Calculation of EIS gains
My client has made several investments in the same company: some were subscriptions that qualified for enterprise investment scheme (EIS) relief (and will therefore be exempt from CGT on sale) and some were ‘second-hand’ shares that will be chargeable to CGT. I recall that EIS qualifying shares are treated as being ‘of a different class’ to non-qualifying shares, so the costs are not pooled when there is a disposal – the exempt gain is calculated separately from the chargeable gain. But if he sells some shares rather than the whole holding, which shares does he sell first? Can he choose between the chargeable pool and the exempt pool, or does it depend on the dates of purchase, or is it proportional?
Query 20,655 – Chicken Dinner.
Is the employment allowance available to a sole director?
My client carries out professional services through a limited company. Because the business is now making a profit, she would like to pay herself a salary. It occurred to me that she could benefit from the class 1 National Insurance employment allowance, but is that the case? She is in receipt of the state pension, so presumably there is no liability to employee’s primary contributions, but am I right that the employer’s secondary contributions would still be payable?
Also, because she is the sole company director and shareholder, is that a problem? I believe that the employment allowance would not be given in such circumstances. If so, could she simply ask someone else to be a director?
Although married, I believe that she would prefer her husband or other close family members not to be involved in her business. Could I, as her accountant, act as a director or would that lead to professional or other complications? Alternatively, she might ask a cousin or niece or nephew to take on that role. Could this be attacked as some kind of avoidance arrangement?
Any advice regarding this situation would be very welcome.
Query 20,656 – Nick.
From The Little Mermaid to Jack and the Beanstalk
We act for a 77-year-old widow who moved back to the UK from Denmark in December 2023. She has no intention of ever returning to Denmark. She was born in the UK but lived in Denmark for most of her life. She receives pensions from Denmark of £17,600 a year, which are taxed at 38%. Her only UK source income is a UK state pension of £736 a year and bank interest of £4,000 a year. She also has an £800,000 investment bond from which she is drawing far less than her 5% a year.
My question is whether she needs to complete a UK tax return and whether she can recover any of the Danish tax. Readers’ views would be welcomed.
Query 20,657 – Hans Christian.
Two claims or one?
My client made a very unsuccessful investment in an enterprise investment scheme company a few years ago. He invested in shares in a company that are now worthless. There will be a capital loss that can be set against income of some £450,000 (after allowing for income tax relief on subscription), and deferred capital gains coming back into charge of £240,000. I am fairly sure that he can choose to claim the loss against income of the year of loss and/or the previous year, and choose to pay capital gains tax on the gains (ie the loss does not have to be set against the gain). For maximum relief against income taxed at higher rates, it would be beneficial to split it into different years rather than claiming it all at once.
Is it possible to make a partial negligible value claim, or must that claim be a deemed disposal of the whole of the shareholding at once? The company is unlikely to be liquidated for some time, so he still owns the shares.
Query 20,658 – L for Loser.
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