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HMRC internal manual

Venture Capital Schemes Manual

EIS: deferral relief: shares issued before 6 April 1998: what investments qualify?


To qualify for deferral relief against shares issued before 6 April 1998 the taxpayer must subscribe for EIS shares on or after 29 November 1994 and receive Income Tax relief on the subscription. The maximum amount of deferral relief which can be claimed in any one tax year is the total amount subscribed up to £100,000 for shares issued in that one tax year. But a gain in excess of £100,000 can be deferred by subscriptions for shares issued in different tax years.

An investor who is unable to obtain the full amount of Income Tax relief available because his or her Income Tax liability is insufficient can still claim deferral relief on the full amount which would qualify for Income Tax relief. For example an investor subscribes £100,000 for 100,000 EIS shares which are issued in the same tax year. Because their Income Tax liability is insufficient the investor’s Income Tax relief is restricted to £12,000 but he or she can claim deferral relief up to the full subscription of £100,000 for shares issued in that tax year.

For shares issued before 6 April 1998 deferral relief is not available if the investor’s Income Tax liability is nil before taking account of Income Tax relief for an EIS subscription. In these circumstances no Income Tax relief is actually given and as a result deferral relief is not available.