Resources List
UNDER EIS Tax Relief
Other beneficiaries and EIS shares
Understanding the tax consequences when EIS shares are transferred to beneficiaries who are not married to the original investor is crucial for effective estate planning.
When shares are gifted
When shares are gifted to non-spouse beneficiaries, it's treated as a sale for tax purposes.
Tax implications of the gift
for the original investor | Tax implications for the recipient
| |
|---|---|---|
Income tax
relief | Where shares are transferred within three years of investment, income tax relief claimed is repayable. | No implications after gift. |
Capital gains
tax relief | Where shares are transferred within three years of investment, growth will be subject to capital gains tax. | Any growth in value after transfer is no longer from from capital gains tax. |
Loss relief | If the shares have fallen in value between investment and gift, loss relief can be claimed against income or gains. | Loss relief is available against capital gains only. The loss is based on the fall in value between the date of gift to the date of sale. |
Capital gains
deferral relief | Deferred gains become chargeable immediately. | No implications after transfer. |
Inheritance
tax relief via BR | If the investor dies within seven years of making the gift, inheritance tax may be payable. However, if the investor held the shares for at least two years before making the gift and the recipient still owns them when the investor dies, no inheritance tax is due. | The shares will need to be held for a further two years to be free from inheritance tax as part of the recipient’s estate. |
When shares are inherited
When shares are inherited from the original investor, the tax implications change.
Tax implications for the original
investor on death | Tax implications for the recipient
| |
|---|---|---|
Income tax
relief | No implications – income tax relief remains even if death is within three years. | No implications after transfer. |
Capital gains
tax relief | No implications – growth to the date of death is tax-free, even if the death is within three years of investment. | Any growth in value after the transfer is no longer free from capital gains tax. |
Loss relief | No implications. | Loss relief is available against capital gains only. The loss is based on the fall in value between the date of death and the date of sale. |
Capital gains
deferral relief | No implications – deferred gains are eliminated on death. | No implications after transfer. |
Inheritance
tax relief via BR | Shares will be free from inheritance tax provided the shares have been held for two years on death. | The shares will need to be held for a further two years to be free from inheritance tax as part of the recipient’s estate. |
NB: Beneficiaries who are married are treated differently for tax purposes.