Client realises capital gain on EIS/SEIS shares. All other conditions for CGT exemption are met but there was insufficient income tax when purchased to obtain income tax relief.
Does this mean that the EIS/SEIS capital gain is not exempt?
Replies (4)
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Did client make a claim to income tax relief?
The CGT exemption is available if EIS/SEIS income tax relief is "attributable" to the shares as defined in s201 and s257e ITA. That requires the investors income tax liability to have been reduced by the income tax relief, which would be the case if there was any income tax liability and a claim to relief was made (even if the whole amount of relief could not be used). No claim to income tax relief, no CGT exemption.
Yes and no
As I understand it the answer to your first question is yes, full exemption applies to the disposal of the EIS shares.
As for your second question the position is that if IT relief can't be given then there is no CGT exemption. The fact that a claim for IT relief i made on a tax return doesn't alter the position.
See HMRC VCM20060