Tax-advantaged investments

Question 1

Describe the tax treatment of a VCT.

Answer 1

• 30% income tax relief up to £200k
• Cannot exceed total income tax liability
• Must be held for at least 5 years
• Gains CGT exempt immediately
• No loss/deferral relief
• Dividends tax-free
• IHTable on death/no BPR

Question 2

Describe the tax treatment of an EIS.

Answer 2

• 30% income tax relief up to £1m (or £2m if KICs)
• Cannot exceed total income tax liability
• Can be carried back to previous tax year
• CGT deferral relief available 1 year before or three years after gain
• CGT exempt after 3 years
• Qualify for business relief after 2 years