How to calculate the clawback of EIS income tax relief

Produced by a Tolley Corporation Tax expert

Corporation Tax

Guidance

The enterprise investment scheme (EIS) encourages individuals to invest money in shares issued by qualifying unquoted companies.

A subscription for eligible shares of a qualifying EIS company is a tax efficient investment for the individual. They can benefit from the following tax reliefs:

•
income tax relief for the investor of up to 30% of the amount invested and disposals of EIS shares after three years may be free from CGT (see the Enterprise investment scheme tax relief guidance note)
•
capital gains deferral relief allows investors disposing of any asset to defer gains against subscriptions in EIS shares (see the Enterprise investment scheme deferral relief guidance note)
•
losses on EIS shares may be offset against taxable income (see the Losses on shares set against income guidance note)
•
EIS investments should qualify for IHT business property relief after two years’ ownership (see the BPR guidance note)

This guidance note discusses the calculation of the amount of income tax relief that might be withdrawn or reduced in certain situations.

Introduction

Broadly,

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