Deferring Capital Gains Tax
If you are an experienced investor who is not afraid of investment risk and has a capital gain, it is possible to role over the gain into an Enterprise Investment Scheme and defer paying the CGT due.
There are also two more tax benefits in that such an investment qualifies for Business Relief for
Inheritance Tax after two years of ownership, or immediately if the funds invested were from an
investment or business that already qualified.
The other tax break is for income tax. The investment qualifies for 30% Income Tax relief, up to the
level of tax paid.
Example:
A landlord sells a property for £300,000, of which £50,000 is subject to CGT at the rate of 28%
(£14,000), after taking into account their CGT allowance. By investing the £50,000 into the EIS
scheme, the CGT is no longer due now. The money is outside of the estate for IHT after two years
(potential saving £20,000) and up to £15,000 can be claimed against Income Tax due or paid already.
EIS shares are high risk as they are held in early-stage companies and not all of them will succeed.
There is loss relief which softens the blow when this happens.
