EIS and SEIS Planning
Enterprise Investment Schemes (EIS) were introduced by the government in 1994. They encourage investment in small UK businesses in exchange for valuable tax reliefs.
You will receive a credit against your income tax bill of 30% of the amount you invest, provided you have a sufficient tax liability. You can also defer gains into an EIS up to the value of your investment. These reliefs can also be carried back into the prior tax year. Any EIS gains are tax-free after three years. Any EIS losses can be offset against income tax or capital gains tax. After two years of ownership the EIS value is exempt from inheritance tax as it qualifies for Business Relief.
As an EIS invests into very small unlisted companies, the risk of capital loss is high. If you don’t make losses, then the investment is also illiquid, and you may have to wait until the EIS manager can sell the individual companies on to return money to you. EIS money can be tied-up for a decade and so should only be used for long-term capital that you know you are not going to need.
The government introduced the Seed-Enterprise Investment Scheme (SEIS) to support even smaller UK companies, with an increase in the income tax relief from 30% to 50%. These investments are even higher risk.
EIS and SEIS planning is available to Altor clients in our Core Service.
Nothing on this website or its links constitutes a personal recommendation; the information contained is designed to be informative but not to be relied upon as individual circumstances could affect the relevance of this guidance.