What is EIS Tax Relief?
EIS is a government scheme designed to help smaller higher-risk trading companies to raise finance by offering a range of tax reliefs to investors who purchase shares in those companies.
What are the investment amounts?
Individuals may invest any amount in EIS shares. However, only the first £1,000,000 invested in any one tax year will qualify for relief, although a carry-back facility to the prior tax year is available.
What can the investor expect?
- The investor can expect income tax relief at the rate of 30% on the amount invested in qualifying investments. EIS relief can be withdrawn if certain events occur within three years (e.g. the shares are sold).
- Provided that income tax relief has been claimed, any gain arising on disposal of the shares after three years will be exempt from capital gains tax.
- Deferral of capital gains (no limit) on any other assets, by reinvesting all or part of the gain into an EIS company within one year before, or three years after the gain occurred.
- Relief for any losses made on the disposal of EIS shares against capital gains tax or, in some circumstances, income tax in the year of disposal or previous year.
- An investor can, subsequent to the investment, have the opportunity to participate in the running of the business and to receive reasonable remuneration for doing so.
What can the qualifying company expect?
- Certain company activity restrictions.
- The company can enjoy the opportunity to raise finance either for initial start-up or for expansion and this type of investment may be a candidate to be ‘matched’ by Development Capital funds depending upon the geography, sector and stage of development of the business concerned.
How can Blue Sky Corporate Finance help you?
Our experienced corporate finance professionals will advise on the suitability of the EIS scheme, seek pre-clearance of a transaction via HM Revenue & Customs, complete/file the initial EIS 1 application and provide the service of completing the annual returns under the EIS scheme.
To find out more about“qualifying individuals”, “eligible shares” and “qualifying companies” just get in touch.