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EIS deferral relief

EIS Deferral Relief - interaction with other in-year capital losses

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Hello.

Client made EIS investment of £20K in November 2017.(Tax relief was not his main focus, but I obviously want to maximise his reliefs.)

He has various managed share portfolios on which there are usually annual gains and losses across a number of disposals.

He did not make sufficient capital gains (after in-year losses) within the following 12 months to utilise most of the CGT Deferral Relief.

Say Gains of £35K, losses £22K Annual Exemption £11.7K - only £1.3K of Deferral Relief can be used.

I know that normally, losses on share disposals must be set against gains of the same year, before applying the Annual Exemption.

My question is; can I allocate EIS Deferral Relief to the capital gains on the specific shares sold at a gain within 12 months of the EIS investment, (thus leaving only £1K of gain), so that the bulk of the in-year losses are available to carry forward to the following year (because I cannot carry forward the EIS Relief).

I am reading some articles that seem to imply this is allowed, but can't find anything definitive, and EIS doesn't crop up that often for me.

Thanks in anticipation of any advice you can offer.

Replies (5)

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By The Dullard
20th Dec 2019 10:34

It's actually the other way around. The legislation says that if you have a gain on an asset and you have an EIS investment within one year before and three years after that gain accruing, then you can defer the gain into the EIS investment.

That all takes place before you consider offsetting losses and utilising the annual exempt amount.

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Replying to The Dullard:
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By gouldltd
20th Dec 2019 11:36

Thank you very much for your post.

Just to be clear, are you saying that what I want to do, is in fact exactly what I should be doing anyway....
i.e. I should be deferring all the gains on the share portfolio (sold up to 12 months after the EIS investment date) and then look to see what gains are left, set off part of the losses to match them, and then I can carry forward any remaining losses into the next tax year.

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Replying to gouldltd:
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By gouldltd
20th Dec 2019 14:04

I've just re-read your reply, and I can see that IS what you are saying.
It takes a while to re-focus the mind when it has become a stuck record...!
Thank you again.

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Replying to gouldltd:
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By Tax Dragon
20th Dec 2019 14:07

Also worth noting the 3-year point.

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Replying to Tax Dragon:
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By gouldltd
20th Dec 2019 14:14

yes- thank you, though not much to be gained in that direction for my particular client's circumstances.

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