Admission Document - BrainJuicer

Other reliefs
• Section 574 relief
Section 574 of the Taxes Act permits a capital loss arising on the disposal of Ordinary Shares which
were acquired by subscription in a qualifying trading company to be relieved against an individual
investor’s taxable income, as an alternative to setting the loss against capital gains. Upon making the
appropriate claims, relief is given against income of the tax year in which the loss arises, and/or the
preceding year of assessment.
Relief is restricted to shares in unquoted companies carrying on a qualifying trade, as defined for EIS
purposes.
• Inheritance Tax (IHT) relief
Unquoted ordinary shares in companies such as the Company should qualify for 100 per cent. IHT
business property relief, provided they have been held for two years prior to an event giving rise to a
potential charge to IHT.
In the event of a lifetime gift, the transferee may need to retain the shares for up to seven years to
ensure business property relief remains available to the transferor.
Taxation of chargeable gains
• Individuals and Trustees
Disposals of shares are generally identified on a LIFO (last in, first out) basis for the purpose of
calculating gains chargeable to tax. There are different rules for shares on which EIS relief is claimed.
In addition, gains made by individuals, trustees and personal representatives may qualify for taper
relief. This relief reduces the amount of a chargeable gain on disposal, depending on the length of time
the shares have been held since the date of acquisition of the shares.
With effect from 6 April 2000, shareholdings in unquoted trading companies may qualify as business
assets, eligible for enhanced rates of taper relief. If the shares in the Company are treated as business
assets and the investor holds the shares for two years or more he or she may qualify for the maximum
business asset taper relief and effectively reduce his or her capital gains tax rate on disposal of the
shares to 10 per cent. (assuming that he or she is a higher rate taxpayer).
If chargeable gains on EIS shares are deferred by reinvestment into further EIS shares, taper relief may
be extended to treat periods of ownership of successive EIS investments as effectively one period.
• Corporate shareholders
The above changes to the taxation of chargeable gains do not apply to corporate shareholders, to
which share “pooling” and indexation rules apply.
Taxation of dividends
• Individuals and Trustees
Under UK tax legislation, no tax is withheld at source from UK Company dividend payments,
although such payments carry a tax credit of one-ninth of the cash dividend paid (which is equal to
10 per cent. of the aggregate of the dividend and the tax credit).
Individual shareholders whose income is within the lower or basic rate bands are liable to tax at 10
per cent. on their gross dividend income (i.e. the cash dividend plus the tax credit). The tax credit
attaching to the dividend will satisfy the income tax liability on UK dividends of an individual
shareholder whose income is within the lower or basic rate bands but non-taxpayers will not be
entitled to any repayment of the associated tax credit. Shareholders liable to higher rate tax (currently
at a rate of 40 per cent. for income other than dividends) have a liability to income tax of 32.5 per
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