EIS: how to claim Capital Gains Tax Deferral Relief

YellowSock

In tax year 17/18 I made an EIS qualifiing investment and have recieved an EIS tax certificate.


I am now completing my self assessment 17/18 online using the HMRC website (late - I know ;-). This is my first EIS investment. I would like to defer a capital gain made in 17/18.


How does this work? I was hoping to not pay capital gains tax on 31st January. From what I read it looks more that I am only applying for capital gains tax deferal in this tax return but first have to pay it and will then get back later a refund ?


I am low on cash at the moment so that makes a significant difference to me.



Thank you for your help!

londoninvestor

You should indeed be able to not pay CGT - assuming the deferral relief takes your net gain below the £11,300 allowance.

On your return:
1) In the "Gains in the year, before losses" box, give the figure including the deduction of deferral relief. So let's say you had total gains of £13,000, losses of £700 and you're claiming £1,000 of deferral relief. You enter "gains in the year before losses" as £12,000, and "losses in the year" as £700.

2) Complete the "Are you making any gain or election" box appropriately. As I remember, there's no option for deferral relief specifically, so use the "other" category.

3) In the "Any other information" box on the CGT section, explain you are claiming deferral relief - specify the amount, the investee company, the reference number from your EIS tax certificate, and the tax office that issued it (if this is shown - it used to be, but seems to be no longer there on forms from the last 3 months or so).

4) On whatever form or spreadsheet you are uploading to show your working, make sure the deferral relief is shown, so it's clear how you arrived at your "gains" figure in part (1).

To be pedantic, you should claim deferral relief against one or more specific gains, rather than against your net gains - because you need to show that the gain was in the allowable time window relative to the EIS investment. However, if everything was in 17/18, you certainly meet the date criteria (the EIS investment must be no earlier than 1 year before, and no later than 3 years after, the gain it offsets), so they may not be too bothered about you showing this.

londoninvestor

Also, if your net gains minus EIS investments are less than £11,300 - only claim enough deferral relief to get you down to exactly £11,300.

Claiming more doesn't save you any tax this year, and could cost you more in tax when the EIS shares are eventually sold.

YellowSock

londoninvestor wrote: »

You should indeed be able to not pay CGT - assuming the deferral relief takes your net gain below the £11,300 allowance.

On your return:
1) In the "Gains in the year, before losses" box, give the figure including the deduction of deferral relief. So let's say you had total gains of £13,000, losses of £700 and you're claiming £1,000 of deferral relief. You enter "gains in the year before losses" as £12,000, and "losses in the year" as £700.

2) Complete the "Are you making any gain or election" box appropriately. As I remember, there's no option for deferral relief specifically, so use the "other" category.

3) In the "Any other information" box on the CGT section, explain you are claiming deferral relief - specify the amount, the investee company, the reference number from your EIS tax certificate, and the tax office that issued it (if this is shown - it used to be, but seems to be no longer there on forms from the last 3 months or so).

4) On whatever form or spreadsheet you are uploading to show your working, make sure the deferral relief is shown, so it's clear how you arrived at your "gains" figure in part (1).

To be pedantic, you should claim deferral relief against one or more specific gains, rather than against your net gains - because you need to show that the gain was in the allowable time window relative to the EIS investment. However, if everything was in 17/18, you certainly meet the date criteria (the EIS investment must be no earlier than 1 year before, and no later than 3 years after, the gain it offsets), so they may not be too bothered about you showing this.

Perfect answer !

Thank you soo much. Very helpful. I really appreciate it!

londoninvestor

YellowSock wrote: »

Perfect answer !

Thank you soo much. Very helpful. I really appreciate it!

Welcome - easy when you know how, but it confused me at first too. (I wasn't including the deferral relief in my gains figure, then searching in vain for a separate place to put it.)