Occasions resulting in withdrawal of income tax relief

The enterprise investment scheme (EIS) is a scheme that encourages individuals to invest money in shares issued by qualifying unquoted companies with a permanent establishment in the UK.

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

• •income tax relief for the investor of up to 30% of the amount invested (see the Enterprise investment scheme income tax relief guidance note)
• •disposals of EIS shares after three years may be free from CGT (see the EIS and VCT shares guidance note (subscription sensitive))
• •capital gains deferral relief allows investors disposing of any asset to defer gains against subscriptions in EIS shares (see the Enterprise investment scheme re-investment relief guidance note)
• •losses on EIS shares may be offset against taxable income (see the Losses on shares set against income guidance note (subscription sensitive))
• •EIS investments should qualify for IHT business property relief after two years’ ownership (see the BPR guidance note (subscription sensitive))

This guidance note discusses the occasions that may result in the income tax relief being withdrawn or reduced. For the mechanism of calculating the withdrawal or reduction of relief, see the How to calculate the clawback of relief guidance note.