VCM30400 - EIS disposal relief: TCGA92/S150B (3): example
In this example TCGA92/S150A (3) applies to restrict the exemption.
- July 1994 investor subscribes £150,000 for 100,000 shares in an EIS company. Maximum Income Tax relief of £20,000 is given in the tax year 1994-95.
- August 1996 the investor receives £20,000 value from the company. The Income Tax relief is reduced by £2,666 (£4,000 x £100,000 / £150,000) by making a Case VI assessment.
- January 2000 all the shares are sold for £270,000.
The chargeable gain is calculated as below:
| Disposal proceeds | £270,000 |
| Less cost |
7. £150,000 |
| Unindexed gain | £120,000 |
| Less indexation to April 1998, see CG17207 |
8. £19,350 |
| Chargeable gain |
£100,650 |
The TCGA92/S150A (3) formula is:
|
A | = |
9. Amount of tax relief | = |
|
| B | Subscription x lower rate of tax 1994-95 | 11. £30,000 |
The chargeable gain exemption is restricted to £100,650 x 2
/ 3 = £67,100 leaving a chargeable gain at this point of
£33,550.
The exemption is further reduced by the following amount:
|
Exempt gain |
x |
12. Reduction in relief |
| Relief attributable to shares before the reduction |
| £67,100 | x |
£2,666 | = | £8,944 |
|
|
| £20,000 |
|
|
The exempt gain becomes £58,156 and the chargeable gain £42,494 (£33,550 + £8,944), subject to taper relief.
