EIS Tax Reliefs
To incentivise investment for high risk start-ups, the UK government offers tax reliefs under the Enterprise Investment Scheme (EIS)
If a company is judged to be EIS compliant - in general terms it must be a high risk start-up - investors can get the following reliefs:
End Result: for higher rate tax-payers, every £200k committed under EIS represents a maximum potential loss of £77,000 as below
If a company is judged to be EIS compliant - in general terms it must be a high risk start-up - investors can get the following reliefs:
- Initial Income Tax : receive 30% of investment back from HMRC in the first tax return after investment
- CGT : if the investment succeeds, pay no CGT on any profits
- Further Income Tax: if the investment fails, 45% of the remaining investment can be offset against income tax
- Inheritance Tax: shares in EIS companies generally qualify for 100% tax relief. I.e. can be passed on without paying 40% IHT
- CGT Deferral: if an investor sells an investment they can defer paying CGT by reinvesting any gain into an EIS company
End Result: for higher rate tax-payers, every £200k committed under EIS represents a maximum potential loss of £77,000 as below
Important Notes:
- The tax reliefs outlined assume a higher rate tax payer
- There are conditions to receive the tax benefits above - e.g. hold shares for at least 3 years
- We recommend all readers seek professional advice before deciding to make any EIS investment
- The tax reliefs outlined assume a higher rate tax payer
- There are conditions to receive the tax benefits above - e.g. hold shares for at least 3 years
- We recommend all readers seek professional advice before deciding to make any EIS investment