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“How to reduce CGT due by 8%” should read “How to reduce CGT due by 8 percentage points” or better still "How to reduce CGT by up to 44.4%".
A reduction from 28% to 20% is a reduction of 29% roughly and a reduction from 18% to 10% is a ‘saving’ of over 44%. I mean, if you say to client if you do X it will save you 8% tax he might not think that the risk of doing X is worthwhile. If you tell him it will save 28% or 44% he might be more interested.
If that were a problem then you would never get EIS relief (i.e. that anti-avoidance provision cannot be that wide - see Lloyds Leasing case re main purpose test). The article mentions and then fails to expand on potentially achieving 20% CGT after an incorporation of a BTL portfolio by gifting shares rather than gifting the properties (without an incorporation).
'The reduction of an investor's tax liability which flows from the schemes in the circumstances intended by Parliament is obviously not a tax advantage at which this rule is aimed. We therefore do not have to judge whether a subscription for eligible shares would have been made if it had not attracted relief"
https://www.gov.uk/hmrc-internal-manuals/venture-capital-schemes-manual/...
Terrible advice. Take your money out of a relatively stable investment (property) and put it in the riskiest asset class of all (EIS) all to try and save 8% tax.
Not to mention most EIS shares aren't traded on a market, and the reason they are EIS is that there is a significant risk you won't get anything back at all.
Also, as I'm not an IFA I couldn't give this advice anyway, and any IFA who gave this sort of advice wouldn't be on my contacts list.
Take the 8% hit and be free to place the capital where you want it, and be able to access it when you want it, rather than risk losing lots of it or be tied in to investments with no market.
This might be appropriate for some small proportion of the gain so actual savings will be no where near 8%.
But the advice to potentially save 8% CGT via an incorporation (e.g. if doing IHT PET planning) is potentially good.
“The government is committed to reducing burdens for taxpayers and building a transparent and accessible tax system fit for the digital age… HMRC will collect and process information affecting tax in as close to real time as possible, stopping tax due or repayments owed from building up.
Try telling this to all the construction industry businesses still waiting for refunds of CIS suffered in excess of CIS and PAYE due. HMRC have not been able to sort out PAYE/CIS overpayments under RTI yet. When was RTI introduced? So they now think MTD will solve all our problems?
A potentially interesting article Rebecca.
I disposed of a rental property last year, and must disclose a significant gain on my 2015/16 tax return for CGT purposes.
Putting aside the risk of EIS' for a moment, I would love to save 8%, but you say I would have needed to invest the gain in an EIS 12 months before the gain, which doesn't make sense.
Please advise.
As I stated in the article above the investment in EIS sahers must be made within a " four-year window which starts 12 months before the date on which gain is made, and ends to 36 months after that date."
So you have three years after the gain on the rental property was made, to invest in EIS. But also if you acquired EIS shares up to 12 months before the gain was made that earlier EIS investment can also be used to defer the gain.