EIS—introduction to regime and description of tax reliefs

The following Tax practice note provides comprehensive and up to date legal information covering:

  • EIS—introduction to regime and description of tax reliefs
  • Summary of EIS tax reliefs
  • Income tax relief
  • CGT exemption
  • CGT deferral relief
  • Interaction with business asset disposal relief (BADR)
  • Interaction with taper relief
  • Advance assurance and claiming EIS relief
  • Information memorandum

EIS—introduction to regime and description of tax reliefs

The EIS is designed to encourage investment in smaller, higher-risk trading companies by offering a range of tax reliefs to individual investors purchasing newly issued shares in those companies.

EIS allows unquoted companies (companies listed on AIM are unquoted for these purposes) that meet certain requirements to raise finance by issuing qualifying shares to qualifying investors. The EIS regime is prescriptive and sets out a number of requirements that must be met, including in relation to:

  1. the individual investors

  2. the issued shares, and

  3. the issuing company

The income tax relief available to qualifying EIS investors is probably the best known of the tax reliefs. With the top rate of income tax at 45%, EIS investment is expected to continue to remain attractive to individuals seeking to mitigate their personal tax liabilities. This Practice Note describes this income tax relief as well as the various other tax reliefs available to individual investors qualifying for EIS relief. For information on other reliefs that may be relevant to investors in EIS, see Practice Note: Tax incentives for individuals investing in AIM companies.

For more details on the conditions that must be satisfied before such tax reliefs are available, see Practice Notes:

  1. EIS—conditions for relief: individual investor conditions

  2. EIS—conditions for relief: issued shares, the funds raised and the arrangements in general

  3. EIS—conditions for relief:

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