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EIS Investments which go bust.

EIS investments which are no longer eligable for tax relief despite claiming it in previous tax year

I have a client who has a large portfolio of EIS investments of which I have claimed tax relief and CGT deferral relief in previous tax years. One of the holdings has now been liquidated. The shares have only been owned for just over 1 year.

Am I correct in thinking that because this is a liquidation the tax relief is still intact and the loss relief of 70% of the value can be claimed in the year the company was liquidated.

Secondly will the capital gains deferral mean that a capital gain is created equal to the amount initially deferred and this will be a capital gain in the same year of the liquidation?

Thanks in advance for your help.

 

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18th Aug 2017 09:32

Income tax relief equal to the amount invested less the relief already given under EIS.

The deferred capital gain comes back into charge in the year of liquidation, IIRC.

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18th Aug 2017 09:35

That is my understanding. see S182 ITA2007 confirming the position that relief is not withdrawn when a company enters receivership or administration for genuine commercial reasons.

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to firecodeblue
18th Aug 2017 16:40

Clawback of income tax relief is restricted to the amount of loss, so if the shares become worth nothing you pay nothing back, if you sold the shares at a 50% loss you would pay back 50% of the relief etc.

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18th Aug 2017 15:11

*edited*

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