Capital Gains Tax on Inherited Property

johnie_the_joiner

Dear CTA

Deferral of the CGT is an option which you may wish to consider, principally being investment in EIS shares which also carry income tax benefits should you have taxable income.

Could you explain what EIS shares are ?

Many thanks

antrobus

johnie_the_joiner wrote: »

...Could you explain what EIS shares are ?...

See: http://www.eisa.org.uk/benefits

Basically it would involve using your share of the proceeds of the house sale to buy shares in some small company. You might or might not want to take that kind of risk.

CTA_2

johnie_the_joiner wrote: »

Dear CTA

Deferral of the CGT is an option which you may wish to consider, principally being investment in EIS shares which also carry income tax benefits should you have taxable income.

Could you explain what EIS shares are ?

Many thanks

EIS (Enterprise Investment Schemes) is a method of deferring CGT until a later taxpoint. Note that this doesn't reduce or prevent CGT, it is only a timing relief.

By investing in EIS shares (these companies are typically high risk start up trading companies which have to meet certain qualifying conditions) you would receive income tax relief.

Example: invest £100,000 in EIS shares. You receive income tax relief of 30% of the invested amount therefore you would have an income tax relief of £30,000 to set against taxable income.

If your gain on the property is £100,000 then the full gain would be deferred. The tax would be payable on the future event of selling the EIS shares.

If you hold the shares for a three year period, then any capital gain on the shares is exempt.

EIS represents sound tax planning if the investor is comfortable with the level of risk involved and as a HMRC approved scheme a taxpayer can be comfortable with claiming the reliefs.