VCM20080 - EIS: disposal relief: TCGA92/S150B(2): example

In this example TCGA92/S150A(2) applies but TCGA92/S150A(3) does not.

  • July 2015 investor subscribes 拢1,000,000 for 100,000 shares in an EIS company. Maximum Income Tax relief of 拢300,000 is given in the tax year 2015-16.
  • August 2017 the investor receives value from the company and as a consequence the Income Tax relief is reduced by 拢60,000 by making an assessment.
  • January 2020 all the shares are sold for 拢1,150,000.

The chargeable gain is calculated as below.

Disposal proceeds 拢1,150,000

less cost 拢1,000,000

Chargeable gain 拢150,000

The exemption is reduced by the following amount:

Chargeable gain X Reduction in relief

Relief attributable to shares before the reduction

拢150,000 X 拢60,000 = 拢30,000

拢300,000

拢120,000 of the gain is exempt and 拢30,000 is chargeable.