What is EIS relief and what are the benefits?

The Enterprise Investment Scheme (EIS) is a government scheme that provides a range of tax reliefs for investors who subscribe for qualifying shares in qualifying companies. There are five current EIS tax reliefs available to investors in companies qualifying under the EIS.

As with any tax matter, you should seek the advice of a qualified professional.

A summary of the benefits is as follows:

  • Income tax – reduction of income tax liability by up to 30% of the amount invested, if qualifying EIS investment is held for no less than three years from the date of issue. Hence, for every 100p invested you would receive a tax relief of 30p.
  • CGT freedom – no ‘capital gains tax’ is payable on the disposal of shares after three years, provided the EIS initial income tax relief was given.
  • IHT Relief – ‘Inheritance Tax’ – Shares in EIS qualifying companies will generally qualify for Business Property Relief for Inheritance Tax purposes at rates of up to 100% after two years of holding such investment, so that any liability for Inheritance Tax is reduced or eliminated in respect of such shares.
  • CGT Deferral Relief – Tax on capital gains realised on a different asset can be deferred for as long as the EIS qualifying shares are held or even indefinitely, where disposal of that asset was less than 36 months before the date of the issue of shares in the EIS investment or less than 12 months after it.
  • Loss Relief – If EIS shares are disposed of at any time at a loss (after taking into account income tax relief), such loss can be set against the investor’s capital gains, or his income in the year of disposal or the previous year.