VCM32000 - EIS disposal relief: identification of disposals
TCGA92/S150A (4) - (5)
The ordinary share identification rules do not apply to shares that have attracted EIS relief. There is no pooling of shares acquired before 6 April 1998 and the last in first out and other rules introduced by FA98 do not apply. Instead the Income Tax rules in ICTA88/S299 (6) and ITA/S246(2) apply. Disposals are identified first against the earliest acquisition. For same day acquisitions the order of disposal on or after 6 April 1998 is set out at ICTA88/S299 (6A) and ITA/S246 (3), see VCM26080.
Example
An investor subscribed £20,000 for 20,000 new shares in an
EIS company. These shares were issued to her on 1 June 1994 and
were the only shares in an EIS company issued to her in 1994-95.
She claimed Income Tax relief on all £20,000.
On 1 July 1996 she bought a further 15,000 shares from a
third party for £15,000. These shares did not attract any EIS
reliefs.
On 1 January 2000 the taxpayer sold 25,000 shares for
£50,000.
For CGT purposes the taxpayer has two separate blocks of
shares in the EIS company.
- 20,000 shares acquired 1 June 1994 any gain on the disposal of which after 5 years is not chargeable.
- 15,000 shares acquired on 1 July 1996 which are not exempt. This is now called a TCGA92/S104 holding, see CG50590 onwards.
The shares sold on 1 January 2000 are identified:
- firstly with the 20,000 shares issued on 1 June 1994. As these were issued before 6 April 2000 and have been held for more than 5 years no gain arises on their disposal, and
- secondly with 5000 of the shares from the Section 104 holding.
Section 104 holding
|
| Number of
shares | Pool of
qualifying expenditure | Pool of indexed expenditure |
| 1 July 1996 | 15,000 | £15,000 | £15,000 |
| Indexation to April 1998, see CG17207 |
13. £1,005 |
||
|
| 15,000 | £15,000 | £16,005 |
Capital Gains Computation
| Pool of Indexed Expenditure £16,005 | x |
14. 5,000 | ||
| 15,000 | = | £5,335 | ||
| Pool of Qualifying Expenditure £15,000 | x |
15. 5,000 | ||
| 15,000 | = |
16. £5,000 |
||
| Indexation allowance | = | £335 |
| Disposal proceeds (5,000 non-exempt shares) | £10,000 |
| Less cost |
£5,000 |
| Unindexed gain | £5,000 |
| Less indexation |
£335 |
| Chargeable gain (before taper relief) | £4,665 |
An example on same day acquisitions is at VCM38290, example 1.
