Enterprise Investment Schemes

EIS applies to investment in specific unquoted companies and offers a plethora of tax incentives. Well over £1 billion was raised under the scheme in 2014/15 so it has been a popular success.

EIS covers a wide range of proposals from those attempting to take as little risk as possible under the regulations, to those backing speculative start-up ventures. It was set up 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.

An EIS company has to observe certain rules, not just at the time of the investment but for at least three years afterwards. If it fails to meet those rules tax relief will not be given, or, if it has already been given, will be withdrawn.

Investors must meet certain conditions for tax relief to be due.

EIS investments are made available in a variety of ways, including crowdfunding. Some promoters offer an EIS portfolio solution, in which investment is spread across several companies to diversify risk. There are restrictions on how these schemes are marketed and they should only be considered by experienced investors who are able to withstand the total loss of the investment.

Maximum investment:

£1 million per tax year

Pros:

  • 30% Initial tax credit
  • Deferral of CGT
  • No CGT on gains
  • Loss relief
  • Usually IHT exempt after 2 years

Cons:

  • Highly illiquid
  • 3 year minimum holding period
  • Usually early stage and high risk
  • Costs can be high

Useful sites

gov.uk
gov.uk

Disclaimer

The information set out above is included for information purposes only and is not an offer or an invitation to buy or sell or a solicitation of an offer or invitation to buy or sell or enter into any agreement with respect to any security, product, service or investment. Any opinions expressed do not constitute investment advice and independent advice should be sought where appropriate. All information is current as of the date of publication, subject to change without notice, and may become outdated over time.
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