Page 69 - Praetura IM EIS2019 DRAFT

EIS Taxation Reliefs

It is recommended that prospective Investors seek subscribe up to £1.0million, or £2.0million provided that the Although there is a limit for income tax relief (see
independent advice to ensure that they fully understand additional £1.0million is invested into Knowledge Intensive section a) and for the exemption from capital gains tax
how any tax advantages may apply to their situation and Companies. The relief is given against the individual’s upon a disposal (see section d), there is no limit on the
circumstances. Tax treatment depends on the individual income tax liability for the tax year in which the Shares amount of EIS-qualifying investments which can be
circumstances of each investor and may be subject to are issued unless the individual makes a Carry Back Relief used to CGT is chargeable at 10% and 20% from 6 April
legislative or other change in the future. claim. Relief is limited to an amount which reduces the 2016 for individuals, except on disposals of residential
individual’s income tax liability to nil. property and carried interest, for which the rates are 18%
Praetura Ventures does not give tax advice and prospective and 28% (the applicable tax rate depends on the total
Investors should consult a tax or other suitably qualified Carry Back Relief amount of the individual’s taxable income and will be
advisor to discuss their personal circumstances. Carry Back Relief claims may be made for amounts 20% or 28% for an individual who is subject to higher
subscribed for Shares in EIS Qualifying Companies, such rates of income tax); 20% for trustees or for personal
EIS Tax Reliefs that an investment is treated, for tax relief purposes, as representatives of someone who has died (except that
(based on investment in the 2018/19 tax year) having been made in the tax year before the tax year in disposals of residential property and carried interest
To obtain the tax reliefs described below, it which the investment was actually made. In effect, and are taxed at 28%); and 10% for gains qualifying for
is necessary to subscribe for Shares in EIS-Qualifying provided no 2017/2018 EIS investments have already been Entrepreneurs’ Relief (subject to a maximum lifetime limit
Companies and claim the relief. The summary below is made, this allows an investor to invest up to £3million in of £10.0million). From 23 June 2010 to 5 April 2016,
based on current law and gives only a brief outline of the tax 2018/2019 and claim full tax relief. This would be subject the rates were 18% and 28% for all assets that did not
reliefs. It does not set out all the rules which must be met by to the individual having a sufficient tax liability in both qualify for Entrepreneurs’’ Relief.
EIS-Qualifying Companies and an Investor. The tax reliefs years and that the additional £1million was invested into
will only be relevant to Investors who pay UK income tax Knowledge Intensive Companies. When a previously deferred gain crystallises, the rate
and/or wish to defer a capital gain. of CGT then payable will depend upon the legislation
Capital Gains Tax Deferral that is in force at the time, ad may be greater or lower
Income Tax Relief Capital gains tax deferral on unlimited gains invested in than the rate that would have been applied had Capital
Individuals can obtain up to 30% income tax relief on the qualifying companies, in respect of gains that arise within Gains Deferral not been claimed. If Capital Gains
amount subscribed for Shares in EIS-Qualifying Companies three years before and 12 months after the date of issue of Deferral is claimed on an Entrepreneurs’’ Relief qualifying
(up to an annual maximum £1.0million for the 2018/19 tax the shares. To the extent to which a UK resident Investor gain that was realised on or after 3 December 2014,
year, or £2.0million provided that the additional £1.0million (including individuals and certain trustees) subscribes for Entrepreneurs’’ Relief will be available when the deferred
is invested into Knowledge Intensive Companies), Shares, they can claim to defer paying tax on all or part of a gain crystallises.
although relief will be denied for investment into an chargeable gain. The gain may have arisen on the disposal
EIS-Qualifying Company with which the individual is of any asset, or a previously deferred gain may have been
connected. Spouses and civil partners can each separately brought back into charge. 69