The following Personal Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
Venture capital schemes are tax efficient investments sanctioned by the Government in order to encourage investment in UK enterprises. They comprise the following schemes:
enterprise investment scheme (EIS)
seed enterprise investment scheme (SEIS)
venture capital trusts (VCT)
social investment relief (SI relief, also known as social investment tax relief (SITR))
The tax reliefs are similar but not identical. Some investors consider VCTs to be more attractive as the risks are spread by indirectly investing in a number of unquoted companies rather than investing direct in one company, as with EIS and SEIS investments.
This guidance note considers the capital gains tax position of individuals disposing of shares acquired through the schemes listed above.
EIS is the name of a scheme which encourages individuals to invest money in shares issued by qualifying unquoted trading companies with a permanent establishment in the UK.
A subscription for eligible shares in a qualifying EIS company is a tax efficient investment for the individual. The individual can benefit from the following tax reliefs:
income tax relief of 30% on the amount invested
any capital loss on the EIS shares is an allowable loss for capital gains tax (CGT) but gains are exempt (if certain conditions are met)
the investment can be used to defer the gain on the sale of any asset
These reliefs are considered in further detail in the Enterprise investment scheme tax relief and Enterprise investment scheme deferral relief guidance notes. The conditions for a valid investment are discussed in the Conditions to be met by the EIS issuing company and Conditions to be met by the EIS investor guidance notes.
If EIS shares are sold at a profit, the capital gain is exempt from CGT. However, if a loss is incurred this is an allowable loss for CGT purposes so long as the individual is UK resident. This is unusual in CGT, as normally where assets are exempt the gains are not chargeable and the losses are
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