Any capital loss made on the sale of shares in EIS Qualifying Companies can be offset against either capital gains in the tax year when the loss occurs or can be carried forward against capital gains in subsequent tax years or could be offset against income of that tax year or the preceding tax year. Where an investor has been granted EIS Relief, the capital loss is calculated net of EIS Relief.
For gains offset against income tax, the net effect is to limit the investment exposure to 48p in the £1 for a 40% tax payer if the shares become totally worthless. Alternatively the losses can be offset against Capital Gains Tax at the prevailing rate - 18% from tax year 2008/09.
Example
£
Realised value
Nil
Initial investment
50,000
EIS relief
(10,000)
Loss relief (£40,000 x 40%)
(16,000)
Net loss on investment
24,000
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