Quest Chartered Management Accountants Logo

Enterprise Investment Scheme EIS

Share on facebook
Share on twitter
Share on linkedin
Share on pinterest

Enterprise Investment Scheme EIS

95% of firms in the UK have less than 10 staff and in times of growing economic uncertainty, it is to these small businesses the government is turning to provide a welcome boost for our economy.

The one issue many small startups have however is gaining worthwhile investment. Companies who are listed on the stock exchange will have an easier time finding investors as opposed to those companies who are not, this is where the Enterprise Investment Scheme (EIS) comes in.

The UK Government is well aware that investment in companies not listed on the stock exchange is smaller when compared to those which are, this is because of the risk factor involved.

Due to this a series of tax reliefs are offered to encourage investors to share some of the risks.

…………………………………………..

Are you a business looking for help with Annual & Management Accounts? Find out how we can tailor a solution to the preparation of your annual accounts that will fit your business like a glove.

…………………………………………..

What type of tax reliefs are offered?

There are two types of tax relief the EIS can offer and they can be found below,

Income Tax Relief

  • The minimum subscription for each investor is £500 per company and the maximum is £1,000,000 per annum.
  • Investors who have less than a 30% share in the company can reduce their income tax liability by an amount that is equal to 30% of their share subscription.

Capital Gains Tax Relief

  • Deferral of gains can be realised on assets providing they were either disposed of less than 12 months prior, or less than 36 months after the EIS investment.
  • This relief is not limited to investments of £400,000 per annum and can be claimed by investors whose interest in the company exceeds 30%.
  • Even if you were to sell the shares at a loss, such loss can be set against the investor’s capital gains or their income in the year of disposal.
  • There is no capital gains tax payable on the disposal of shares after three years, this is provided that the EIS initial income tax relief was given and not withdrawn on those shares.

Who can qualify?

The rules for qualifying can be quite complicated, however here we have broken them down into two different sections, and the specific requirements for each can be found below:

Companies

  • The entry into the scheme is subject to a decision and audit to be completed by an appointed tax officer.
  • The company must not have assets greater than £7 million.
  • All capital gained must be actively engaged in the company within 24 months.
  • The company must not be listed or have any intention of being so at the time of the investment.

…………………………………………..

Want to know how we can help your business? We are local chartered accountants providing services including tax advice, business support and independent financial advice.

…………………………………………..

Investors

  • The investor may not have more than a 30% interest in the company.
  • The investor must not have any other form of controlling interest in the company.
  • The investor must not have any form of preferential shares.
  • No partner or associate may have other interests in the company.

If you liked this blog post: Enterprise Investment Scheme EIS, then make sure to check out all our other posts on our Tax  Tips, News & Advice page.

If you want to discover how else we can help your business, Quest also offers the following services: Tax Services, Self-Assessment, VAT, Payroll, Business Tax, New Business, R&D Tax Credits and Tax Deadlines.

We’ve got your back. Call trusted Birmingham accountants Quest on 0121 235 0315 for a chat or CONTACT US to book a free consultation. 

Discover how we can help you pay less tax, put more money in your pocket and avoid stress (and a hefty fine!) by getting your tax return in on time, giving you more space to relax and focus on growing your business.

Enterprise Investment Scheme EIS