Tax issues for investors

Produced by Tolley in association with Anne Fairpo

The following Corporation Tax guidance note Produced by Tolley in association with Anne Fairpo provides comprehensive and up to date tax information covering:

  • Tax issues for investors
  • EIS
  • Sunset clause
  • Conditions to be met by the issuing company
  • Conditions to be met by the investor
  • VCR
  • Sunset clause
  • Interest relief
  • Business asset disposal relief
  • Investors’ relief

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:

  1. the Enterprise Investment Scheme (EIS)

  2. venture capital relief (VCR)

  3. interest relief

  4. business asset disposal relief (previously known as entrepreneurs’ relief)

VCM13090

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

EIS relief can be claimed on an investment in unquoted shares, giving:

  1. income tax relief of 30% of the amount invested

  2. 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.

Sunset clause

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.

Conditions to be met by the issuing company

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:

  1. be unquoted and without arrangements for becoming quoted (AIM, PLUS Quoted and PLUS Traded are presently regarded as unquoted for this purpose)

  2. not be in financi

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