subscribes £500,000 for shares issued on 4 July 2006, so she obtains relief on £400,000 for 2006-07 only and there is an excess of £100,000. For 2005-2006 she has already had relief on £60,000. Although that is £140,000 less than the maximum for that year, the amount she can regard as relating to shares issued in that year is limited to £50,000, and she cannot get relief on the remaining £50,000.

See VCM14170 for details of how to claim for an earlier year.