Gov’t tax relief cap to apply to losses on EIS shares
Relief on EIS investments is currently already capped and so will not be subject to new rules.
Government plans to introduce a cap in income tax relief announced at the last Budget will apply to losses made by investors on enterprise investment scheme shares, according to a Treasury consultation paper.
The consultation was published on Friday (13 July) and is seeking views on the implementation of the proposals in Finance Bill 2012 on the capping of tax relief. The deadline for responses is 5 October 2012.
The paper outlines the scope of the proposals and the tax reliefs it is applicable to. It confirms that the reliefs that will be subject to the new cap of the greater of £50,000 per year or 25 of earnings are those that are not currently capped and that can be offset against general income.
In relation to EISs, the paper says that as investment into these schemes is already limited to £1m - revised up from £500,000 at the Budget - they will not be subject to the new cap.
However, it adds that losses made against EIS shares, which can be offset against an individuals tax liability, are currently uncapped and so will qualify under the definition.
EISs offer 30 per cent tax relief at source, in line with that offered on venture capital trusts.
The consultation also sets out how the cap will be calculated using ‘adjusted total income’, which will be net of any pensions contributions and will include any charitable donations from gross pay made through payroll giving.