Taxes Consolidation Act 1997 section 508K

Capital gains tax

Section 508K sets out the capital gains tax rules that apply when an individual disposes of shares in respect of which Employment Investment Incentive Scheme (EIIS) relief has been given.

• A gain on the disposal of EIIS shares is computed without regard to any EIIS income tax relief given, but where a loss arises the allowable cost is reduced by the lesser of the relief amount and the computed loss, normally producing a no-gain/no-loss result.
• Where an individual holds a mix of EIIS and non-EIIS shares, or EIIS shares acquired at different times, disposals are matched using the section 508M identification rules, with relieved shares treated as disposed of before unrelieved shares, on a first-in-first-out basis.
• If a reorganisation of share capital occurs (such as a bonus issue), the relieved and unrelieved shares are treated as separate holdings, so that any new shares can be traced back to their original relieved or unrelieved status.
• Any necessary adjustments to capital gains tax, whether by assessment or repayment, must be made when EIIS relief is given or withdrawn, and EIIS relief is disregarded when applying the rule in section 554 that prevents expenditure being deducted for both income tax and CGT purposes.