VCM23080 - EIS: deferral relief: shares issued on or after 6 April 1998: how deferral relief is allowed

TCGA92/SCH5B/PARA2

The relief must be claimed (see VCM23200 for guidance on the claims procedure) and it is given by treating the gain as not arising until some future event. There is no requirement that the proceeds of the disposal giving rise to the gain are directly applied to subscribe for the new shares. The investor can specify an amount of relief in his claim as long as this does not exceed the amount of:

• his unused qualifying expenditure on eligible shares, and
• that part of the original gain which is unmatched.

An investor’s qualifying expenditure on eligible shares is the amount subscribed for the shares and that expenditure is unused if it has not been included in an EIS deferral relief claim or in a SEIS re-investment relief claim.

The original gain is unmatched to the extent that it has not been included in a claim to EIS deferral relief within TCGA92/SCH5B, 5C (in respect of qualifying investments in VCT shares issued on or before 5 April 2004, see VCM58010 onwards), or SEIS re-investment relief, TCGA92/SCH5BB.

Example

In 2020-21 a taxpayer carries out the following transactions:

• he disposes of a property under an unconditional contract dated 1 May 2020 giving rise to an agreed chargeable gain of £90,000,
• he subscribes for and is issued with £60,000 worth of shares in an EIS company on 1 September 2020,
• he subscribes for and is issued with a further £40,000 worth of shares in another EIS company on 1 December 2020.

The taxpayer can claim a total amount of £90,000 deferral relief in respect of this gain and the two share issues. He does not have to claim relief on his acquisition in September prior to that in December.