伊人直播

ITA07/S209

Where relief has to be reduced following a disposal, the amount of the reduction is:

• the amount of relief attributable to the shares,

or

• a sum equal to tax at the original EIS rate (20% or 30% depending on the year the shares were acquired) on the amount or value of the consideration received,

whichever is the smaller.

But if the relief attributable to the shares is less than tax at the EIS rate on the amount originally subscribed, for example because that amount exceeded the maximum amount relievable, the reduction in the relief is to be restricted proportionately.

Guidance on the attribution of EIS relief to shares is at VCM14020 and on the identification of shares on a disposal is at VCM16020.

Example 1

Miss King subscribed 拢200,000 for shares in Lovely Fashions Ltd issued to her in 2009-10, and obtained relief of 拢40,000 (拢200,000 at 20%). Two years later she sells the shares under a bargain at arm鈥檚 length for 拢110,000.

The withdrawal is calculated at the EIS rate applicable to the year in which relief was given, rather than the EIS rate applicable at the time relief is withdrawn - so in this case, 20%.

20% of 拢110,000 is 拢22,000 and this, being less than 拢40,000, is the amount of relief to be withdrawn. (She may be able to claim Share Loss Relief on the net loss of 拢72,000, i.e. 拢90,000 less the remaining tax relief of 拢18,000, - see VCM70000 onwards.)

Example 2

Suppose Miss King鈥檚 subscription had been 拢250,000. Because the maximum amount on which she could get relief was 拢200,000, her relief would have amounted to 拢40,000 only. That is four fifths of a sum equal to tax at the relevant EIS rate on 拢250,000, so when she sells her shares for 拢110,000 the amount of relief to be withdrawn is not 拢22,000 but only 拢17,600.

Top of page

Part disposals

If the disposal is of part only of the holding of shares we need to decide how much of the relief attributable to the holding relates to the shares disposed of. If the shares are disposed of for the same amount or more than the individual paid for them, the relief withdrawn will be a proportionate amount of the relief originally given. If they are disposed of for less than the individual paid for them, (providing the disposal was by way of a bargain at arms length), only relief equal to tax at the EIS rate on the amount of consideration received is withdrawn. The following examples (which assume that disposals are at arms length) illustrate how the amount of relief to be withdrawn is calculated.

Example 3

In 2010-11 Mr Larkin subscribed 拢100,000 for 100,000 shares in Sussex Crafts Ltd and obtained relief of 拢20,000. Two years later he disposes of 25,000 shares for a consideration of 拢30,000. The relief is apportioned across the 100,000 shares so that 拢5,000 is attributable to the 25,000 shares sold, leaving 拢15,000 attributable to the 75,000 shares retained. Since the relief of 拢5,000 is less than 20% of the consideration of 拢30,000, it is withdrawn in full.

Example 4

Suppose that Mr Larkin receives only 拢10,000 for the 25,000 shares that he sells. The apportioned relief of 拢5,000 exceeds 20% of the consideration of 拢10,000, so only 拢2,000 of the relief attributable to those shares is withdrawn. As before, the relief apportioned to the remaining 75,000 shares is 拢15,000; if those shares are later disposed of at a profit no part of the remaining 拢3,000 of relief relating to the shares already disposed of can be withdrawn on account of the later disposal.

Example 5

Suppose that Mr Larkin had subscribed 拢600,000 for his 100,000 shares, obtaining the then maximum relief of 拢100,000, being an amount equal to tax at 20% on 拢500,000. Two years later he disposes of 25,000 shares for a consideration of 拢100,000.

The relief of 拢100,000 is apportioned between the shares, so that 拢25,000 is apportioned to the 25,000 shares and 拢75,000 to the 75,000 shares. So the comparison is between the apportioned amount of the relief, that is, 拢25,000, and 20% of 拢100,000, being 拢20,000, and the amount to be withdrawn is the lesser of the two, 拢20,000. The remaining 拢75,000 of relief related to the shares disposed of cannot be withdrawn as a result of any later disposal of the other shares at a profit.