Income Tax Act 2007 section 210

Cases where maximum EIS relief not obtained

Section 210 deals with situations where an investor has not obtained the full amount of EIS income tax relief on a share subscription — typically because their income tax liability was too low to absorb the full relief — and how this affects the amount of relief that must be withdrawn on a later disposal of those shares.

• Where the actual income tax reduction obtained (A) is less than the tax at the EIS rate on the amount claimed (B), any relief withdrawn on disposal is scaled down by the fraction A divided by B
• If part of a share issue is treated as issued in a previous tax year under the carry-back rules, the two portions are treated as separate issues, each assessed independently for the effective rate of relief obtained
• If the EIS relief attributable to shares was reduced before the relief was actually given (other than for bonus share adjustments), the amount A is treated as what it would have been without that prior reduction
• The adjustment does not apply to reductions arising from the attribution of relief where bonus shares have been issued alongside the original shares