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Topic: Elections and claims

EIS relief claim
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EIS relief claim

EIS relief claim

When you make a qualifying enterprise investment scheme (EIS) investment, you have the right to offset the income tax relief against your tax bill for the year before you made the investment. How can you make this claim?

EIS relief - generally

When you make an investment that qualifies for EIS income tax relief, you can reduce your income tax liability at a rate of 30% x the qualifying investment. This is subject to a maximum of £300,000 of relief in any one tax year, i.e. relating to an investment of up to £1 million. Relief cannot be claimed until the EIS3 certificate has been issued by the investee company, sometimes this is a considerable time after your tax return has been filed for the year. The relief can be claimed by amending the tax return, provided it is done within the usual time limit of twelve months from the original filing deadline. However you may need to make a claim later.

EIS relief - carry back

The legislation allows you to carry back some or all of the EIS relief to the tax year prior to the one you made the investment in. You might want to do this if you cannot use the relief fully for the year of investment. For example, if your tax liability was lower than the amount of EIS relief some would be wasted because it cannot reduce your tax bill below zero.

Example. Jill makes a qualifying investment under EIS in 2019/20, and wishes to claim the £20,000 relief against her liability for 2018/19. The filing due date for that return is 31 January 2020, and the amendment window is open until 31 January 2021. The EIS3 certificate is received in March 2021, and so Jill cannot amend the 2018/19 return but she can amend the 2019/20 one. She only has a tax liability of £10,000 in that year so half of the relief would be wasted.

A carry back of EIS relief can be claimed either by completing the Additional information section on an amended tax return, as long as you are within the time allowed for an amendment, or by submitting a stand-alone claim.

You can use our letter to make a stand-alone claim with or without a carry back.

Making a claim

Your claim will need to provide information about the investee company and your investment. Use the information on the EIS3 certificate for this. It is crucial that the information is accurate as HMRC can deny claims because of incorrect details. You can choose to claim the relief for the year of investment, carry it back to the previous year or opt for a mixture of both - delete those not applicable. Fill in the remaining details where indicated and send the completed claim to the HMRC office you usually deal with for your personal tax.

Time limit

Claims must be made within five years of the 31 January which follows the end of the tax year in which the investment was made. For example, if the EIS3 shows the investment was made in 2019/20, you have until 31 January 2026 to make a claim.

 

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