The Enterprise Investment Scheme (EIS)

The Enterprise Investment Scheme (EIS)

The UK Government launched the Enterprise Investment Scheme (EIS) in 1994 to encourage investment into ambitious private companies with high growth potential.

The purpose of the EIS was that investment into early stage companies often carries a high risk of loss of capital. Alongside this, low market liquidity means that it may be difficult to sell or realise the investment. EIS lowers these associated risks by offering investors a number of incentives to counterweigh those risks. The intention is that an EIS company will be attractive to potential investors, thus helping it raise finance.

The reliefs available through the EIS are detailed further below. To find out more information please visit the HMRC website.

What are the benefits of EIS tax relief?

Income Tax Relief


Investors can claim up to 30% income tax relief through the Enterprise Investment Scheme (EIS) on investments up to £1 million per tax year. This can be used in the year of investment or carried back one year.

Tax Exemption


Investors can benefit from Capital Gains Tax (CGT) exemption on profits earned on shares that have been held for a minimum of three years or the shares can be held for longer if investors want to accrue their CGT exemption.

Defer On Gains


The payment of Capital Gains Tax by investors can be deferred on gains realised on the disposal of any kind of asset which is reinvested in a company that qualifies for EIS tax relief.

Loss Relief


Loss relief, should the company you’ve invested in fail (e.g., if the shares are disposed of at a loss), you can choose that the amount of loss be set against any income tax of that year or of the previous year.

What are the
available EIS tax reliefs?

Income Tax Relief

You can claim back up to 30% of the value of your investment in the form of income tax relief on qualifying EIS investments per tax year. For example, if you make an investment of £100,000 you can save £30,000 in income tax, provided you have sufficient Income Tax liability to cover it.

As EIS allowances are allocated individually, a married couple could invest up to £2 million in a single tax year and be eligible for income tax relief. The shares must be held for at least three years from the date of issue. Tax relief will be given at the onset. However, if you dispose of the shares before the three years is up, the tax relief will be withdrawn.

Additionally, you can claim 30% tax relief on qualifying EIS investments up to a cap of £2 million per tax year as long as at least £1 million is invested in knowledge-intensive businesses, such as those in the life sciences sector. Therefore, a married couple could claim up to £4 million if investing in qualifying knowledge-intensive businesses.

However, it should be noted that people connected with the applicable company are not eligible for income tax relief on their shares.

For more information, please visit the HMRC website.


Capital Gains Tax Exemption

Any gains are free of Capital Gains Tax, so long as the shares are held for at least three years and the income tax relief was claimed on them. Shares can however be held for much longer than three years and therefore potentially enable the investor to accrue their CGT exemption over a long period of time, which can be very desirable.

For more information, please visit the HMRC website.


Capital Gains Tax Deferral Relief

Capital Gains Tax will not have to be paid until a later date if you dispose of any kind of asset and used the gain you made on that asset to invest in shares in a company that qualifies for EIS. The investment must be made one year before or three years after the gain arose and the connection to the company is unimportant. Payment of the Capital Gains Tax will usually arise when you dispose of the EIS shares.

For more information, please visit the HMRC website.


Loss Relief

If an EIS investment performs poorly and you lose money on your EIS investment, you may be able to claim loss relief. The investor can choose that the amount of the loss, minus the income tax relief given, can be set against income of the year in which they were disposed or alternatively, on income of the previous year instead of being set off against any capital gains. This will depend on which better suits the investor’s individual needs.

For more information, please visit the HMRC website.


Inheritance Tax Exemption

There will generally be inheritance tax relief of 100% after two years on the value of EIS shares that have been held. Thus, reducing or eliminating any liability for inheritance tax in respect of such shares. Please note, if the shares are listed on a recognised stock exchange, this inheritance tax relief will not be available.

For more information, please visit the HMRC website.


Carry Back (applying EIS tax relief to a previous year)

You can treat some or all of the shares as being issued in the preceding tax year, as long as the limit for the value of EIS shares purchased had not been reached (£1 million) in that year.

This ‘carry back’ facility enables any relief to then be given against the income tax liability of that preceding year rather than against the tax year in which those shares were acquired.

For more information, please visit the HMRC website.


Finding EIS and SEIS investment opportunities
on the Regionally Platform

Explore EIS and SEIS eligible companies currently fundraising on the Regionally platform.

Remember, your capital is at risk when investing. Please see Regionally’s Risk Warning and Website Disclaimer for more information.

**IMPORTANT** The above information is only meant to be a simple summary. This information should not be relied upon when investing into a company on the Regionally platform. There are a number of criteria that investors and companies need to meet in order to qualify for tax reliefs. Professional advice should be taken.

For more information, please visit the HMRC website.

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