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About Enterprise Investment Schemes (EISs)

The Enterprise Investment Scheme (EIS) was introduced in 1994 by the UK Government to encourage individuals to invest in unquoted businesses by offering tax reliefs, in order to support job creation and promote economic growth.

EISs can either be a single company or a portfolio of qualifying companies, and investors considering investing in an EIS should speak with their Financial Adviser to ensure that they understand the risks of investing.  It is important to have diversification to spread risk and to know that investing in unquoted companies (whether directly or through a discretionary portfolio) is always considered to be higher risk.

If you are interested in investing in an EIS scheme or a SEIS, please take a look at our Offer Open for Investment page which lists a selection of offers on behalf of our clients.

Tax benefits for EIS investors
  • Income Tax Relief. 30% income tax relief on a maximum investment of up to £1,000,000.
  • The income tax relief can only reduce the income tax liability to zero.
  • Tax-free Capital Gains. As long as shares held for at least three years, the sale of the shares at a profit will be capital gains tax-free (a reduction of the current rate of 28% to 0%).
  • Capital Gains deferral relief. Any size of capital gain made on the disposal of any kind of asset can be ‘deferred’ by re-investment into EIS-compliant companies. The deferred gain is then due on the sale of the EIS shares unless the sale is to a spouse or on the death of the shareholder.
  • Capital Loss relief. Capital loss on EIS shares can be set against income in the year the loss arises or the previous tax year. For a high tax rate payer this equates to 35% value of the EIS shares. Combined with income tax relief, the investor has a downside loss protection of 65p in the £1 invested.
  • Inheritance Tax (IHT) property relief. Investments in EIS-compliant shares can attract IHT business property relief (BPR) of 100% value of investment on gift or on death.
The specifics that relate to the recipient qualifying company include:
  • They must be unquoted – although AIM and PLUS Quoted companies do qualify.
  • They must be independent.
  • They must have gross assets of less than £15m before the EIS shares are issued, and £16m post issue.
  • They must have less than 250 employees.
  • Annual maximum funding from a combination of the EIS, Venture Capital Trusts and the SEIS cannot exceed more than £5m per year.
  • They must be genuine trading companies (although certain types of trade are prohibited). 
  • They must have a ‘permanent establishment’ (essentially a fixed place of business) in the UK.  
For information about Seed EIS funds, please see our SEIS page.

Important Information
Shares must be held for at least 3 years to receive most SEIS benefits summarised above and readers are directed to information on the HMRC website here for full details on EIS investing. Your attention is drawn to the fact that this article does not constitute a personal recommendation. City Alliance is not authorised to provide specific and personal advice on the suitability of investments for a potential investor’s individual circumstances, risk tolerance or investment objectives. If you have any doubt about whether an investment in a fund such as an EIS Fund is appropriate you should consult a suitably qualified financial adviser.


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