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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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To reduce CGT, INVEST IN AN EIS A person has made a capital

Resolved Question:

To reduce CGT, INVEST IN AN EIS
A person has made a capital gain of £100k in Aug-15.
Please explain what is mean by below which I got off the internet. What is the period, the person can make an investment in EIS to meet tax laws?
Any gains that are made on investments in an Enterprise Investment Scheme (EIS) are free from CGT if held for three or more years. If the shares are disposed of at a loss, one can elect for the amount of the loss, less any income tax relief given, to be set against income for the year in which the shares were disposed of - or any income for the previous year - instead of being set against capital gains. CGT deferral relief is available to individuals and trustees of certain trusts.
The payment of tax on a capital gain can be deferred where the gain is invested in a share of an EIS qualifying company. The gain can arise from the disposal of any kind of asset, but the investment must be made within the period of one year before or three years after the gain arose.
There is no minimum period for which the shares must be held; the deferred capital gain is brought back into charge whenever the shares are disposed of, or are deemed to have been disposed of under the EIS legislation. The downside of EIS is that generally these types of schemes are higher risk than traditional stocks and shares.
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Everything you have typed is pretty straightforward. There is more on the EIS scheme here.

Look under the heading "What are the time limits for subscribing for EIS shares to get deferral relief?" on page 5 here for the time limit to make an investment in EIS and defer a capital gain and therefore the potential CGT liability on that gain to a later tax year. See from page 4 here for information on deferral relief.

Gains made from selling EIS shares are tax free if they are sold after 3 years or more of the shares being owned. See page 1 here.

If the shares are sold at a loss, the loss can be offset against income as opposed to other capital gains. This may result in an income tax repayment. See page 2 here.

Se page 6 here for information on what happens when a deferred gain is brought back into a charge to CGT.

I hope this helps but let me know if you have any further questions.
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