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Learn how to claim EIS tax relief when you invest in a company.
In today's article, we'll explain the steps you need to take to claim EIS tax relief on your tax return.
We have recently published a number of articles on the Seed Enterprise Investment Scheme. SEIS helps small, early-stage companies to raise money through individual investors.
EIS can be used by larger and more mature companies. It also offers significant tax benefits for the investor. We'll start off by explaining the advantages of using the scheme.
Tax Benefits Of EIS
First, you need to check that you are eligible to use the scheme. Check out all the resources on our dedicated EIS page. You can also stay up to date by bookmarking the HMRC page on EIS.
Here are the tax benefits of EIS:
- No Capital Gains Tax (CGT) on any gains after 3 years
- Potential Inheritance Tax relief of 40% after 2 years
- Initial Income Tax Relief of 30%
- The potential for unlimited CGT deferral indefinitely
- 61.5% loss relief for a top-rate tax payer
We'll now discuss exactly how to claim these benefits.
What You Need To Claim
Usually, you'll claim the EIS tax relief when you fill out your tax return. The exact method you need to use depends on what you've invested in:
- EIS5 form - if it is an "Approved EIS fund"
- EIS3 form - for all other investments
Both forms require the same information, however. When you come to complete the form, make sure you have:
- The name of the company you've invested in
- The amount on which you're claiming relief
- The date of issue of the shares
- The name of the relevant HMRC office
- How you want the relief attributed (if you're claiming more than £1m)
How To Claim
If you want to claim EIS relief via a paper tax return, you'll need to do so via form SA101.
There's a section called "Other tax reliefs" where you can add details of Venture Capital Trust shares, Maintenance payments etc. Use box 2 to give the details of your EIS investments.
If you want to use the online form:
- Section 3 - Select "Yes" for the section that begins "Do you want to claim other tax reliefs..."
- Section 4 - Give details of the EIS investments in the section that begins "Subscriptions for shares under the Enterprise Investment Scheme..."
The third option is to use the EIS forms themselves. For example, if you typically account for all your tax via PAYE you could just use EIS3 or EIS5. Complete the relevant sections on pages 3 and 4 and send to your HMRC tax office.
Whatever method you choose, it's important to make sure you are fully compliant and your paperwork is filled out correctly. If you'd like to discuss working with us to obtain tax relief via EIS, please get in touch.