What is the Enterprise Investment Scheme Tax Relief?

The Enterprise Investment Scheme (EIS) is designed to help smaller higher-risk trading companies to raise finance by offering a range of tax reliefs to investors who purchase new shares in those companies. EIS was set up in 1993/4 and since then over £10bn has been invested into more than 20,000 companies. In the most recent tax year (2011/12) for which HMRC stats is available, over £1bn was raised under EIS.

EIS provides tax breaks for qualifying private investors and was designed to stimulate investment into British based SME’s. The main reliefs available to private investors are an income relief on the cost of the investment (currently 30%) and a capital gains tax exemption if the investment is sold at a profit in the future.

What EIS means for Investors? 

The Enterprise Investment Scheme (EIS) makes investing in early-stage companies particularly attractive for UK-resident tax payers.

A summary of EIS tax relief:

  • Income tax relief up to 30% of the amount invested up to a maximum investment of £1 million per tax year (provided the shares are held for three years and the income tax relief has not been withdrawn)
  • Tax-free capital gains on the investment (provided the shares are held for three years)
  • Deferral of tax on other capital gains (of any amount) made in the three years prior to and one year after the EIS investment
  • Loss relief on any capital losses made on the EIS investment which may be offset against other capital gains or income
  • Relief from inheritance tax (as long as the investment is held for two years prior to the relevant chargeable event)
  • Investment can be carried back (made at any time within the tax year) and treated as if it were invested in the previous tax year

Find out more and understand how this can benefit you by contacting our Tax Team on 0161 249 5040

What EIS means for Companies? 

Companies that qualify for EIS (the criteria includes being based in the UK with fewer than 250 employees) can take up to £5 million of EIS funds in any 12 month period.

If you are considering setting up a new company and seeking investment from potential investors, this is an attractive incentive.  Investors are more likely to invest in an EIS qualifying company due to the tax reliefs that are available.

We can assist you with the EIS approval and registration process for your company.  For more information please contact our Tax Team on 0161 249 5040