Married couples and EIS

Understanding the rules for EIS tax reliefs when investors transfer ownership of their EIS shares to a spouse or civil partner.

When shares are gifted

If the gift’s made to a spouse during the investor’s life, this isn’t considered a sale of shares for tax purposes.

	Tax implications of the gift for the original investor	Tax implications for the spouse
Income tax relief	No implications – income tax relief is not repayable even if gifted within three years of investment.	If income tax relief is withdrawn after gift, the spouse is responsible for repayment.
Capital gains tax relief	No implications – gifts between spouses do not trigger capital gains tax.	Growth is tax-free, provided the shares have been held for a combined total of three years between the spouses.
Loss relief	No implications – gifts between spouses cannot crystalise a loss.	Loss relief is available against income or gains, based on the investment amount paid by the original investor net of income tax claimed.
Capital gains deferral relief	No implications – deferred gains do not come back into charge.	Deferred gains are chargeable to the spouse when the shares are sold.
Inheritance tax relief via BPR	No implications – gifts between spouses are free from inheritance tax.	The shares need to be held for a further two years to qualify for BPR as part of the spouse’s estate.

If EIS shares are transferred to a spouse on the original investor’s death, the tax implications are different.

	Tax implications for the original investor on death	Tax implications for the spouse
Income tax relief	No implications – inheritance tax relief is not repayable even if death is within three years of investment.	If income tax relief is withdrawn after transfer, the spouse does not have to repay it.
Capital gains tax relief	No implications – growth to the date of death is tax-free, even if death is within three years of investment.	Any growth in the value after the transfer is no longer free from capital gains tax.
Loss relief	No implications – death does not crystalise a loss.	Loss relief is available against capital gains only. The loss is based on the fall in value between the date of death to the date of sale.
Capital gains deferral relief	No implications – deferred gains are eliminated on death.	There are no implications after the transfer.
Inheritance tax relief via BPR	No implications – transfers between spouses are free from inheritance tax.	Shares will qualify for BPR, as long as the combined ownership period of the spouses is at least two years.