VCM23390 - EIS: deferral relief: shares issued on or after 6 April 1998: receipts of insignificant value: examples
Example 1
An investor makes a subscription of £30,000 for shares in X Ltd which were issued to him on 1 June 2017. X Ltd commenced trading on 1 January 2017.
He claims and is granted deferral relief in respect of a gain of £30,000 accruing to him on 1 December 2016.
»Ê¹ÚÌåÓýapp period of restriction relating to the shares in X Ltd is the period from 1 June 2017 up to and including 31 May 2020.
»Ê¹ÚÌåÓýapp investor receives value from X Ltd as follows:
| Date | Amount |
|---|---|
| 1 October 2017 | £200 |
| 1 February 2018 | £250 |
| 1 May 2019 | £650 |
»Ê¹ÚÌåÓýapp value received on 1 October 2017 is an amount of insignificant value as it does not exceed £1,000.
»Ê¹ÚÌåÓýapp aggregate of the relevant receipt on 1 February 2018 and the earlier receipt on 1 October 2017 (which fell within the period of restriction in relation to the shares) is £450. As this amount does not exceed £1,000 the value received on 1 February 2018 is an amount of insignificant value.
»Ê¹ÚÌåÓýapp aggregate of the relevant receipt on 1 May 2019 and the earlier receipts on 1 October 2017 and 1 February 2018 (both of which fell within the period of restriction relating to the shares) is £1,100. As this amount exceeds £1,000 and is not insignificant in relation to the deferred gain, the aggregate is not an amount of insignificant value and the investor is treated as receiving value of £1,100 on 1 May 2019. »Ê¹ÚÌåÓýapprefore the shares issued on 1 June 2017 will be treated as ceasing to be eligible shares on 1 May 2019 unless replacement value is received, see VCM23400.
Example 2
An investor makes a subscription of £20,000 for shares in Y Ltd which were issued to her on 1 September 2017. Y Ltd commenced trading on 1 October 2015.
She claims and is granted deferral relief of £20,000 in respect of a gain of £40,000 accruing to her on 1 January 2017.
»Ê¹ÚÌåÓýapp period of restriction relating to the shares issued on 1 September 2017 is the period from 1 September 2016 up to and including 31 August 2020.
She makes a further subscription of £15,000 for shares in Y Ltd which were issued to her on 1 February 2018.
She claims and is granted deferral relief in respect of a gain of £15,000 accruing to her on 1 November 2017.
»Ê¹ÚÌåÓýapp period of restriction relating to the shares issued on 1 February 2018 is the period from 1 February 2017 up to and including 31 January 2021.
»Ê¹ÚÌåÓýapp investor receives value from Y Ltd as follows:
| Date | Amount |
|---|---|
| 1 December 2017 | £100 |
| 1 June 2018 | £500 |
| 1 February 2019 | £450 |
Shares issued on 1 September 2017
»Ê¹ÚÌåÓýapp value received on 1 December 2017 is an amount of insignificant value as it does not exceed £1,000.
»Ê¹ÚÌåÓýapp aggregate of the relevant receipt on 1 June 2018 and the earlier receipt on 1 December 2017 (which fell within the period of restriction relating to the shares issued on 1 September 2017) is £600. As this amount does not exceed £1,000 the value received on 1 June 2018 is an amount of insignificant value.
»Ê¹ÚÌåÓýapp aggregate of the relevant receipt on 1 February 2019 and the earlier receipts on 1 December 2017 and 1 June 2018 (which fell within the period of restriction relating to the shares issued on 1 September 2017) is £1,050. As this amount exceeds £1,000 and is not insignificant in relation to the deferred gain, the aggregate is not an amount of insignificant value, and the investor is treated as receiving value of £1,050 on 1 February 2019. »Ê¹ÚÌåÓýapprefore, the shares issued on 1 September 2017 will be treated as ceasing to be eligible shares on 1 February 2019 unless replacement value is received, see VCM23400.
Shares issued on 1 February 2018
»Ê¹ÚÌåÓýapp value received on 1 December 2017 is an amount of insignificant value as it does not exceed £1,000.
»Ê¹ÚÌåÓýapp aggregate of the relevant receipt on 1 June 2018 and the earlier receipt on 1 December 2017 (which fell within the period of restriction relating to the shares issued on 1 February 2018) is £600. As this amount does not exceed £1,000 the value received on 1 June 2018 is an amount of insignificant value.
»Ê¹ÚÌåÓýapp aggregate of the relevant receipt on 1 February 2019 and the earlier receipts on 1 December 2017 and 1 June 2018 (which fell within the period of restriction relating to the shares issued on 1 February 2018) is £1,050. As this amount exceeds £1,000 and is not insignificant in relation to the deferred gain, the aggregate is not an amount of insignificant value and the investor is treated as receiving value of £1,050 on 1 February 2019. »Ê¹ÚÌåÓýapprefore, the shares issued on 1 February 2002 will be treated as ceasing to be eligible shares on 1 February 2018 unless replacement value is received, see VCM23400.
Note that, where a receipt of value falls within periods of restriction relating to more than one share issue, the rules do not provide for an apportionment of the amount received. »Ê¹ÚÌåÓýapp amount of the receipt must be considered in relation to each separate issue. If the amount received exceeds £1,000 and is not insignificant in relation to the deferred gains the investor has received an amount of value which is not insignificant in relation to each share issue.