Resources List
UNDER EIS Tax Relief
Married couples and EIS shares
Understanding the tax rules when transferring EIS shares between spouses or civil partners can help investors make informed decisions.
Tax Implications of Gifting EIS Shares
If EIS shares are gifted to a spouse or civil partner during the investor's lifetime, this is not considered a taxable sale.
Tax Implications for Original Investor | Tax Implications for Spouse | |
|---|---|---|
Income tax
relief | No impact – income tax relief is not repayable, even if the shares are transferred within three years of the original investment. | If income tax relief is withdrawn after the gift, the spouse becomes liable for repaying it. |
Capital gains
tax relief | No impact – gifts between spouses do not trigger a CGT charge. | Growth is tax-free, provided the shares have been held for a combined total of three years between both spouses. |
Loss relief | No impact – gifting between spouses cannot realise a loss. | Loss relief is available against income or gains, based on the original investment amount after accounting for any income tax relief claimed. |
Capital gains
deferral relief | No impact – deferred gains are not brought back into charge upon the gift. | Deferred gains become chargeable to the spouse when the shares are sold. |
Inheritance
tax relief via BR | No impact – transfers between spouses are exempt from inheritance tax. | The shares must be held for an additional two years to qualify for Business Relief as part of the spouse’s estate. |
When shares are gifted
When EIS shares are transferred to a spouse upon the original investor's death, the tax implications vary.
Tax implications for the
original investor on death | Tax implications for the spouse
| |
|---|---|---|
Income tax
relief | No impact – income tax relief is not reclaimable, even if the death occurs within three years of the investment. | If income tax relief is withdrawn after the transfer, the spouse is not required to repay it. |
Capital gains
tax relief | No effect – any growth up to the date of death is tax-free, including within the three-year holding period. | Any growth in the value of the shares after the transfer will no longer be exempt from capital gains tax. |
Loss relief | No implications – losses are not crystallised upon death. | Loss relief can be claimed against capital gains, with the loss calculated from the date of death to the eventual sale of the shares. |
Capital gains
deferral relief | No impact – deferred gains are nullified upon death. | No further implications for the spouse after the transfer. |
Inheritance
tax relief via BR | No implications – transfers between spouses are exempt from inheritance tax. | The shares will still qualify for Business Relief (BR) if the combined holding period between the spouses is at least two years. |
Important Note: Unmarried couples are considered single individuals for tax purposes and do not benefit from the tax advantages available to married couples or civil partners.