Enterprise Investment Scheme

The following notes are for guidance only, and companies and investors should not proceed solely on the basis of the information here, and should consider seeking professional advice.

The Enterprise Investment Scheme (EIS) is designed to help smaller higher-risk trading companies to raise finance by offering a range of tax reliefs to investors who purchase new shares in those companies.

5 Compelling Reasons for EIS from the EISA:

30% Initial Income Tax Relief – claim back up to 30% relief against personal income tax on EIS investments to a maximum of £500,000 each per tax year. This allowance can be carried back to the previous tax year for offset against income tax. Shares must be held for a minimum of 3 years from the date they are issued. Actual cost 70 pence in the £1. View Example

CGT Freedom – No Capital Gains Tax payable on disposal of shares after three years provided the EIS initial income tax relief was given and not withdrawn on those shares. No Capital Gains Tax to pay. View Example

Inheritance Tax Relief – Shares in EIS qualifying companies will generally fall outside the estate for the purposes of Inheritance Tax purposes after two years, potentially reducing IHT liability to nil. Potential 40 pence in the £1 saving. View Example

CGT Deferral Relief – is not capped at £500,000 and allows up to three-year-old capital gains tax to be rolled over into EIS companies and deferred indefinitely.  Potential unlimited and indefinite deferral of existing an existing CGT bill. View Example

Loss Relief – If EIS shares are disposed of at any time at a loss (after taking into account income tax relief), the loss can be set against either the investor’s income tax (in the year of disposal or the previous year)  or capital gains tax liability.  Maximum exposure 35 pence in the £1 for a 50% tax payer. View Example

Also see http://www.hmrc.gov.uk/eis/index.htm

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