Date of publication: December 2017
Benefits of EIS
EIS Tax relief is designed to encourage investment in small high risk companies.
- 30% income tax relief for investor, for investments up to £1million;
- In the Autumn Budget 2017, the Chancellor announced an additional £1 million annual limit from 6 April 2018on the amount an individuals may invest under the EIS, provided any amount over £1 million is invested in one or more knowledge-intensive companies;
- Relief can be carried back to previous tax year;
- Shares can be sold, after a qualifying period, free of Capital Gains Tax and shares will normally qualify for relief from inheritance tax too. (The qualifying period is normally 3 years from date of investment or, if trade began later, 3 years from commencement of trade);
- Capital losses on disposal of shares can be offset against income;
- Other capital gains can be deferred by investment in EIS shares.
Rules for the company:
- Cannot be controlled by any other company;
- Cannot be quoted on the stock market;
- Gross assets must be less than £15 million before the investment and less than £16 million after the investment;
- Must have fewer than 250 full time employees;
- Must be a trading company, carrying out a qualifying trade, or the parent company of a trading group;
- Non-qualifying trades include dealing in land, receiving royalties, certain high asset backed businesses as well as certain professional services;
- Does not have to be resident in the UK, but it must have a UK permanent establishment;
- Maximum capital raised under EIS and similar tax favourable schemes must not exceed £5 millionin any 12 month period;
- Companies can apply to HMRC for assurance that they qualify.
Rules for the individual:
- Maximum investment is 30% of share capital. Shares held by associates (close family or business partners) are included;
- Cannot be a director or employee of the company (an exception is available in certain situations for an unpaid director);
- It is possible to make an EIS investment through a Fund in order to reduce risk, or through a nominee.
SEIS (Seed Enterprise Investment Scheme):
- Available to very small start-up companies
- less than 25 employees,
- assets up to £200,000;
- The investor gets 50% of the amount invested as income tax relief;
- Maximum investment £100,000 per investor;
- Maximum company can raise is £150,000; and
- Investors can be company directors but can’t own more than 30% of the company.
The information given in this document is for information only and does not constitute investment, legal, accounting or tax advice, or representation that any investment or service is suitable or appropriate to your individual circumstances. You should seek professional advice before making any investment decision. The value of investments, and the income from them, can fall as well as rise. An investor may not get back the amount of money invested.
Past performance is not a guide to future performance. The facts and opinions expressed are those of the author of the document as of the date of writing and are liable to change without notice. We do not make any representation as to the accuracy or completeness of the material and do not accept liability for any loss arising from the use hereof. We are under no obligation to ensure that updates to the document are brought to the attention of any recipient of this material.
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