EIS: disposal relief: TCGA92/S150B(3): example
In this example TCGA92/S150A(3) applies to restrict the exemption.
- July 2008 investor subscribes £750,000 for 100,000 shares in an EIS company. Maximum Income Tax relief of £100,000 is given in the tax year 2008-9.
- August 2009 the investor receives £100,000 value from the company. The Income Tax relief is reduced by £13,333 (£20,000 x £100,000 / £150,000) by making an assessment.
- January 2013 all the shares are sold for £1,350,000.
The chargeable gain is calculated as below:
|Less cost||£ 750,000|
|Chargeable gain||£ 600,000|
The TCGA92/S150A (3) formula is:
|A||=||Amount of tax relief||=||£100,000|
|B||Subscription x EIS rate (20% 2008-09)||£150,000|
The chargeable gain exemption is restricted to £600,000 x 2 / 3 = £400,000 leaving a chargeable gain at this point of £200,000.
The exemption is further reduced by the following amount:
|Exempt gain||x||Reduction in relief|
|Relief attributable to shares before the reduction|
The exempt gain becomes £346,667 and the chargeable gain £253,333 (£200,000 + £53,333).