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Set up in 1994, the EIS is a well-established UK government scheme offering generous tax reliefs to investors in small growth companies. EIS is designed to help smaller companies raise finance by offering a range of tax reliefs to investors who purchase new shares in qualifying companies.
Depending on individual circumstances, investors can enjoy some or all of the tax benefits noted below.
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You will receive 30% tax relief on the amount invested in EIS qualifying companies against your income tax bill for the year of investment, up to a maximum of £2 million invested (provided that any amount above £1m is invested in Knowledge Intensive Companies). In addition, if you want to treat some or all of the shares subscribed for in the current tax year as though they were subscribed for in the previous tax year, then you may do so up to a further £1 million (reduced by any EIS investments already made in that tax year).
Please note, with regard to our Committed Capital EIS Portfolio Service, not all your investments will necessarily fall in the same tax year unless you instruct us to do so.
CGT, such as from the sale of shares or a second property, can be deferred for the life of the EIS investment. You can defer any gains made in the three years prior to, or the year following, the date your subscription is invested into EIS companies. There is no limit to the amount of gains that can be deferred for CGT purposes.
The companies in which we invest also qualify for Business Property Relief. This means that investments made through the Committed Capital EIS Portfolio Service can be exempt from inheritance tax (IHT) after just two years (from the point at which the investment into the underlying EIS company is made). In order to qualify, the investments must also be held at the time of death.
All capital gains made from EIS investments are tax free (when held for the minimum 3 year holding period). Given the higher returns targeted by the Committed Capital EIS Portfolio Service, this is an important tax benefit, allowing investors to include smaller companies in their investment portfolio in a highly tax efficient manner.
At the current rates of income tax, up to 45% loss relief may be available on any holdings that are realised at a loss net of initial income tax relief, helping to offset the effect of any assets which underperform in the overall portfolio. For a 45% taxpayer this would provide total tax relief of 61.5%. The investor can choose whether to set the loss relief against other gains made now or in the future, or against income for the year in which the loss arises or the previous year.
The above tax advantages can only be claimed when the investors funds have been deployed into a company, rather than when an investor makes an initial subscription.
The above does not constitute tax advice. It is recommended that investors take independent, tax, legal and financial advice from a qualified professional adviser before considering an investment.
We are members of the EIS Association (EISA) which is the official trade body for the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) industry.
EISA is a highly effective not-for-profit organisation that exists to aid the provision of capital to UK small and medium-sized enterprises (SMEs) through these two schemes.
EISA works closely with HM Treasury, HM Revenue and Customs, government ministers, MPs and the FCA to enhance EISs and SEISs and promote the benefits of using them to investors, companies and their respective advisers. EISA collaborates with other trade bodies that support investment into SMEs, including the British Venture Capital Association (BVCA), the Association of Investment Companies (AIC), the Institute of Chartered Accountants in England and Wales (ICAEW) and the UK Business Angels Association (UKBAA). The EISA Director General sits on the BVCA Venture Capital Working Group, which aims to present a unified voice from all sections of the SME and venture finance industries to the UK government and the EU.
EISA’s membership is drawn from all areas of the EIS/SEIS industry and includes EIS/SEIS fund managers, lawyers, accountants, tax advisers, corporate financiers, IFAs and wealth managers throughout the UK.
Please contact Mary Rodgers at email@example.com if you are interested in learning more about EISA and becoming a member.