VCM38100 - EIS: deferral relief: shares issued on or after 6 April 1998: how deferral relief is allowed

TCGA92/SCH5B/PARA2

The relief must be claimed (see VCM38500 for guidance on the claims procedure) and it is given by treating the gain as not arising until some future event. There is no requirement that the proceeds of the disposal giving rise to the gain are directly applied to subscribe for the new shares. The investor can specify an amount of relief in his claim as long as this does not exceed the amount of:

• his unused qualifying expenditure on eligible shares,

and

• that part of the original gain which is unmatched.

An investor's qualifying expenditure on eligible shares is the amount subscribed for the shares and that expenditure is unused if it has not been included in a deferral relief claim.

The original gain is unmatched to the extent that it has not been included in a claim to deferral relief within TCGA92/SCH5B or 5C (in respect of qualifying investments in VCT shares issued on or before 5 April 2004, see VCM68010 onwards).

Example

In 1998-99 a taxpayer carries out the following transactions:

• he disposes of a property under a contract dated 1 May 1998 giving rise to an agreed chargeable gain of £90,000,
• he subscribes for and is issued with £60,000 worth of shares in an EIS company on 1 September 1998,
• he subscribes for and is issued with a further £40,000 worth of shares in another EIS company on 1 December 1998.

The taxpayer can claim a total amount of £90,000 deferral relief in respect of this gain and the two share issues. He does not have to claim relief on his acquisition in September prior to that in December.