Reader’s forum questions: Loss of EIS relief and Reliefs available to married couple who want to sell their former properties

Reshma Johar responds to two Reader’s forum questions for Taxation magazine:

Loss of EIS relief

If a company is taken over, will an investor lose EIS relief? 

My client has subscribed for some enterprise investment scheme (EIS) shares in a company. To my surprise, the company is seemingly doing very well. So well, in fact, there is serious talk of an AIM flotation soon. The problem is that this flotation may well occur before the EIS termination date. So far, all the conditions of the EIS relief have been met and income tax relief has been enjoyed. There is talk of the AIM company being a new holding company (Holdings plc) and it appears my client will be asked to exchange his EIS shares in the existing singleton company for new shares in Holdings plc. If this takes place before the termination date in respect of his shares, will the EIS relief be clawed back? My client is worried that he will lose tax relief. Can this be avoided?

Cashing in

Reliefs available to married couple who want to sell their former properties.

My clients are a couple who married in August 2007. Before their marriage, the wife had been living continuously in her own flat bought in 1991 and the husband likewise in his own flat bought in 1999. At practically the same time as they married the husband decided to buy a cottage in his own name for them to live in and they moved in on returning from their honeymoon. The two former main residences were then let. They now wish to sell the two flats. The gain on the wife’s flat will be about £200,000 and that on the husband’s property is likely to be about £300,000. I am unclear as to how much only or main residence relief (OMR) and lettings relief each of them is entitled to claim. On my reading of the legislation both properties appear to qualify for these reliefs. The wife has a qualifying period of occupation from 1991 to August 2007 (OMR due would be about £135,000 plus £40,000 lettings relief) and the husband from 1999 to August 2007 (OMR due would be about £155,000 plus £40,000 lettings relief). Could Taxation readers advise me as to whether I might have missed something?