VCM20010 - EIS: general: structure of the scheme and the guidance

This section of the manual deals with those features of the EIS which are common to both income tax relief and the capital gains deferral relief , but which are not found in the other venture capital schemes.

Income tax relief is covered in Part VII, Chapter III, ICTA & Part 5, ITA. The ITA provisions apply where the EIS shares are issued on or after 6 April 2007. Capital gains deferral relief is covered in TCGA92/SCH5B.

EIS makes two reliefs available to persons who subscribe for shares. They are referred to in this manual as income tax relief and deferral relief. In addition, where income tax relief has been obtained and has not been withdrawn, any gain realised is exempted from CGT, (see VCM30000 onwards.

Those provisions which apply to only income tax relief are dealt with at VCM25000 onwards, and those which apply only to deferral relief at VCM35000 onwards (where the shares were acquired before 6 April 1998) and VCM38000 onwards (where they were acquired on or after 6 April 1998). The present chapter deals with those provisions that are common to both reliefs.

The reliefs are available only in the case of subscription for newly issued ordinary shares (see VCM12010). These shares must be shares in a qualifying company (see VCM20500).

Apart from the rules dealt with in the present chapter, there are also rules relating to the purpose for which the shares are issued and the way the money raised by the issue is employed (see VCM12060 - VCM12090), and, where the company is a parent company, the nature of the particular company which employs that money (see VCM12100).