Her Majesty's Revenue and Customs (HMRC) offers generous tax incentives for UK taxpayers to encourage investment in startups and early-stage businesses. The benefits to investors are attractive and that is why the majority of investment opportunities offered on the VentureFounders platform will be EIS- eligible.
The Enterprise Investment Scheme (EIS) is designed to encourage equity investments in early-stage companies. The scheme can be used by businesses that are looking to raise up to £5,000,000 in any 12 month period.
The following reliefs are available to investors under the EIS scheme:
- Income Tax: Individuals can claim 30% of their gross investment amount back in income tax relief, subject to a maximum annual investment amount of £1,000,000. HMRC also allows the relief to be split between the tax year of investment and the previous tax year
- Capital Gains Tax: Any gain made on a disposal of your shares is exempt from Capital Gains Tax so long as they have been held for a minimum of three years. If you sell your shares within three years, you can claim Capital Gains Relief of up to 50% of the profits so long as it is reinvested in to other EIS qualifying companies
- Inheritance Tax: EIS investments are exempt from Inheritance Tax on shares held for a minimum of two years
- Loss relief: is available in the event that the company fails. The amount that can be claimed in loss relief is equal to your original investment amount minus the 30% income tax relief you claimed, multiplied by your effective tax rate
PLEASE NOTE: The availability of any tax relief, including EIS, depends on the individual circumstances of each investor, the shares being issued 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 EIS, you should obtain independent tax advice before doing, or refraining from doing, anything.
For detailed information about EIS please visit www.hmrc.gov.uk/eis