Enterprise Investment Schemes

Enterprise Investment Schemes

Enterprise Investment Schemes (EISs)

These schemes were launched with the idea of helping smaller companies who carry higher risks to enhance their growth. The main objective was to attempt to inject more finance into these companies to try and further their development.

In order to raise this finance, EISs offers tax advantages to investors when purchasing new shares within these smaller companies. These schemes offer more tax relief than other investment opportunities as they often hold a considerable amount of risk due to investing within one specific company, rather than spreading the risk over several smaller companies such as within a VCT Scheme.

These schemes are usually aimed at individuals who can afford to tie up their money for a longer period of time and individuals who would feel the benefit a considerable amount of tax relief.

Main Benefits

  • Individuals can claim up to 30% relief for income tax amounting to a maximum investment of £1,000,000 (up to £300,000 relief).

This tax relief can only be claimed if you have held the shares usually for at least 3 years (from the date of issue) and if you are not connected to the company.

  • Exemption from Capital Gains Tax

This scheme enables you to have relief on the gains you make from your investment and may even enable you to defer your capital gains tax depending on your circumstances.

  • Relief of 100% can be claimed from inheritance tax

This relief applies as long as you have held these shares for at least 2 years and still own them at death.

  • Loss relief of up to 45% can be claimed

If shares are sold at a loss, this amount, less any relief from income tax allowable, can be set against income of the year in which they were disposed of, or any income of the previous year, instead of being set off against any capital gains.

The information provided should be treated solely as a guide and you should seek professional advice regarding your own personal circumstances and objectives.