EIS and Seed EIS

Author

Andy Wood

Andy is a practical, creative tax adviser who assists a variety of clients in achieving their personal and commercial objectives in the most tax efficient manner.

  • The Enterprise Investment Scheme or “EIS” is a venture capital relief. It also has a little brother called Seed EIS.
  • Both are designed to provide investors in smaller, growth companies with attractive tax incentives IF they invest in qualifying shares and meet a myriad of other conditions and requirements.
  • These reliefs include:
  1. Income tax relief – this is in the form of a tax reducer or tax credit which comes off the bottom of the tax calculation:
  • For EIS, this is 30% of the total qualifying investment – which is £1m for ‘general’ EIS investments or £2m if the investment is in a Knowledge Intensive Company
  • For Seed EIS, this is 50% of £100k
  • These limits apply annually…
  1. Secondly, there is a Capital Gains Tax Exemption – If the shares qualify – and remain qualifying for a period of usually 3 years – then any gain on sale is exempt for capital gains tax purposes;
  2. Finally there are reinvestment reliefs available – these apply where one is reinvesting the gains from the sale of another asset – the form of the relief is slightly different depending on whether it is EIS or Seed EIS.
  • These reliefs are highly attractive. However, this is not pure altruism from the Government. The quid pro quo is very much that these are high risk investments.
  • Don’t put the tax tail ahead of the investment dog. As some investment dogs get put down.
  • ETC can provide you with advice around whether your business might qualify for EIS or Seed EIS and take you through the process.

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