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EIS and SEIS investors benefit from £525 million of income tax relief

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.

Background

Individuals investing in start-ups companies and SME (SMEs) through the through EIS and SEIS initiatives are set to benefit from £525 million in tax relief for the 2014/15 tax year says Enterprise Tax Centre’s (ETC) Richard Cunningham. ETC state that this a substantial increase from previous years and shows a growing interest and willingness to invest in this type of growth company.

According to ETC, HMRC has estimated that the total income tax relief on investments made through:

  • Enterprise Investment Scheme (EIS) will have hit £350m in 2014/15;
  • Seed Enterprise Investment Scheme (SEIS) will provide tax reliefs totaling £85m in income tax relief for SEIS investments in 2014-15 – a 42% jump on the previous year’s £60million estimate.

In addition, relief on Capital Gains Tax for EIS investments is expected to increase by a half to £90m this year compared to £60m last year.

 

Why do we have such reliefs?

The two schemes were created to encourage investment in small, unquoted companies. EIS, which has been around for decades in one form or another, was expanded in April 2012 to enable individuals to invest larger amounts in to a wider array of companies.

Very much the newer kid on the block, SEIS was launched in April 2012 time to further stimulate growth for and provide finance to start-ups and earlier stage businesses.

 

What’s in it for me?

The income tax relief under each scheme is as follows:

  • EIS – investors receive 30% initial income tax relief on a maximum annual subscription of £1m per year;
  • SEIS – investors receive 50% tax relief in the tax year the investment is made. The maximum subscription is £100k per year.

Both of these schemes allow investors to sell their shares in the Company after three years exempt of CGT.

 

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