VCM23390 - EIS: deferral relief: shares issued on or after 6 April 1998: receipts of insignificant value: examples
Example 1
An investor makes a subscription of £30,000 for shares in X Ltd which were issued to him on 1 June 2017. X Ltd commenced trading on 1 January 2017.
He claims and is granted deferral relief in respect of a gain of £30,000 accruing to him on 1 December 2016.
The period of restriction relating to the shares in X Ltd is the period from 1 June 2017 up to and including 31 May 2020.
The investor receives value from X Ltd as follows:
| Date | Amount |
|---|---|
| 1 October 2017 | £200 |
| 1 February 2018 | £250 |
| 1 May 2019 | £650 |
The value received on 1 October 2017 is an amount of insignificant value as it does not exceed £1,000.
The aggregate of the relevant receipt on 1 February 2018 and the earlier receipt on 1 October 2017 (which fell within the period of restriction in relation to the shares) is £450. As this amount does not exceed £1,000 the value received on 1 February 2018 is an amount of insignificant value.
The aggregate of the relevant receipt on 1 May 2019 and the earlier receipts on 1 October 2017 and 1 February 2018 (both of which fell within the period of restriction relating to the shares) is £1,100. As this amount exceeds £1,000 and is not insignificant in relation to the deferred gain, the aggregate is not an amount of insignificant value and the investor is treated as receiving value of £1,100 on 1 May 2019. Therefore the shares issued on 1 June 2017 will be treated as ceasing to be eligible shares on 1 May 2019 unless replacement value is received, see VCM23400.
Example 2
An investor makes a subscription of £20,000 for shares in Y Ltd which were issued to her on 1 September 2017. Y Ltd commenced trading on 1 October 2015.
She claims and is granted deferral relief of £20,000 in respect of a gain of £40,000 accruing to her on 1 January 2017.
The period of restriction relating to the shares issued on 1 September 2017 is the period from 1 September 2016 up to and including 31 August 2020.
She makes a further subscription of £15,000 for shares in Y Ltd which were issued to her on 1 February 2018.
She claims and is granted deferral relief in respect of a gain of £15,000 accruing to her on 1 November 2017.
The period of restriction relating to the shares issued on 1 February 2018 is the period from 1 February 2017 up to and including 31 January 2021.
The investor receives value from Y Ltd as follows:
| Date | Amount |
|---|---|
| 1 December 2017 | £100 |
| 1 June 2018 | £500 |
| 1 February 2019 | £450 |
Shares issued on 1 September 2017
The value received on 1 December 2017 is an amount of insignificant value as it does not exceed £1,000.
The aggregate of the relevant receipt on 1 June 2018 and the earlier receipt on 1 December 2017 (which fell within the period of restriction relating to the shares issued on 1 September 2017) is £600. As this amount does not exceed £1,000 the value received on 1 June 2018 is an amount of insignificant value.
The aggregate of the relevant receipt on 1 February 2019 and the earlier receipts on 1 December 2017 and 1 June 2018 (which fell within the period of restriction relating to the shares issued on 1 September 2017) is £1,050. As this amount exceeds £1,000 and is not insignificant in relation to the deferred gain, the aggregate is not an amount of insignificant value, and the investor is treated as receiving value of £1,050 on 1 February 2019. Therefore, the shares issued on 1 September 2017 will be treated as ceasing to be eligible shares on 1 February 2019 unless replacement value is received, see VCM23400.
Shares issued on 1 February 2018
The value received on 1 December 2017 is an amount of insignificant value as it does not exceed £1,000.
The aggregate of the relevant receipt on 1 June 2018 and the earlier receipt on 1 December 2017 (which fell within the period of restriction relating to the shares issued on 1 February 2018) is £600. As this amount does not exceed £1,000 the value received on 1 June 2018 is an amount of insignificant value.
The aggregate of the relevant receipt on 1 February 2019 and the earlier receipts on 1 December 2017 and 1 June 2018 (which fell within the period of restriction relating to the shares issued on 1 February 2018) is £1,050. As this amount exceeds £1,000 and is not insignificant in relation to the deferred gain, the aggregate is not an amount of insignificant value and the investor is treated as receiving value of £1,050 on 1 February 2019. Therefore, the shares issued on 1 February 2002 will be treated as ceasing to be eligible shares on 1 February 2018 unless replacement value is received, see VCM23400.
Note that, where a receipt of value falls within periods of restriction relating to more than one share issue, the rules do not provide for an apportionment of the amount received. The amount of the receipt must be considered in relation to each separate issue. If the amount received exceeds £1,000 and is not insignificant in relation to the deferred gains the investor has received an amount of value which is not insignificant in relation to each share issue.