Enterprise investment scheme tax relief

Produced by Tolley
Enterprise investment scheme tax relief

The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Enterprise investment scheme tax relief
  • Overview of EIS tax reliefs
  • The end of the enterprise investment scheme
  • EIS income tax relief
  • Rate of EIS income tax relief
  • The permitted maximum EIS investment
  • Operation of EIS income tax relief
  • Making a claim for EIS income tax relief
  • Making a carry back claim for EIS income tax relief
  • Dividends from EIS companies
  • More...

Overview of EIS tax reliefs

The enterprise investment scheme (EIS) offers significant tax reliefs to encourage individuals to invest money in qualifying shares issued by qualifying unquoted companies. The scheme is designed to encourage investment in small, young companies that need investment to grow but have limited access to market finance, often because they are perceived as high-risk. EIS offers income tax reliefs and capital gains tax (CGT) reliefs to individual investors who subscribe to new shares in such companies.

A subscription for eligible shares of a qualifying EIS company is therefore a tax efficient investment for the individual. The investor can benefit from the following tax reliefs:

  1. EIS income tax relief

  2. CGT exemption

  3. loss relief against CGT or income tax

  4. CGT deferral relief

These reliefs are considered in further detail below. A worked example of the reliefs is provided in SEIS and EIS ― overview guidance note.

Business property relief (BPR) may also be available if the shares are held for the qualifying period for BPR. See the BPR overview guidance note.

The conditions for a valid investment are discussed in the Conditions to be met by the EIS issuing company and Conditions to be met by the EIS investor guidance notes.

It is possible to make investment through an approved EIS investment fund. From 6 April 2020, these must be focused on knowledge intensive companies. For more details, see the Enterprise investment scheme ― introduction guidance note and Simon’s Taxes E3.137.

The end of the enterprise investment scheme

A sunset clause for EIS income tax relief has been introduced. This means that EIS tax relief will no longer be available for subscriptions made on or after 6 April 2025, unless the legislation is renewed by Treasury Order.

EIS income tax relief

Rate of EIS income tax relief

For subscriptions made on or after 6 April 2011, the income tax relief available is 30% of the lower of:

  1. the amount subscribed for the shares

  2. the permitted maximum

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