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HMRC internal manual

Venture Capital Schemes Manual

EIS: disposal relief: income tax relief reduced


The CGT exemption may have to be restricted if:

  • the investor’s Income Tax relief is reduced because they have received value from the company and or ITA07/S213 applies, see VCM15030.
  • ITA07/S224 applies to reduce an investor’s Income Tax relief where a company repays, reduces or repurchases any of its share capital or makes payments for giving up rights to share capital, see VCM15090 onwards.

The restriction is calculated as follows:

  • compute the chargeable gain in the normal way including the operation of TCGA92/S150A (3), see VCM20040.
  • reduce the exemption by an amount calculated by multiplying the gain by the fraction:
Reduction in relief
Total relief attributable to the shares before the reduction

If TCGA92/S150A(3) applies to reduce the exemption the fraction should be applied to the exempt part of the gain and the deduction made from the exempt part of the gain. If the relief has been reduced on more than one occasion the numerator of the fraction is the total amount of all the reductions.