EIS guide

5 Loss relief Peter is a higher rate taxpayer and has a diversified portfolio of investments, including £50,000 in EIS-qualifying shares. Due to unforeseen circumstances, in 2019/20 he decided to sell his investment portfolio. Peter’s EIS portfolio sold at a £25,000 loss, however his other (non-property) investments have resulted in a £60,000 gain, incurring CGT of £12,000, and he has already used his £12,000 CGT allowance in 2019/20. 60 CASE STUDIES Peter invested £50,000 into EIS-qualifying shares in 2014/15 Peter is therefore able to offset a portion of his £10,000 loss against his outstanding £12,000 CGT liability (£25,000 loss - £15,000 income tax relief = £10,000 available to offset)* ISA £50,000 EIS investment 5 YR £15,000 30% income tax relief available £12,000 Peter has already used his CGT allowance in 2019/20 EIS £25,000 a loss of £25,000 on his original investment However, Peter has made a gain on his other investments, incurring CGT of £12,000 (£60,000 x 20%) +£60,000 OTHER 6 Timing and deployment of capital Katie wants to invest in a portfolio of EIS opportunities to take advantage of the IHT relief. Katie is in ill health and wants to pass on some of her estate to her young children in the form of long-term investments. Katie wants to pass on some of her estate to her young children Katie dies in April 2021 After speaking with her adviser, she invests in a generalist EIS portfolio service . The paperwork is completed and she transfers the investment amount to the manager in February 2019 The qualifying period for investments through an EIS fund starts when the money is invested in an underlying investee company IHT relief claim Jane and John, Katie’s children, make a claim for IHT relief in respect of the value of her EIS investments A portion of the amount invested does not qualify for relief Not all the money had been deployed 2 years prior to Katie’s death Advisers need to be aware of this issue when they factor the date of the income tax relief into their planning and when they are using IHT relief for estate planning. 61 CASE STUDIES * As a higher rate taxpayer, this £10,000 is multiplied by 20% = £2,000 available to offset against his CGT liability in 2019/20.