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Tax efficient investment

Enterprise Investment Scheme (EIS) – approved funds
Following the increase in the investment limits for Knowledge Intensive Companies from 6 April 2018, the Government intends to reform the current EIS approved funds structure.

The reforms are intended to take effect from 6 April 2020 and are aimed specifically at Knowledge Intensive Companies.

The reformed EIS Fund will require:
  •  at least 80% of the funds to be invested in Knowledge Intensive Companies;
  • 50% of each new ‘fund raise’ to be invested within 12 months;
  • the balance of the fund raise to be invested within 24 months;
  •  annual compliance statements to be submitted to HMRC by the fund manager.
A tax relief carry-back rule will also be introduced so that an investor in the EIS approved fund may be able to claim income tax relief in the year before the fund closes.

EIS approved funds are managed funds that invest in a number of EIS approved companies. Currently, the fund manager must invest at least 90% of the monies raised within 12 months of closing the fund raise and the income tax relief cannot be carried back by the taxpayer. 

The reforms are part of the wider Patient Capital review to encourage investment in innovative firms.

Draft legislation for the new fund will be published in the Finance Bill 2019/20