Enterprising Investment that is also tax efficient

EIS presents a great opportunity for the company and investor, and here’s why…

The Enterprise Investment Scheme has been in existence for a number of years, and presents a very tax efficient method of investment.

EIS provides tax relief for a subscription of shares in a qualifying company, and could yield the following benefits for the individual:

  • 30% income tax relief on the amount invested;
  • A capital gains tax exemption when disposing of the shares;
  • A deferral of other capital gains when the equivalent amounts are reinvested in a qualifying EIS company; and
  • If the disposal of shares results in a capital loss, that loss can be offset against general income such as a salary and bank interest.

For a 45% taxpayer, the combination of EIS income tax and loss relief can limit the maximum economic loss to 38.5% for an EIS investment.

The scheme is predominantly aimed at smaller companies involved in riskier industries. These companies often require an investment of capital to kick-start their business. Therefore, EIS provides a synergy in its benefits to both the investor and target company.

As the requirements are very specific in targeting smaller companies involved in trading activities, the scheme is actively encouraged by the Government as a way of bringing about investment.