UK Investment Opportunities for Movies & Entertainment

SPHINX

CGT DEFERRAL RELIEF (in detail)

Where an individual has a chargeable capital gain which arises within the period of three years before or one year after a subsciption has been been made in an EIS company, a claim may be made to defer the assessment of that chargeable gain, or any part of it. The amount of the gains that may be deferred is subject to no maximum and is limited only by the amount subscribed for in the EIS Company. Gains may be deferred until the shares are disposed of or, if earlier, until certain other events occur. Once the shares in the EIS Company have been sold, the deferred gain will fall back into charge to Capital Gains Tax in the year of disposal.

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Example - assuming income tax relief is also claimed

Initial Investment	£50,000	April 2008
Income Tax Relief @ 20%	(10,000)
Capital Gains Deferral	(20,000)	April 2007 - gain of £50,000 (taper relief variable assumed not to apply)
Net cash outlay for Investment	£20,000

Shares sold August 2011

Proceeds	£80,000
Chargeable gain	£nil - tax free if held for more than three years
Tax free gain	£30,000
Deferred gain chargeable 2008/09	£50,000
Tax payable at 18%	£9,000

If income tax was obtained at 20%, the total income tax saved will be £40,000 being £30,000 tax free gain plus £10,000 income tax relief. Also the gain deferred was chargeable @ 40% in 2007/08 but falls in @ 18% in 2022/12, saving £11,000.

Example - assuming deferral relief only is claimed

Initial Investment	£1,000,000	April 2008
Capital Gains Deferral	(400,000)	2007 Gain £1m
Net cash outlay for Investment	£600,000

Shares sold August 2011

Sales proceeds		£1,200,000
Chargeable gain	£200,000 @ 18%	£36,000
Deferred gain chargeable	£1,000,000 @ 18%	£180,000

Tax saved by claiming deferral relief £220,000 being £400,000 less £180,000.

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