Enterprise Investment Scheme (EIS)
The Enterprise Investment Scheme (EIS) can benefit individual investors who subscribe for new ordinary shares in AIM and PLUS companies which qualify as trading companies. Qualifying investments up to £200,000 in aggregate in a tax year (husband and wife may each invest £200,000) entitle an investor to the following tax reliefs:
20 per cent initial income tax relief on investment (‘initial relief’)
- The investment must remain qualifying and be held for three years to qualify for this relief.
- For shares subscribed prior to 6 October in any
tax year, a maximum of 50 per cent of each
investment and no more than £25,000 in
aggregate may be treated as invested in the
previous tax year.
- Relief is restricted to the actual income tax
liability for the year, if lower than 20 per cent.
Exemption from capital gains tax on disposal
- The investment must be held for three years.
- Initial relief must not be withdrawn.
- The exemption is restricted if initial relief was
not given on the full amount or if that amount
has been reduced.
Loss relief if the investment fails or is disposed of at a loss
- This is calculated at an investor’s top rate of tax (40 per cent for a higher rate payer) effectively on the net loss, after taking into account the initial tax relief.
- Losses can be relieved either against capital gains in the year of
loss or a subsequent year or against income in the year of the
loss or the previous year.
- The maximum net loss can thus be restricted to 48 per cent of cost.