EIS Tax Relief
Business Investment Opportunities on the Horizon?
Businesses are facing particularly challenging times at the moment. There has been much emphasis on access to loans (with or without Government backing) but we should not ignore traditional forms of investment. For those with resources to invest there could be some interesting opportunities on the horizon.
What is the Enterprise Investment Scheme (EIS)?
EIS has been designed to allow businesses to raise money to assist business growth. It does this by offering tax reliefs to individual investors who buy new shares in a company. For business owners it is worth noting that they can raise up to £5 million each year, and a maximum of £12 million in a company’s lifetime. This also includes amounts received from other venture capital schemes.
A company may qualify for the scheme if at the time of investment it has:
- no more than £15 million in gross assets
- less than 250 employees
- been less than 7 years since its’ first commercial sale
Higher limits could apply if a company carries out research, development or innovation and meets certain conditions.
There are rules to be followed but investors can claim and keep EIS tax reliefs relating to their shares. Tax reliefs could be withheld or withdrawn from investors if the rules are not followed for at least 3 years after the investment is made. The EIS gives investors 30% income tax relief on investment and roll over/ deferral of chargeable gains into the investment. However, the gains do come back into charge when/if the EIS shares are sold.
It is worth noting that much EIS and SEIS investment is through structured investment products and individuals looking at these products should seek guidance from a regulated advisor.
The above comments are for information only, and do not constitute advice. Rayner Essex is not regulated to give investment advice.
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