A summary of the most frequently asked questions
| What is EIS? |
The Enterprise Investment Scheme (EIS) is a UK government initiative designed to help smaller, riskier companies raise finance by offering tax reliefs to individual investors. |
| Why was EIS introduced? |
EIS was introduced to encourage investment into start-ups and early-stage businesses, supporting economic growth and fostering innovation. |
| What are the key tax reliefs under EIS? |
EIS offers several tax reliefs, including: - Income Tax Relief: A percentage (usually 30%) of the amount invested. - Capital Gains Tax Exemption: On any gains made from EIS shares. - Loss Relief: If shares are sold at a loss. - Inheritance Tax Exemption: After holding for two years. |
| What are the criteria for a company to qualify for EIS? |
Key criteria include: - The company must be unquoted. - It should have less than 250 employees. - Its gross assets should not exceed a certain amount (e.g., £15 million before the investment). - It should be UK-based and use the funds for a qualifying trade. |
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How long do I need to hold EIS shares? |
To benefit from EIS reliefs, you should hold onto your EIS shares for at least three years from the date of issue (or from the date the trade started, if later). |
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How much can I invest under EIS? |
An individual can invest up to £1.0million in one tax year under EIS, or up to £2.0million provided that anything above £1.0million is invested in knowledge-intensive businesses. |
| What are ‘knowledge-intensive businesses’? | These are companies that significantly invest in R&D or innovation, and meet specific criteria set by the UK government. |
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Can I carry back my EIS relief? |
Yes, it's possible to treat shares as if they were acquired in the previous tax year, thereby allowing for tax reliefs to be applied to the earlier year. |
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How do I claim EIS tax reliefs? |
You can claim EIS tax reliefs by completing the EIS section of your Self Assessment tax return. |
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Do EIS investments impact my personal tax allowance? |
No, EIS investments won't affect your personal tax allowance. They offer a reduction in your tax liability. |
| Can I invest through an intermediary or fund? |
Yes, many investors choose EIS funds or portfolios managed by intermediaries, which pool investments into multiple EIS-eligible companies. |
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Are there risks associated with EIS investments? |
Absolutely. Investing in startups and early-stage companies is inherently risky. While there are tax advantages, the value of your investment can go down as well as up. Always consult with a financial advisor before investing. |
| Can I sell my EIS shares? | Yes, but selling them before the three-year minimum holding period may result in loss of tax reliefs. |
| Where can I find more detailed information on EIS? | For in-depth details, read the official HMRC guidance on EIS. |