Enterprise Investment Scheme (EIS)

The Enterprise Investment Scheme (EIS) is a statutory scheme designed to assist smaller companies in raising capital.  By subscribing cash for new shares in an EIS company, investors may qualify for a range of attractive tax reliefs, including:

• Income tax relief at 20% of the amount invested provided that the shares are held for a minimum of three years. The maximum amount on which investors may obtain income tax relief in any tax year is £500,000.
   
• Capital Gains Tax (CGT) deferral on an unlimited amount of chargeable gains by making an investment in an EIS equivalent to the chargeable gain. The investment must be made in the period beginning twelve months before and ending three years after the date of the disposal giving rise to the capital gains to be deferred.
  
  Since 2004 the EIS has been virtually the only vehicle to shelter capital gains. Investors can still defer 40% CGT liabilities on gains made prior to 6 April 2008 – which on exit would only re-trigger a 28% CGT charge under current legislation.
   
• CGT Exemption on capital gains realised on the disposal of an EIS investment, provided that the shares have been held for at least three years.
   
• Loss Relief so that the capital loss on an investment can be set against capital gains of that tax year or a later tax year, or against income of that tax year or the preceding tax year.
   
• Inheritance Tax Exemption – Investments in an EIS are exempt from Inheritance Tax (IHT), providing the shares have been held for at least two years.

Carry back income tax relief to 2009/10 tax year

Investors in the EIS can also carry back up to £500,000 of their investment to the previous tax year for the purposes of income tax relief.  This does not affect an individual’s current tax year entitlement, thereby enabling a maximum investment of £1m per individual in any tax year.

EIS’s should, by their nature, be considered as high-risk investments. EIS investments may be difficult to sell and should therefore be regarded as long term investments. The value of an EIS can go down as well as up so you may get back less than you originally invested, even taking into account the tax benefits. These tax breaks can be withdrawn and you may be required to repay any tax relief which you have received. Therefore it is important that investors understand the risks associated with them.

To learn more about the Enterprise Investment Scheme, please visit our knowledge centre.

Our EIS Product Range

We have a range of high quality EIS products - please refer to the menu for further information.