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HMRC internal manual

Venture Capital Schemes Manual

EIS: taper relief for serial investments: business or non-business asset: example 1: Taper relief does not apply to gains accruing or treated as accruing after 5 April 2008

Victoria disposes of some shares in ABC Ltd to which deferral relief is attributable at a gain of £100,000. She held the shares from 2 May 1998 until 2 May 2005, and they qualify as a business asset for taper relief purposes throughout that period.

She invests £100,000 in shares in XYZ Ltd, and obtains deferral relief by setting the expenditure on these shares against the £100,000 gain on the ABC shares. The XYZ Ltd shares are issued to her on 1 September 2004 and she disposes of them at a gain of £50,000 on 2 May 2008. The shares do not qualify as a business asset for any part of that period.

The £100,000 gain is brought back into charge on 2 May 2008. The qualifying holding period for taper relief purposes begins with 2 May 1998 and ends on 2 May 2008. For taper relief purposes, Victoria is treated as having disposed of an asset which was a business asset shareholding for the seven years from 2 May 1998 until 2 May 2005, and a non-business asset shareholding for the 3 years from 2 May 2005 until 2 May 2008. The £100,000 gain is therefore split pro rata into a £70,000 gain on a business asset which has been held for 10 years, and a £30,000 gain on a non-business asset which has been held for 10 years.

The amount of this gain which is chargeable is £35,500, being £17,500 (25% of £70,000) for the business asset plus £18,000 (60% of £30,000) for the non-business asset part.