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Treasury excludes EIS losses from income tax relief cap

by Daniel Grote on Dec 12, 2012 at 10:37

Treasury excludes EIS losses from income tax relief cap

The Treasury has said it will exclude share loss relief on holdings in enterprise investment schemes (EISs) from its cap on income tax relief announced in the 2012 Budget.

In its response to a consultation on the measures, it said respondents had argued applying the cap to EISs would act deter investors from placing money in the schemes, and that they had pointed to the limits already in place for EISs.

'In the light of the arguments made, the government has decided that share loss relief for shares qualifying for EIS/seed enterprise investment schemes (SEIS) should be excluded from the cap. Share loss relief on shares not within EIS/SEIS will remain within the cap,' it said.

The Treasury will also exclude relief attributable to overlap profits from the cap. Overlap profits occur when profits are assessed for tax purposes twice, usually when businesses decide to change their accounting period.

'The government agrees with the respondents that applying the cap in these circumstances may cause the unintended consequence of denying overlap relief,' it said.

'Therefore, the government will make a technical adjustment and remove trade loss relief and early trade losses relief attributable to overlap relief from the scope of the cap. Overlap relief will now align with the other computational reliefs originally excluded from the cap.'

The government announced its plans to introduce a cap on income tax relief on anyone claiming more than £50,000 a year in the 2012 budget to 25% of income. It was then subjected to a backlash from charities who claimed the move could hit donations.

1 comment so far. Why not have your say?

Arthur Schopenhauer

Dec 12, 2012 at 11:28

Now can they clarify the UCIS position on SEIS, EIS and VCT It would be good to be sure that BPRA also is not caught with UCIS and that the redraw of the planning zones will not prejudice projects already in construction.

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