Treatment of EIS relate back?

Treatment of EIS relate back?

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I had always thought that if one related back an EIS subscription to the previous tax year, it counted as if it were paid in the previous year for all tax purposes.  However, Tolleys Income Tax ( Smailes and Benneyworth ) say in their key points on EIS:

"Where a claim is made to treat shares as issued in the preceding year, it should be remembered that any resulting tax relief will be treated as available in the later tax year, and therefore there will be no reduction in amounts payable for the earlier year, nor in self assessment payments on account calculated by reference to the liability of the earlier year."

Is this indeed the position?

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By Montrose
02nd Dec 2015 16:31

Revenue manuals justification

See  SACM 11035

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By Portia Nina Levin
02nd Dec 2015 17:11

More nonsense in a book

TMA 1970, Schedule 1B does not apply in relation to a claim under ITA 2007, section 158(4) or 257AB(5). The previous respondent's link only relates to claims that fall within Schedule 1B.

Suppose your EIS shares are issued in 2014/15, you simply claim your relief in 2013/14, via the tax return if still in time, or by written claim.

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By nogammonsinanundoubledgame
02nd Dec 2015 18:11

Interesting software glitch?

I had one of these just the other day. We use Sage for our tax software. Not perfect by any means, but if the software prohibits me from doing something I feel that there is at least a chance that I am not supposed to do it, triggering further research as required.

In this case, Sage would neither

(1) allow me to enter an EIS claim in the 2013-14 return for a share issue in 2014-15, nor

(2) allow me to validate a 2014-15 tax return that contains a claim for freestanding credit amounting to the effect on 2013-14 of the carry back.

Now, only one of those options can be technically correct, notwithstanding Sage's indigestion, because while the principal amount of tax is identical the due dates change as do the interest consequences.

Sage claim that a freestanding credit (ie option 2) can only be claimed in the tax return for an adjustment to an earlier year where it results from a trading loss carry back or an averaging election.

I could in fact go for option 1 by bypassing the normal data entry methods and editing the face of the tax return directly.

So I thought that I would give HMRC a call, just on the off-chance that I might actually get a higher evolved monkey than me. They had little sympathy, because (according to them) if you complete a 2014-15 tax return using *their* web-based software, it will (according to them) allow you to enter a freestanding credit for an EIS carry back (the question of whether that is the correct procedure not being addressed).  I have not tested that.

Onwards and upwards

With kind regards

Clint Westwood

 

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