How does an EIS work?

EIS is designed so that your company can raise money to help grow your business. It does this by offering tax reliefs to individual investors who buy new shares in your company. Your company must receive investment under a venture capital scheme within 7 years of its first commercial sale.

Are EIS a good investment?

A potential win for start-ups and investors. But EIS isn’t just potentially good for the investor. It’s been pivotal in ensuring start-ups in the UK can reach their potential. Under EIS, small businesses can raise up to £5million each year, and a maximum of £12million in the company’s lifetime.

How much can you invest in an EIS?

How much can I invest in EIS? The maximum amount you can invest is £1 million per tax year or £2 million, providing anything above £1 million is in ‘knowledge intensive’ investments.

How do I invest in EIS?

You can invest into EIS-eligible businesses direct or via a fund. There are two ways of investing into an EIS-eligible investment opportunity: by investing directly into a single company or through an EIS fund where a fund manager builds your portfolio.

How long does an EIS take?

The time to prepare an EIS ranged from 51 days to 6,708 days (18.4 years). The average time for all federal entities was 3.4 years.

Who is eligible for EIS relief?

To qualify for this relief, income tax relief must have already been claimed – and not withdrawn by HMRC. Also, investors have to hold the shares for at least three years, and the company must remain EIS-qualifying for at least three years.

Is EIS high risk?

EIS companies are early-stage businesses, so investments into these companies are high risk. Investments could fall in value, potentially to zero, and investors may not get back their investment.

Why should I invest in EIS?

Up to 30% income tax relief, either against this year’s tax bill, or last year’s via a carry back facility. Ability to defer capital gains made elsewhere, by investing these in an EIS. Tax-free growth – no Capital Gains Tax liability if your investment does well.

How many years can you carry back EIS relief?

When to claim your relief If you invest with EIS, SEIS or SITR, you can claim relief up to 5 years after the 31 January following the tax year in which you made the investment. For VCTs, you can claim relief up to 4 years after the end of tax year of assessment in which you made the investment.

Is EIS relief available to companies?

Although the tax reliefs are available only to the investors, and not the company itself, the intention is that an EIS company will be attractive to potential investors, thus helping it raise finance.

When can I claim EIS tax relief?

You will normally claim EIS tax relief when you complete your tax return. You will be asked some information which is included in your EIS3 certificates. These are certificates you receive from each of the companies you invested in, typically a few months after the investment.

How do you carry back EIS relief?

It is possible to ‘carry back’ all or part of the investment to the preceding tax year as long as the limit for relief is not exceeded for that year. An individual may carry back current year EIS investments to the previous year, provided that the limit in the previous year is not exceeded.

What happens if an EIS company goes bust?

Income Tax – Relief Withdrawal: – If the EIS company goes into liquidation within (generally) three years of the share issue, Income Tax relief originally given is clawed back. – However, if the value received on liquidation is considered insignificant or no value is received at all, no Income Tax relief is withdrawn.

How is EIS relief calculated?

HOW MUCH RELIEF IS AVAILABLE? When you dispose of EIS shares at a loss, the Share Loss Relief rules allow you to deduct the amount of the loss either from capital gains or from your taxable income1. The value of the relief will be between 20% and 45% of your loss, depending on the rate at which you pay tax.