EIS/VCT

Question 1

EIS IHT FACTS

Answer 1

-

Question 2

EIS - IT facts

Answer 2

-

Question 3

VCT - IHT facts

Answer 3

-

Question 4

VCT - IT FACTS

Answer 4

-

Question 5

Benefit of David using some of his NS&I to invest in VCT

Answer 5

• he will receive 30% tax relief on the amount invested up to £200k
• not exceeding the level of income tax paid in the tax year of share issue
• this will reduce the level of income tax he pays
• provided the shares are held for 5 years
• income/dividends are tax free
• which does not use his dividend allowance
• benefitting David who is a higher rate tax payer
• no CGT payable on any gains on disposal
• and no minimum holding period to benefit from CGT exemption
• suitable for his high ATR

Question 6

Factors to consider in assessing suitability of David investing in an EIS

Answer 6

• would receive 30% income tax relief
• capped at the amount of taxable income in the tax year shares are issued
• as long as he holds the shares for three years
• can carry back part of the contribution to the previous year to increase tax relief available
• could be used to defer the CGT on encashment of inv trust
• as long as investment is made within 12 months before or 3 years after gain arising
• gain on investment is free of CGT
• losses can be offset against income tax
• this will help achieve objective of IT and CGT efficiency
• non income producing
• but income needs can be met from other assets
• EIS will be outside estate after two years
• which will reduce the IHT payable on second death
• BUT EIS will be included when calculating RNRB
• it is a high risk investment and fits his ATR