Short answer
EIS deferral relief lets you postpone capital gains tax on a gain from any asset by reinvesting the gain in qualifying EIS shares between one year before and three years after the gain arose. There is no upper limit. The deferred gain becomes chargeable again when the EIS shares are disposed of, unless it is deferred again.
How deferral works
When you make a chargeable gain — for example on selling a property, shares or a business — you can claim to defer some or all of it by subscribing for EIS shares. The deferred gain is 'frozen' and comes back into charge later. You can choose how much of the gain to defer.
Key conditions
| Condition | Detail |
|---|---|
| Timing | Shares issued within 1 year before or 3 years after the gain |
| Residence | UK resident when the gain arose and when the shares were issued |
| Amount | No upper limit; defer up to the amount subscribed |
| Connection | You can claim deferral even if you are connected with the company |
| Income tax relief | Not required for deferral |
When the deferred gain comes back into charge
- You dispose of the EIS shares (other than to your spouse or civil partner).
- You become non-UK resident within three years of the share issue.
- The shares stop being eligible, for example because the company stops qualifying.
The revived gain is taxed at the CGT rates in force when it comes back into charge, which may be higher or lower than when it arose. It does not revive on death.
Illustration
An investor makes a £100,000 gain on selling shares and, within three years, subscribes £100,000 for qualifying EIS shares. They claim to defer the whole gain. If they later sell the EIS shares, the £100,000 deferred gain becomes chargeable at that time, unless reinvested in further EIS shares. Illustration only.
How to claim
Use the EIS3 certificate and claim through Self Assessment, normally with helpsheet HS297. The claim must be made within five years of 31 January following the tax year in which the shares were issued.
Frequently asked questions
Does deferral relief cancel the tax?+
No. It postpones it. The gain is removed permanently only in limited cases, such as death while still holding the shares.
Can I defer a gain from a second home?+
Yes. A gain on any asset can be deferred, provided the timing and other conditions are met.
Sources
- GOV.UK — Venture capital schemes: tax relief for investors
- GOV.UK — Enterprise Investment Scheme and Capital Gains Tax (HS297)
Tax rules can change. The information on this website is general information only and is not personal financial, investment, tax or legal advice. It does not take account of your individual circumstances. See our editorial policy.
Interested in EIS investing?
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Capital at risk. EIS investments are high risk and illiquid. Tax reliefs depend on individual circumstances and qualifying conditions.