VCM43550 - EIS: taper relief for serial investments: chargeable event other than a disposal: example

On 5 September 2004, Alfred disposes of an oil painting at a gain of £250,000 which he had acquired on 12 August 1998. He invests £400,000 in shares in ABC Ltd on 14 December 2004, and obtains deferral relief by setting £250,000 of the expenditure on these shares against the gain on the painting. He disposes of all the shares in ABC Ltd on 3 January 2008 at a gain of £110,000, and they qualify as a business asset for taper relief purposes throughout the period for which he held them.

The deferred gain of £250,000 which is brought back into charge on 3 January 2008 when the shares in ABC Ltd are disposed of qualifies for 6 years' taper relief as a non-business asset.

The gain of £110,000 on the ABC Ltd shares qualifies for 3 years' business asset taper relief.

If Alfred defers these gains under the EIS by setting qualifying expenditure on shares in another company against them, the gain of £110,000 can benefit from cumulative taper relief but the gain of £250,000 cannot.