EIS CGT relief

EIS CGT relief

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Client invested £5,000 in an EIS start up many years ago (too long ago to revise the return) and just never got round to claiming EIS income tax relief.  The company was eligible, and so was she - she had taxable income; she just forgot to put the EIS investment on her tax return.  Fast forward ten years and she sells shares for £2m landing her with a £560k CGT bill (NO ER due).  Now, the legislation talks about CGT exemption only being available if you got IT relief but only makes reference to the reason for not getting it being due to (a) company ineligible (b) insufficient holding period (c) no IT liability in the year of claim. The legislation is silent on not getting IT relief due to forgetfulness.

As it stands client loses out on a modest IT relief but the ends up losing out again due to lack of CGT exemption.  It seems fair enough to lose the CGT exemption if you were never eligible for IT exemption but hardly fair to lose out on CGT exemption just because you forgot to claim some income tax relief on an investment. 

Any views on attempting to get a reasonable outcome for client on this (or indeed what a reasonable outcome is?)

Thanks

Replies (3)

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By kaff
14th Mar 2012 20:33

What's 'reasonable'?
Sec 150A(2) exempts a gain if an amount of [EIS] relief is 'attributable' to the shares. Sec 150A(11) refers to Part 5 ITA to determine whether relief is 'attributable'. Sec 201 ITA then defines 'attributable' by reference to whether an individual's income tax liability has been reduced by virtue of the investment in question. That seems to be a question of fact.

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Replying to lionofludesch:
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By flixboro
15th Mar 2012 12:25

What's 'reasonable'?

Thanks Kaff.  would you consider that the individual's income tax liablity has been reduced by virtue of the investment in question?  it seems to me that the liability was reduced, but the actual tax paid wasn't, because the individual failed to ask for their tax payment to be reduced to the amount they were liable for.

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By tallsiii
08th May 2012 15:21

Sec 150A

Hello

 

I have the same problem as your client. Please could you tell me what document Sec 150A(11) refers to? I would like to read it in order to take this one further.

 

 

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