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HMRC internal manual

Venture Capital Schemes Manual

HM Revenue & Customs
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EIS: deferral relief: shares issued on or after 6 April 1998: trustees: examples

The following examples illustrate how the proportion of the gain eligible for deferral relief is calculated for disposals by trustees. In all the examples A, B, C and D are individuals; X and Y are companies.

Example 1

Settled properties are held on an accumulation and maintenance trust for the benefit of A, B and C. Each of them will become absolutely entitled to one third of the settled property on reaching age 18. If any of the beneficiaries dies before age 18, D becomes absolutely entitled to their share of the settled property.

As all the beneficiaries are individuals all chargeable gains arising on disposals by the trustees will be eligible for deferral relief.

Example 2

This is an accumulation and maintenance trust of a different kind. A, B and C are each entitled to one third of the property, if alive, on their 25th birthday. If none reaches the age of 25, D gets the property. They are entitled to their share of the income, and therefore have an interest in possession, from their 18th birthday. An asset is sold just before the oldest, A reaches his 18th birthday. Therefore at that date there was no interest in possession. If the trustees acquire qualifying shares after A’s 18th birthday relief is still due, because although there is now an interest in possession it is for a fixed period, up to A’s 25th birthday.

Example 3

A is entitled to 35% of the income of the settlement. The remainder is held on discretionary trusts for B, C and D. The trustees have power to appoint capital to A, B, C and D. The default trust is in favour of X, the local football club, which is not an individual or charity. The process is that we have a real interest in possession held by A and a deemed interest in possession held by a company. Therefore 35% of the gains are eligible for relief.