Capital gains tax reliefs
For EIS investments: these can be used to defer capital gains tax (CGT) on other assets. The EIS investment must be made between 12 months before and 36 months after the date of disposal of the asset on which the gain arises. The deferred gain will come back into charge when either:
- the EIS investment is disposed of
- the company breaches any of the conditions for EIS, or
- if you become a non-UK resident.
A gain which comes back into charge (other than on you becoming non-UK resident) can be re-deferred by making another EIS investment.
For SEIS investments: deferral relief does not apply, but instead reinvestment relief is available. You can obtain CGT relief on 50% of the SEIS investment which qualifies for income tax relief. This is a relief rather than a deferral, and the gain will not come back into charge unless the income tax relief on the SEIS investment is withdrawn.
The capital gain you want to be relieved must be made in the same year as your income tax relief is claimed, but the gain does not have to be realised before the SEIS investment is made.
Capital gains tax exemption on disposal
If income tax relief was received on the original investment, it wasn’t withdrawn and the shares have been held for a minimum of three years, an EIS or SEIS investment will be exempt from CGT on disposal.