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Where Taxpayers and Advisers Meet

CGT disposal from an EIS losing value

Oli From Reading
Posts:3
Joined:Sun Aug 29, 2021 3:08 pm
CGT disposal from an EIS losing value

Postby Oli From Reading » Sun Aug 29, 2021 3:18 pm

This might be more of an EIS question, but is about the CGT behaviour of an EIS.

My question is how to handle CGT disposal relief when the value of the EIS is less than the purchase price.

I bought shares in an EIS originally at £30k in order to defer £30k of CGT, and 4 years later the EIS is only worth £14.8k. I want to bring the CGT back into charge but only for £12,300 of it (which is the allowance). So should I sell £6,068 of those shares, because that value is the current value of shares that were originally worth £12,300? Then the next year I'll sell another £6,068 and the year after the remainder, and not have to pay any CGT.

I'm not using my CGT allowance for anything else this year or any other year involved.

Also (I've never had to do this before) I hope it's obvious when I come to my self-assessment tax form where to declare CGT disposal?

Thanks,
Oli

iwmtaxadvisor
Posts:23
Joined:Wed Sep 09, 2020 5:12 pm
Contact:

Re: CGT disposal from an EIS losing value

Postby iwmtaxadvisor » Mon Sep 13, 2021 2:25 pm

Can I restate the question slightly for simplicity.

30k original gain, all invested into EIS more than three years ago, gain deferred. 30% claimed against income tax as well, and none of this income tax relief has been withdrawn. Now worth 14k What happens if I sell half of these?

15k deferred gain is revived as per HS297 is charged to gains tax and personal allowance available
Base value is 15k original investment minus income tax relief claimed 30k x 30% /2 = 4.5k sold for 7k, so 2.5k is available as an income tax loss

There are planning options. Depending upon your tax rate, you may choose to sell them all, or wait until a more highly taxed year.

The trouble with EIS schemes always has been the open ended nature of the internal charges and their compound effect upon the underlying investment. Consequently some advisers only develop SEIS among three or four families, and even then the whole scheme has to be rigidly simple to be big enough for all the compliance and light enough on costs to have a good chance of coming out ahead compared to risk equities.
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