Pixel

What is EIS?

Gary Green
Gary Green
April 25, 2017

While the SEIS has many advantages, its significance for investors is limited by the riskier profile of this type of investment as well as the maximum amount that wealthier investors can put into the scheme.

The SEIS is often the first scheme that companies will use to raise investment and is often followed by the use of the Enterprise Investment Scheme (EIS).

The EIS encourages investment in smaller, unquoted, trading companies but the limits are significantly larger than for the SEIS. The main tax relief for investors comes in the form of Income Tax relief of 30%. (Compare to the 50% for SEIS).

EIS Rules

The maximum annual amount that an individual can invest through the EIS is £1 million. Income Tax relief is limited to that which reduces your income tax liability for the year to nil. This is the same rule as for SEIS.

EIS investments also qualify for other reliefs. These include:

  • Capital Gains Tax deferral relief for the life of the investment
  • Tax relief for any losses made on the shares bought
  • Venture Capital Trusts (VCT) scheme

The scheme encourages individuals to invest in small, usually high-risk trading companies. Individuals aged 18 or over can get Income Tax relief at 30% on new subscriptions for ordinary shares in VCTs . The maximum amount qualifying for relief is £200,000 in each tax year.

Capital Gains Tax

In certain circumstances, investors can also use Entrepreneurs' Relief to benefit from a reduced rate of CGT. Entrepreneurs' Relief mainly applies to the sale of a business, shares in a trading company or an individual’s interest in a trading partnership. Where Entrepreneurs' Relief is available CGT of 10% is payable in place of the standard rate.

There are a number of qualifying conditions in order to qualify for the relief. There is a lifetime limit that means that individuals can qualify for the relief more than once subject to an overriding total limit of qualifying capital gains up to the current £10 million cap.

Next Steps

The new Investors’ Relief effectively extends the scope of Entrepreneurs' Relief to external investors in unlisted trading companies. Investors’ Relief applies a 10% rate of CGT to gains accruing on the disposal of qualifying ordinary shares in an unlisted trading company held by individuals.

The shares must be held for a period of at least three years starting from 6 April 2016 in order to qualify for the relief. There is a separate lifetime cap of £10 million for qualifying gains by investors.

If you are an investor give us a call to discuss the different investor reliefs that are possibly available to you.

Interested in our services?
Fill in your details and a member of our experienced team will be in touch shortly to discuss your needs.
We adhere to strict GDPR rules and do not reveal or sell your data to any third-parties. For more, please read our Privacy Policy.
Latest Insights
September 21, 2021
How to Claim EIS Income Tax Relief in 2021

If you need to know how to claim EIS income tax relief and enjoy what is...

September 2, 2021
Recovery Loan Scheme - What Is It and How Do I Apply?

As businesses seek to re-open and recover from the global pandemic, there are various forms of...

August 16, 2021
The Super-Deduction Scheme - How Does It Work?

You may have heard the term 'super-deduction' recently and wondered if you could be affected by...

August 12, 2021
The Tax Benefits of Non-Domiciled Status for UK Residents

Having a Non-Domiciled Status if you reside in the United Kingdom can have great benefits for...

July 9, 2021
Stamp Duty Land Tax (SDLT) Surcharge for Non-UK Residents

Stamp Duty Land Tax (SDLT) rates have changed again for non-residents buying a home in England...

July 7, 2021
How Is Cryptocurrency Taxed & Do I Need to Fill A Self-Assessment?

Cryptocurrency may live online with no government control or borders, but if you are in the...

July 5, 2021
Venture Capital Schemes: Tax Relief Guide For Investors

When it comes to finding out what tax relief is available for investors using a venture...

July 2, 2021
Claiming Business Asset Disposal Relief in 2021

Business Asset Disposal Relief (BADR) used to be known as Entrepreneurs’ Relief before 6 April 2020....

June 30, 2021
What Is Form 17? Transfer Of Beneficial Ownership

As a general rule, the fall-back position for couples who live together with their spouse or...

View Our latest insights »
Get the latest UK tax & business news and guidance delivered straight to your inbox
We care about the protection of your data. No spam. Unsubscribe anytime.
Copyright © 2021 Key Business Consultants LLP. Reg: E&W OC389322
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram