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HMRC internal manual

Venture Capital Schemes Manual

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HM Revenue & Customs
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EIS: income tax relief: supplementary and general: identification of shares on a disposal

ITA07/S246

An individual who owns shares to which relief is attributable (see VCM14020) may also possess other shares in the same company of the same class. Also, shares to which relief is attributable may have been acquired at various times and at various prices. Consequently, if the individual disposes of a part only of the holding we need rules to identify the particular shares disposed of. The rules are as below.

  • Where the shares were acquired on different days, those acquired first are treated as disposed of first.
  • As between shares acquired on the same day, the order of disposal is:

    • shares to which no EIS relief of any kind is attributable, and to which no SEIS relief is attributable,
    • shares to which only SEIS relief is attributable,
    • shares to which EIS deferral relief only is attributable,
    • shares to which EIS Income Tax relief only is attributable,
    • shares to which both EIS types of relief are attributable.
  • Where shares have been treated as issued in the year preceding the actual year of issue, for the purpose of claiming Income Tax relief (see VCM14170) those shares are treated as disposed of before the others issued on the same day.

For the purpose of the above:

  • shares to which either type of EIS relief is attributable and which have been acquired from a spouse or civil partner are treated as issued when the spouse or civil partner acquired them,
  • shares acquired as a result of a company reconstruction are treated as acquired when the original shares in the predecessor company were acquired.

A special rule applies to shares issued as bonus shares - see VCM14020.

A share disposal may result in the withdrawal or reduction of EIS income tax relief - see VCM15015.