The Enterprise Investment Scheme (EIS) is one example of the tax incentives offered by Her Majesty's Revenue and Customs (HMRC) to UK taxpayers to encourage investment in startups and early-stage businesses.
As EIS tax benefits are extremely attractive, the majority of investment opportunities that we offer satisfy the rules that apply to EIS investments.
Income Tax Relief Explained
- 30% of the cost of the shares can be offset against the individual’s Income Tax liability.
- There is a maximum investment limit of £1,000,000 per year.
- The relief can be split between the tax year of investment and the previous tax year. This is subject to the overriding limit for relief for each year.
- The shares must be held for a certain period or Income Tax relief will be withdrawn.
Capital Gains Tax Relief and Capital Gains Tax Deferral Relief Explained
- If Income Tax Relief has been received, any gain made on a disposal of shares is exempt from Capital Gains Tax. The shares must be held for the minimum period set out in the relevant legislation.
- The payment of tax on a capital gain realised in relation to the disposal of any kind of asset, can be deferred if that gain is used to invest in shares of an EIS qualifying company. The investment in the EIS qualifying company must be made within the period one year before or three years after the gain arose. The Capital Gains Tax is payable whenever the shares of the EIS qualifying company have been disposed.
Loss Relief Explained
- If the shares are disposed of at a loss, the amount of the loss (less any Income Tax Relief already claimed) can be offset against any income in the year in which the shares were disposed of, or any income in the previous year.
- Provided that the shares are held for at least two years, EIS investments will generally qualify for Business Property Relief for the purposes of Inheritance Tax. This means that Inheritance Tax will not apply to the shares.
For detailed information about EIS, please visit www.hmrc.gov.uk/eis
PLEASE NOTE: The availability of any tax relief, including EIS, depends on the individual circumstances of each investor and of the company concerned. This sets out our understanding of tax legislation and HMRC practice as at June 2016. However, the rules may be subject to change in the future. If you are in any doubt about the availability of any tax reliefs, or the tax treatment of your investment, you should obtain independent tax advice before proceeding with your investment.