The Enterprise Investment Scheme (EIS) is designed to help smaller higher-risk trading companies raise finance by offering a range of tax reliefs to investors who purchase new shares.
For investors to be able to claim EIS tax reliefs, the company which issues the shares has to meet several rules regarding the kind of company it is, the amount of money it can raise, how and when that money must be employed for the trade, and the trading activities carried on.
Income Tax relief for individual investors in the EIS is 30%. The maximum annual amount that an individual can invest through the EIS is £1 million or £2 million if at least £1 million of the money is invested in knowledge-intensive companies. The generous tax allowances are in some way meant to offset the fact that making investments in these types of companies can carry a high risk. Investors should be careful not to invest any money they are unprepared to lose.
The tax advantages of the EIS include Income Tax relief, CGT deferral for the life of the investment and tax relief for any losses made on the shares bought. Note that Income Tax relief is limited to the amount which reduces the individual’s Income Tax liability for the year to nil.
If you need support with your business’s tax—Contact Moore (South)'s Tax Team. Our specialist tax team can help you with your business’s tax and ensure it’s done correctly and on time.
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