Enterprise Investment Scheme (EIS) - Financial advisers, investment, wealth management and pensions advice - Ginkgo Financial Ltd
Higher risk investments

Enterprise Investment Scheme (EIS)

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ENTERPRISE INVESTMENT SCHEMES (EIS) INVEST IN ASSETS THAT ARE HIGH RISK AND CAN BE DIFFICULT TO SELL SUCH AS SHARES IN UNLISTED COMPANIES.

THE VALUE OF THE INVESTMENT AND THE INCOME FROM IT CAN FALL AS WELL AS RISE AND INVESTORS MAY NOT GET BACK WHAT THEY ORIGINALLY INVESTED, EVEN TAKING INTO ACCOUNT THE TAX BENEFITS.

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What is the Enterprise Investment Scheme?

The EIS was introduced by the UK government in 1994 to help small UK companies raise capital from private investment. Under the platform, investors are rewarded with tax incentives in return for injecting enterprise capital into AIM listed or unlisted companies.
There are restrictions on the size of business that can receive EIS qualifying investment; some types of business are excluded.

Tax incentives

The EIS offers five tax incentives to private investors who are resident in the UK for tax purposes:

  • Up to 30% upfront income tax relief
  • Tax free growth
  • Tax relief on any investment losses
  • Up to 100% inheritance tax relief
  • Capital gains tax deferral for the life of the investment

The first three benefits are available on amounts of up to £1 million per investor per tax year with a facility to carry back to the previous year. The investment must be held for at least three years following the issue of the shares (or following the start of trade if later). Each investee company must also continue to qualify under the EIS rules during the same period. Capital gains tax deferral is unlimited in amount. Exemption from inheritance tax depends on the investee company qualifying for Business Property Relief and the shares must be held for a minimum of 2 years at the date inheritance tax (IHT) comes in to charge.