CGT EIS deferral relief claim

 Investing in enterprise investment scheme (EIS) shares gives you an opportunity to defer capital gains tax (CGT) that would otherwise be payable.

Claiming relief

EIS deferral relief, sometimes referred to as EIS reinvestment relief, can be used to delay and ultimately (sometimes) reduce a CGT bill which has arisen from the sale or transfer of any type of asset. If you sell an asset and reinvest the proceeds in qualifying EIS shares, you can claim EIS deferral relief.

To qualify for deferral relief, your EIS investment must be made between one year before and three years after selling or disposing of the assets which produced the gain. There’s no maximum or minimum amount of investment required to qualify for EIS deferral relief (in contrast to EIS income tax relief).

When you sell some or all of the EIS investment, a corresponding proportion of the deferred gain becomes chargeable again.

Example. In November 2022 Harry sold his holiday home on which he made a capital gain of £50,300. He declares the gain on his 2022/23 tax return and is due to pay the resulting CGT. But in December 2022 he invests £38,000 in an EIS company. This means he can defer tax on £38,000 of the gain. Because the remaining £12,300 is covered by his CGT annual exemption, Harry will have no tax to pay.

In May 2026 Harry sells half of the shares he bought in the EIS company. This means that half the deferred gain from the sale of his holiday home, i.e. £19,000, becomes chargeable to CGT for 2026/27.