I have held shares in an EIS company for over three years (and claimed tax relief) and they are now entering a fourth round of share sales to generate more funds. I’m looking to dispose of my shares to a limited company that I control to consolidate my holdings in one entity. Given that it has been more than three years and the shares are now being sold at a higher price, I assume I don’t have to pay any capital gains tax on the disposal of my asset?
Arthur Weller replies:
If you look at VCM20000, you can see that there is no charge to capital gains tax if shares for which EIS income tax relief has been given are disposed of at a profit after a retention period of (broadly) three years. The ordinary share pooling and identification rules do not apply. Instead, the EIS share identification rules are used. As it appears you have assumed, a disposal to a limited company that you control is a connected transfer and charged at market value. Please see CG14530.