ENTERPRISE INVESTMENT SCHEMES
A direct investment in an unquoted company which satisfies
certain criteria to do with size and type of trade carried on.
In return for keeping the shares for three years, investors receive
tax benefits.
Changes were made to the EIS from 6 April 1998 when the EIS
and the reinvestment relief scheme were combined. Subsequent changes
have improved the relief available
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Tax Benefits:The new EIS offers investors four tax benefits:
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- 20% Income tax relief
on new ordinary shares up to 400,000 per tax
year. Shares must be held for three years. Relief is against the tax
liability in the year or preceding year in which the shares are issued
- Exemption from capital
gains tax for any gains made on EIS qualifying
shares held for three years or more
- Loss relief
against income or capital gains for losses made on disposing of
qualifying EIS shares after three years
- Unlimited capital gains
tax deferral. CGT on gains can be deferred
if the EIS share subscription is made within one year before or three
years after the date of disposal which gave rise to the gain. Only
400,000 of investment per tax year qualifies for income tax relief
and exemption from CGT on disposal
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NOTE:
- Dividends
are not tax free
- Exit
is via trade sale, flotation or liquidation
- Qualifying companies must have
gross assets of no more than 7m immediately before investment.
- Since 6 April 2004
, VCTs no longer provide CGT deferral. Hence, EIS
is, for most investors, the only means of deferring capital gains tax
liabilities
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EIS Funds (both approved and unapproved) and Portfolio services are also available.
Regulated individuals, authorised under the Financial Services
Act, should contact Allenbridge on 0207 409 1111.