VCM26010 - Enterprise Investment Scheme (EIS): Income Tax relief: Effect of a disposal

ICTA/S299; ITA/S209

Where the subscriber disposes of shares to which relief is attributable within the three year straddling period (ICTA)/ Period A (ITA) , the general rule is that the relief must be either reduced or withdrawn altogether. See VCM26040 for details.

There are, however, two exceptions to this, they are:

• where the disposal is by way of transfer to a spouse or civil partner (see VCM26050),
• where the shares are exchanged for shares in a holding company in the course of a company reorganisation to which ICTA/S304A or ITA/S247 applies (see VCM20550).

Where, in any case to which ICTA/S304A or ITA/S247 do not apply, the whole of the company's issued share capital is disposed of, with the result that it ceases to satisfy the control rule and is therefore not a qualifying company, it may be that that event occurs at the same time as the disposal by the individual shareholder. In this situation our practice is to regard the disposal as occurring before the event which removes the qualifying status of the company, with the result that where the disposal is at a loss the relief is reduced rather than wholly withdrawn.