VCM20050 - EIS: disposal relief: example
- July 2015 an investor subscribes £1,500,000 for 100,000 shares in an EIS company.
- Maximum Income Tax relief of £300,000 is given in the tax year 2015-16.
- January 2021 all the shares are sold for £2,100,000.
The chargeable gain is calculated as below.
| Description | Amount |
|---|---|
Disposal proceeds |
£2,100,000 |
Less cost |
£ 1,500,000 |
Chargeable gain |
£ 600,000 |
The TCGA92/S150A(3) formula is:
| Example | Equals | Description | Equals | Amount |
|---|---|---|---|---|
A |
= |
Amount of tax relief |
= |
£300,000 |
B |
- |
Subscription x EIS rate (30% 2015-16) |
- |
£450,000 |
The chargeable gain exemption is restricted to:
£600,000 x (£300,000/ £450,000) = £400,000
The chargeable gain becomes £600,000 - £400,000 = £200,000.