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The Enterprise Investment Scheme – EIS – An Overview

This scheme is available for smaller ‘higher-risk’ trading companies to raise finance.

The Great Benefis of EIS

Income Tax Relief
An investor can receive up to 30% of their investment, up to £1,000,000 per tax year. This is in the form of income tax relief.

Capital Gains Tax Exemption
If the investor sells their shares after 3 years, any profit is free from Capital Gains Tax.

Loss Relief
If shares are disposed of at a loss, the investor can elect that the amount of the loss, minus any income tax relief given, can be set against income of the year in which they were disposed of, or any income of the previous year, instead of being set off against any capital gains.

Carry Back
There is a ‘carry-back’ facility. As a result this allows all or part of the cost of shares acquired in one tax year to be treated as though the shares had been acquired in the preceding tax year. This is subject to the annual limit for that earlier year not being exceeded.

Capital Gains Tax Exemption
If the investor sells their shares after 3 years, any profit is free from Capital Gains Tax.

Capital Gains Tax Deferral Relief
The payment of tax on a capital gain can be deferred where the gain is invested in shares of an EIS qualifying company. The gain can be made from the disposal of any kind of asset, however the investment must be made within the period of one year before or three years after the gain arose.

EIS – Restrictions for Investors

Connection by Financial Interest
You cannot hold more than 30% of the share capital or voting rights

Connection by Employment
You cannot be a partner, employee or paid director of the company. This applies for up to 2 years before and 3 years after the share issue. However, there is an exception for Business Angels which allows the investor to become a paid director after the issue of the shares.

This is a brief overview of the Enterprise Investment Scheme. For our expertise and advice, Get in Touch Here, and we’ll be happy to help you.