Enterprise Investment Scheme
EIS Advanced Assurance has been granted by HM Revenue & Customs with regard to the Company’s qualification under the EIS.
The Enterprise Investment Scheme (EIS) is a government scheme that provides a range of tax reliefs for qualifying investors who subscribe for qualifying companies. There are five current EIS tax reliefs:
- 30% initial income tax relief
- Capital Gains Tax Deferral Relief
- Capital Gains Tax Freedom
- Loss Relief
- Inheritance Tax Relief
If you would like to find out more about our company, please register your details here:
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30% initial income tax relief
Provided an EIS qualifying investment is held for no less than three years from the date of issue an individual can reduce their income tax liability by an amount equal to 30% of the amount invested. The maximum in respect of which a subscriber may obtain income tax relief in any year is £300,000. Individuals may elect to treat their subscription for EIS shares, up to their maximum annual allowance, as if made in the previous tax year, thereby effectively carrying income tax relief back one year. For income tax purposes (but not CGT deferral, see below), the individual does not need to be a UK resident or ordinarily resident. Income tax relief is, however, only available where an Investor has a UK income tax liability.
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 until there is a changeable event, such as a disposal of EIS shares or breech of the EIS rules. The gain can arise from the disposal of any kind of asset, but the investment must be made within the period 1 year before or 3 years after the gain arose. There are no minimum or maximum amounts for deferral.
Capital Gains Tax Freedom
If an investor has received income tax relief on the cost of the shares, and the If an investor has received income tax relief on the cost of the shares, and the shares are sold after they have been held for at least 3 years, any profit is free from Capital Gains Tax. If no claim to income tax relief is made, then any other sale of the shares will not qualify for exemption from Capital Gains Tax.
If EIS shares are disposed of at any time at a loss (after taking into account income tax relief), such loss can be set against the investor’s capital gains, or his/her income in the year of disposal or the previous year. In computing the loss, you must reduce the cost of your shares by the amount of any Income Tax relief given and not withdrawn. If you want to set the loss against your income you must claim Loss Relief within 1 year from the 31 January following the tax year in which the loss was made.
Inheritance Tax Relief
Inheritance Tax Relief – Shares in EIS qualifying companies will generally qualify for Business Property Relief for Inheritance Tax purposes at rates of up to 100% after two years of holding such investment, so that any liability for Inheritance Tax is reduced or eliminated in respect of such shares.
|Type of relief||Maximum Rate||Maximum Annual Investment||Maximum Tax you can save|
|EIS Income Tax Relief||30%||£1m single person||£300,000 single person|
|EIS Capital Gains Deferral Relief||28%||No upper limit||Capital Gains Tax Deferral of up to 28% of the amount invested|
The amount of income tax relief cannot exceed an individual’s tax liability before other reliefs given by way of discharge of tax. Relief is normally given in the tax year in which the individual invests, although the amount invested (or part thereof) may be regarded as invested in the previous tax year if a claim is made. If you have no liability to Income Tax before taking account of your subscription for EIS shares, you will receive no Income Tax relief and any gain on the disposal of the EIS shares will be chargeable.
|Amount Invested||Tax Relief||Initial net cost to investor|
|Investors claiming EIS Income Tax Relief||£50,000||£15,000||£35,000|
|Investors claiming EIS CGT deferral at 28%||£50,000||£14,000||£36,000|
|Investors claiming both EIS Income Tax Relief and CGT deferral||£50,000||£29,000||£21,000|
- Photograph: Darren Berry
- Duncan Ward, Director
Photograph: Darren Berry