01844261155 mail@richardsons-group.co.uk

Improvements to EIS and Entreprenuers' Relief

4th December 2014

You may have seen, in a news item I posted a couple of years ago, that I had the good fortune to be invited to 10 Downing Street for an event concerned with financial support and incentives in support of innovation.  At that time, I mentioned that I had "...made a suggestion or two about ways to improve the tax system..." to David Gauke, Exchequer Secretary to the Treasury.  One such suggestion I made was in respect of the tax treatment of gains held over by individuals making investments under EIS.

Such gains are taxable when the EIS shares are sold.  This is in contrast to the original SEIS, which acted to relieve the gain of tax altogether; an option which is still available under SEIS, but only now in respect of half the investment.  The suggestion I made, however, was that, when an EIS share is disposed of after the end of the qualifying period, and the original gain crystallises, the law should be changed to make it eligible for Entrepreneurs' Relief and therefore be taxed at 10% rather than the more normal 28%.  This, I suggested, would act as a significant incentive to use EIS, as it would allow someone expecting to be burdened with a 28% tax bill, not only to defer that bill, but also to reduce it to 10% when it does eventually become payable.  This treatment, I recommended, should apply to gains on any class of asset, including things like quoted shares and buy-to-let properties.

You can imagine my pleasure in reading that, in the Chancellor's Autumn Statement yesterday, my suggestion had been adopted.  Who says that Government never listens?