Deferring CGT liability with EIS

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Hello!

I was hoping some of you could provide a little advise/opinion on a CGT bill I am facing. 

I am (personally) selling a property which will have a capital gain on it of about £350k. This figure is after I have taken into account private residence + lettings relief so will have a CGT bill of roughly £100k. 

A 'connected' family member is in the process of setting up a business that is involved in purchasing/renting holiday & student lets in the UK. This is an entirely new business. Would this type of business qualify for an EIS investment in principle? I appreciate this might not be enough information for you to answer this question. If it did, would I be able to invest my capital gain of £350k into this business (providing it gets approval for EIS first) and indefinitely defer my capital gains bill provided I do not sell my shares in the business? 

I appreciate your help/time with this and if there's anything else that would help please let me know.

Replies (5)

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Portia profile image
By Portia Nina Levin
07th Jul 2017 14:11

Surprisingly, there is enough information in your question to answer it.

In principle, a company with the activity described will not qualify as an EIS investment, because the activity described is not a trade.

Enjoy the rest of your day.

Thanks (1)
Portia profile image
By Portia Nina Levin
07th Jul 2017 14:14

Bloody AccountingWeb, and the [***] double-click "Post reply" feature!

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By tradler
07th Jul 2017 14:26

Thank you for your reply Portia.

Say the EIS company was a property management firm which then owned a subsidiary that owned the properties - would property management then be classified as a trade?

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Replying to tradler:
Portia profile image
By Portia Nina Levin
07th Jul 2017 14:31

Well, yes it would. But the property subsidiary would then make it fail another test.

Here's a radical suggestion for you. Rather than taking all your cash and investing it in this relative's business, why don't you invest some of it in some proper advice?

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Replying to Portia Nina Levin:
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By tradler
07th Jul 2017 14:37

Haha, I think that's a stunning idea. Am very much out of my depth and my next question was going to be who would be best placed to advise me on this.

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