ACCA Advanced Taxation (ATX) Practice Exam

True or False: For EIS reinvestment relief, the individual must be UK resident when the gain is realized and on reinvestment.

1. True

2. False

3. It depends on the type of investment

4. Only at the time of reinvestment

The correct answer is: True

The statement is true. For Seed Enterprise Investment Scheme (EIS) reinvestment relief, it is a requirement that the individual claiming the relief must be a UK resident at both the time the capital gain is realized and the time of reinvestment. This requirement ensures that only individuals who have a substantial connection with the UK, both when the gain occurs and when the EIS investment is made, are able to take advantage of the tax reliefs provided under EIS. The focus on residency is important because EIS is designed to encourage investment in UK startup companies and to stimulate the UK economy. By ensuring that the investor is UK resident during both key points, the scheme aligns the benefits of tax relief with individuals who are contributing to the domestic economic landscape. The other options imply variations in residency requirements that do not align with the established criteria of the EIS framework, where consistent residency is crucial for eligibility.