Capital Gains Tax order of reliefs – EIS applies before Taper Relief

While capital gains tax taper relief is long gone its effects still surface occasionally, so it is worth noting the Case of Stolkin v HMRC ([2016] EWCA Civ 447) which concerned the order in which reliefs are applied.

Stolkin is only relevant to cases involving the interaction of taper relief with other reliefs because of perceived ambiguities in the provisions of the Taxation of Chargeable Gains Act 1992 as they applied to taper relief; the interaction of reliefs applicable today is clearer under entrepreneurs’ relief which replaced taper relief on 6 April 2008. Therefore the case is of relevance only in the relatively few cases that remain unsettled and may apply if it becomes necessary to quantify a held-over gain.

The Court of Appeal confirmed HMRC’s contention that where EIS relief is claimed on disposal of an asset that qualifies for partial business taper relief because of mixed business and non-business use, EIS relief takes priority over taper relief and must always be applied first.