How to claim EIS income tax and deferral relief
Things to bear in mind when claiming income tax and deferral relief
Income tax relief
Maximum investment for relief
You can claim up to 30% income tax relief on EIS investments of up to £1 million per tax year1. This increases to £2 million per tax year provided at least £1 million is invested in Knowledge Intensive Companies (KICs)2.
Carry back relief
You can choose to treat an investment as though it was made in the previous tax year. This means that up to £2 million can be invested in a tax year (£1 million in the current tax year and £1 million carried back to the previous tax year).
If at least £2 million of investments are made into KICs, a total investment of £4 million can be made in a tax year (£2 million for current tax year and £2 million treated as made in the previous tax year).
Relief limited to your income tax bill
The amount of income tax relief you claim can’t be more than the income tax you have to pay for that tax year. You can only reduce your income tax bill to zero.
Hold shares for three years
To keep your income tax relief, you’ll need to hold your EIS shares for at least three years from the date they were issued, or from the date each company started a qualifying trade (whichever is later).
Capital gains deferral relief
Defer gains throughout investment
A gain made on the sale of other assets can be reinvested in EIS shares and deferred over the life of the investment.
Unlimited deferral relief
There is no upper limit on the amount of gains that can be deferred.
Reinvestment deadlines
To qualify for deferral relief, the reinvestment into EIS-qualifying shares needs to be made no earlier than twelve months before, or three years after, the original gain.
Money equivalent to gain
It is only the money equivalent to the gain that needs to be reinvested in order to get full deferral relief.
1 The tax year begins on 6 April and ends on 5 April the following year. 2 Knowledge Intensive Companies (KICs) are companies that
consider research and development as its main business activity.