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

Tax Benefits:The new EIS offers investors four tax benefits:
 
  • 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
  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

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.