Enterprise investment scheme ― introduction

Produced by a Tolley Corporation Tax expert

Corporation Tax

Guidance

The enterprise investment scheme (EIS) offers substantial tax incentives to investors in companies which qualify.

In summary, tax reliefs under EIS are as follows:

•
income tax relief for the investor of up to 30% of the amount invested
•
disposals of EIS shares after three years may be free from capital gains tax
•
capital gains tax deferral relief allows investors disposing of any asset to defer gains against subscriptions in EIS shares
•
losses on EIS shares may be offset against taxable income
•
EIS investments should qualify for IHT business property relief after two years’ ownership

Commercial and tax risk to consider when advising on EIS

The tax incentives for EIS investments are intended to encourage investment in high-risk companies. Therefore, there are stringent conditions associated with EIS reliefs and tax advice on EIS should be undertaken and supervised by a suitable experienced practitioner.

Terms of engagement for EIS work should be carefully drafted, in particular because conditions are tested on an on-going basis and tax advisers should ensure that

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