Enterprise Investment SchemesEIS 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 If it fails to meet those rules tax relief will not be given, or, if it has already been given, will be withdrawn.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.
£1 million per tax year
- 30% Initial tax credit
- Deferral of CGT
- No CGT on gains
- Loss relief
- Usually IHT exempt after 2 years
- Highly illiquid
- 3 year minimum holding period
- Usually early stage and high risk
- Costs can be high