Enterprise investment scheme deferral relief

Produced by Tolley
Enterprise investment scheme deferral relief

The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Enterprise investment scheme deferral relief
  • Conditions for EIS deferral relief
  • EIS deferral relief conditions in respect of the investor
  • EIS deferral relief conditions in respect of the investment
  • EIS deferral relief conditions in respect of the company
  • How EIS deferral relief operates
  • Amount of EIS deferral relief
  • Reporting
  • Crystallisation of deferred gain

Deferral relief, also known as re-investment relief, is one of the tax reliefs available under the enterprise investment scheme (EIS). For detail on other tax reliefs, see the Enterprise investment scheme tax relief guidance note.

Under deferral relief, an individual who sells an asset and reinvests the chargeable gain in subscribing for qualifying EIS shares can defer the capital gains tax liability on the asset by claiming EIS deferral relief. To obtain full deferral relief, the investor must invest an amount at least equal to the chargeable gain. If the investor invests an amount that is less than the chargeable gain, then the part not invested will not be deferred and it will be subject to CGT.

It may be worth considering not investing the whole of a gain and retaining a part to be covered by the annual exemption.

It is not a requirement that the investor should obtain EIS income tax relief for the expenditure. This means that an investor can claim deferral relief where there is no liability to tax or the amount subscribed is more than the permitted annual amounts on which income tax relief is available (see the Enterprise investment scheme tax relief guidance note for more on the permitted annual amounts).

There is no minimum amount of investment required to qualify for EIS deferral relief, and the maximum is only limited by the overall risk finance investments annual permitted maximum. The cap is £5m per annum total relevant investments in the issuing company (ie investments under EIS, seed enterprise investment scheme (SEIS), venture capital trusts (VCTs), and investments in social enterprises). Note that the increased annual permitted maximum for knowledge-intensive companies (£10m per year), and the other inv

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