Investing in EIS or SEIS qualified companies will get you tax relief under the Business Investment Relief (“BIR”) provisions.
Business Investment Relief is one of a number of tax strategies available to non-UK domiciled (“non-doms”) individuals. HMRC taxes non doms on the remittance basis when bringing funds into the UK.
When non-doms remit funds there will be a tax charge on the amount received into the UK. However, in order to combat that and also to encourage investment in the UK by non-dom individuals, the government introduced BIR. The rules are as follows:
A non-dom investor is UK resident not paying a remittance basis charge since she has been resident here for less than seven years. With UK income resulting in a UK tax bill of £300,000 and £10m of unremitted foreign income she subscribes for EIS shares by bringing £1m into the UK.
Say she then sells her investment for £2m.
If a business fails, although losing £1m you will save tax at your effective tax rate, assuming you have enough income and pay income tax at 45%, of £450,000.
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