The capital gains tax exemption for enterprise investment scheme purposes was not available on a disposal of shares as no income tax relief had been claimed by the taxpayer due to having no taxable income in the relevant tax year.
The appellant invested £50,000 in shares in January 2005, which HM Revenue and Customs (HMRC) accepted were eligible for enterprise investment scheme (EIS) income tax relief. However, the appellant did not claim that relief, because he had no taxable income in the relevant tax year.
In June 2011, the appellant sold the shares at a gain. He did not include the gain on his tax return for 2011/12, as he understood that there was no capital gains tax (CGT) on disposal. Following an enquiry, HMRC amended the appellant’s tax return to include the gain, on the basis that the CGT exemption was only available if EIS income tax relief had been claimed. The appellant appealed.
