ER - Transitional Rules
A number of individuals made gains prior to 6 April 2008 and have deferred the gain until after 5 April 2008. ER may be available when the deferred gain eventually becomes chargeable after 5 April 2008 if the original sale of shares in a trading company, or the sale of an unincorporated business, would have met the conditions for ER if ER had been available at the time of the original sale.
The deferred gains eligible for relief are where:
- shares in a trading company were disposed of in exchange for loan notes in another company which are Qualifying Corporate Bonds (QCBs); and
- the gains made on shares in a trading company or on the disposal of an unincorporated business were reinvested in Enterprise Investment Scheme (EIS) shares or Venture Capital Trust shares.
Example
Nicola sold her trading business in June 2006 and realised a gain of £280,000. She invested this amount in qualifying EIS shares in August 2006 and the gain was deferred.
In October 2010 she sells her EIS shares and the deferred gain of £280,000 becomes chargeable.
If the gain on the sale of her business in 2006 would have qualified for ER if ER had been available at that time, then ER will be due. Nicola can claim ER against the deferred gain. This would reduce the deferred gain by 4/9ths, leaving a chargeable gain of £155,555. |
If an individual had shares in a trading company which were disposed of in exchange for loan notes in another company which are not QCBs, there may be ER on the disposal of the loan notes after 5 April 2008. However, the loan notes would need to be issued by a trading company in which the individual owns at least 5% of the shares and voting rights in that company and the individual is an officer or employee of that company. |
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