The disposal of shares
Although the sale of shares can be phased over a period, so as to manage any tax liability over a number of tax years, this will result in shares being held for longer. In contrast, at an investment level, having made the decision to sell a share holding, it is often preferable to sell all the shares as soon as possible. Like with the sale of an investment property, an EIS provides the opportunity to defer any capital gain arising on the sale of shares.
Surrendering a single premium investment bond
Unlike other forms of investment, the surrender of a single premium investment bond will typically result in an income tax liability. With income tax relief available at 30 per cent on the amount invested into an EIS, should the surrender result in a £30,000 income tax liability, an investment of £100,000 into EIS would mitigate this in full. Unlike capital gains, the income tax liability is removed in full, provided the investment is held for at least three years.
To misappropriate an old slogan ‘tax planning is for life, not just for the Isa season’. For many clients, tax planning should not start just after Christmas, but on April 6 annually instead. This will give plenty of time to plan a clear strategy involving Isas, pension contributions, EISs and other tax-advantaged investment solutions.
Simon Ruthers is manager, private clients at Oxford Capital
