The following Corporation Tax guidance note Produced by Tolley in association with Anne Fairpo provides comprehensive and up to date tax information covering:
Investors acquiring shares on flotation, where the company is listed on a market such as AIM so that the shares are not at present regarded by HMRC as quoted shares, may be able to claim certain reliefs including:
the Enterprise Investment Scheme (EIS)
venture capital relief (VCR)
business asset disposal relief (previously known as entrepreneurs’ relief)
Investment in shares listed on the full market of the London Stock Exchange and other similar recognised stock exchanges, where the shares are regarded as quoted for tax purposes, is not generally eligible for any relief.
EIS relief can be claimed on an investment in unquoted shares, giving:
income tax relief of 30% of the amount invested
capital gains deferral on the disposal of an asset where the gain on disposal is matched by an EIS investment. The deferred gain becomes chargeable when the EIS shares are disposed of and the gain deferred can include a gain on the disposal of other EIS shares, so that a gain can be deferred indefinitely by reinvestment each time into another EIS company.
Note that a sunset clause has been introduced, after which time EIS income tax relief will not be available. The shares must be issued before 6 April 2025 or such other date which may be announced under Treasury regulations.
For EIS to be available, the company must meet the following tests contained within ITA 2007, s 156, Part 5 et seq at the time of issue:
be unquoted and without arrangements for becoming quoted (AIM, PLUS Quoted and PLUS Traded are presently regarded as unquoted for this purpose)
not be in financial difficulty
have obtained its initial investment within seven years from the relevant first commercial sale of the company or 10 years in the case of a knowledge-intensive company as defined in ITA 2007, s 252A (or meet specific criteria relating to significant changes in activity)
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