Why invest in an Enterprise Investment Scheme (EIS) and what makes it tax efficient?
What makes EIS tax efficient?
EIS investments are highly tax efficient, with an upfront relief on income tax, and substantial downside protection in the form of loss relief; protecting up to 61.5% of the capital invested.
Your EIS investments will benefit from:
- Tax-free upside profits, not capped by taxation
- Loss relief protects each EIS investment on a deal-by-deal basis
The value of loss relief within a diversified venture capital portfolio should not be understated, as the downside is protected on a deal-by-deal basis, whereas the upside is not capped by taxation. If you are interested in investing in an EIS fund, please download our EIS information memorandum (IM). Below we have provided an overview which you might find helpful if you are looking to find out more about EIS Investment.
EIS - 30% income tax relief
30% income tax relief may be claimed against income tax paid or payable in relation to the tax year for which the underlying investments are made, on total investments up to £2,000,000 per investor. Alternatively, an investor can carry back and opt to treat the underlying investments as having been made in the prior tax year, in whole or in part, such that 30% tax relief is available against income tax paid or payable for that year.
EIS - Capital gains deferral
Unlimited capital gains deferral on gains invested into qualifying companies, in respect of those gains that arise within three years before and 12 months after the date of the underlying investments.
EIS - Tax free capital gains
There is no capital gains tax liability on the disposal of shares which have been held for at least three years in EIS qualifying companies or, if longer, three years after the company commenced its trade.
EIS - 100% inheritance tax exemption
The availability of BPR (business property relief) means there may be 100% inheritance tax exemption on the death of the investor for each underlying investment that has been held for at least two years.
EIS - Loss relief
In companies that fail, the combination of loss relief and income tax relief provides a total tax relief of up to 61.5%. A loss on any underlying qualifying investment can be offset by individuals against income in the tax year of the loss, or the previous tax year. Losses may also be offset against capital gains, including those that arise on the revival of any deferred gain.