This makes the the overall tax incentives of EIS even more attractive, as seen in the following example in which two EIS companies in a portfolio become worthless, two repay the original gross cost and one is successful, repaying double the cost. Overall the investor still achieves a net profit:
In 5 companies
|EIS Co 1||EIS Co 2||EIS Co 3||EIS Co 4||EIS Co 5||Total|
|Loss relief (@45%)||£6,300||£6,300||0||0||0||£12,600|
This example assumes that the investor’s marginal rate of tax at the time of realisation is 45%. The comparison is even more favourable if SEIS relief is obtained. However, there is no guarantee that any of the investments will increase in value.
Warning: EIS & SEIS represent high risk investments which should only be considered by experienced investors able to withstand substantial losses.