Tax relief availability & timescales
There are specific time limits and considerations when claiming EIS tax reliefs.
How to claim |
When available |
Timescales to claim |
|
|---|---|---|---|
A) Income Tax ReliefLEARN HOW |
Once you’ve received your EIS3 or EIS5 certificate(s)*, you either:
Complete a section on your tax return. |
Conventional EIS portfolio investments:
In the tax year when shares are issued. Unapproved KIF investments: In the tax year that the shares are purchased. See more about the differences between Conventional EIS and KIFs here. |
5 years from the 31st January following the tax year in which the shares were issued. |
B) Share Loss ReliefLEARN HOW |
Made through a personal tax return form. | When either the shares are disposed of (as the company exits) or when the shares have made a loss/ reached zero value. | Income tax:
1 year from 31st January after the tax year in which the loss was made. Capital gains tax: 4 years after the end of the tax year in which the loss was made. |
C) Capital gains deferral reliefLEARN HOW |
Through a personal Tax return. EIS3 certificates and EIS5 Certificates required. | Conventional EIS portfolio investments:
In the tax year when funds are deployed. Unapproved KIF Investments: In the tax year for which the shares are purchased. |
5 years from 31st January after the shares were issued in the tax year. |
D) Inheritance
LEARN MORE |
Through an inheritance tax form valuing the deceased’s estate. |
On the death of the investor, should they have held the investment for at least two years and at the point of death. | 12 months from the point the investor passed away, or before probate proceedings come to an end. |
E) Capital Gains
|
No actions are required; you do not need to report growth in your tax return. | When the shares are sold, provided they have been held for at least three years. | No action is required, so there are no timescales. |
A) Income Tax Relief
How to claim
How to claim |
When available |
Timescales to Claim |
|
|---|---|---|---|
A) Income tax
|
Once you’ve received your EIS3 or EIS5 certificate(s)*, you either:
Complete a section on your tax return. * The’ How to Utilise EIS Carry Back’ section explains why different EIS certificates may be used. |
Conventional EIS portfolio Investments:
In the tax year when funds are deployed. Unapproved KIF Investments: In the tax year for which the shares are purchased. See more about the differences between Conventional EIS and KIFs here. |
5 years from the 31st January following the tax year in which the shares were issued. |
Claiming Income Tax Relief – The Detailed Process
Typically, you will either receive Income Tax Relief as:
- a lump sum – via a cheque or a direct payment into your bank account
- a reduction of your overall tax bill
- an amendment in your tax code
This is dependent on the deployment times and amount invested. HMRC will review this on a case-by-case basis.
Paper Self-Assessment
You must complete the standard SA100 form and the supplementary SA101 form. The SA101 has a box titled ‘Subscriptions for shares under the EIS scheme’ (shown below).
You must input the amount claimed in tax relief in the relevant tax year, rather than the investment amount, in the ‘Amount subscribed’ section below.
Then, in the large blank ‘Any other information’ box in the SA100 form, include:
- the name of each company you invested in
- the amount you invested in each company
- the amount on which you’re claiming relief for this year
- the date your EIS shares were issued
- if, for a tax year, you’ve subscribed for more than £1 million for shares (or more than £2 million where investments are in KIC), how do you want the relief attributed to them?
Claiming through your self-assessment tax return (online)
You must ‘tailor your return’ when completing your tax return online. This is based on your personal circumstances during the tax year you are filing for.
Please choose ‘Yes’ to the question below in section 3.
Once you have selected ‘yes,’ a free text section will appear where you enter the UIR number, share allocation date, company name, and number of EIS shares (the amount invested rather than just the tax reliefs you’d like to claim).
Once you have received your EIS3 or EIS5 certificates, you can claim income tax relief, although you might not be asked to send these to HMRC when completing your application. It is essential to keep certificates in case they are requested in the future; most fund managers will store them electronically on your behalf.
C) Claiming Capital Gains Deferral
How to claim
How to claim |
When available |
Timescales to Claim |
|
|---|---|---|---|
C) Capital gains
|
Through a personal Tax return. EIS3 certificates and EIS5 Certificates required.* * The’ How to Utilise EIS Carry Back’ section explains why different EIS certificates may be used. |
Conventional EIS portfolio Investments: in the tax year when funds are deployed.
Unapproved KIF Investments in the tax year for which the shares are purchased. See more about the differences between Conventional EIS and KIFs here. |
5 years from 31 January after the shares were issued in the tax year. |
Claiming Capital Gains Deferral – A Detailed Process
To claim capital gains deferral, you will complete the following section of your EIS form and attach it to your tax return. The SA100 form and online tax return also have a section called ‘Capital gains summary pages’, which you must complete.
If the EIS shares were issued in the current tax year, you can only complete any chargeable gains which arose in a previous year. If you’d like to defer gains arising in the current tax year, you’ll need to wait until you’re filing a tax return for this tax year.
Here are some points to consider if you’d like to claim income tax and capital gains deferral together or separately:
Together
You can also claim deferred gains when claiming your income tax relief (following the process above). If you’re looking to defer gains in a previous tax year and the EIS shares were issued in the current or prior tax year, you can send the completed EIS form with details of the deferral with your tax return.
Separately
The critical thing to bear in mind if you’re looking to claim these reliefs separately (e.g. if the gain you’d like to defer is in the current tax year, but you’d like to claim income tax relief for the previous tax year) is that you retain a copy of your EIS form and certificate. Whilst HMRC may not request this in all cases, you must provide a completed original or copy of the form when you want to claim capital gains tax deferral.
D) Claiming Inheritance Tax Relief
How to claim
How to claim |
When available |
Timescales to Claim |
|
|---|---|---|---|
D) Inheritance
|
Through an inheritance tax form valuing the Deceased’s estate. |
On the death of the investor, should they have held the investment for at least two years, it is held at the point of death. | 12 months from the point the investor passed away, or before probate proceedings come to an end. |
On the death of the investor, the executors of the will or administrators of the estate will complete the following:
- The IHT400 form, which is mandatory for estates over the nil rate band
- The IHT413 form which sets out any BR qualifying business and partnership interests and assets in the estate
- HMRC assesses the Business Relief qualification based on the death of the investor. This will be evaluated on a company-by-company basis and include all active EIS investments on the portfolio that have been held for a minimum of 2 years and on death.
Important to consider:
Relevant forms must be sent to HMRC within 12 months of the investor’s death (the month of, rather than a specific date), or penalties may apply.
For more information on what qualifies for Business Relief, see here.
