A Glossary of EIS Terms

A Glossary of EIS Terms

If you’re looking into investment options, you’ll undoubtedly stumble across The Enterprise Investment Scheme (EIS). As one of the government’s four venture capital schemes, it provides investors with some excellent benefits if they want to invest in qualifying companies.

Some of the terms used in discussions of EIS can be confusing. To make getting to grips with the world of EIS easier, we’ve created a useful glossary of key EIS terms.

The Enterprise Investment Scheme (EIS)

In 1994, The UK government launched EIS to help companies raise money to grow their business. It works by incentivising investors to buy shares in young, slightly riskier companies through generous tax reliefs (as outlined below) which can benefit both the investor and business.

Not every company can access the scheme – they must meet specific criteria. Generally, a company can qualify for EIS if it has no more than £15 million in gross assets, less than 250 employees, and it has been fewer than seven years since its first commercial sale.

EIS Tax Relief

As an investor, you can claim EIS relief on up to £1 million worth of the investments in qualifying businesses per year. This rises to £2 million worth of investments if you’re investing in ‘knowledge-intensive’ companies. 

EIS Income Tax Relief

If you’ve been reading about EIS, you’ll have picked up on this key term. EIS income tax relief refers to the 30% of the value of investment that you can claim back in the form of income tax relief and is considered a beneficial element of investing with EIS.

EIS Capital Gains Tax Relief

EIS Capital Gains Tax Relief includes Disposal Relief and Deferral Relief.

Disposal Relief

If you hold shares for three years or more, all gains that accrue on those shares are exempt from Capital Gains Tax when you come to sell them. 

For example, say you invest £20,000 and in three years you find your shares are worth £60,000, you will not have to pay Capital Gains tax on the £40,000 you have gained if you decide to sell your shares. 

Deferral Relief

If you dispose of an asset and use the gain that you have made on that asset to invest in shares in a company that qualifies for EIS, you will not have to pay Capital Gains Tax until a later date. 

This will usually be paid when you dispose of the EIS shares, deferring the payment rather than scrapping it altogether.

EIS Loss Relief

Loss relief mitigates the risk of your investments. Put simply, if a business performs poorly or liquidates and you lose money on your investment you can claim loss relief which will reduce the amount you have to pay.

When it comes to what loss relief you can claim, the rate is equivalent to the highest level of tax that you pay. So, for example, if you pay income tax at 45%, you can claim 45% of your net loss in income tax relief. 

You can also claim 30% income tax relief if the company you have invested in fails and your investment is no longer worth anything. This means that if you buy shares for £20,000 you can claim £6,000 from your 30% income tax relief. You can then claim loss relief on the remaining £14,000 at the equivalent rate of your tax bracket. If this is 45%, this would be £6,300, meaning you would only have to pay £7,700. 

As this example assumes the worst-case-scenario – that you lose the whole of your investment, this is a considerably small amount to pay.

EIS Inheritance Tax Relief

After holding EIS for two years, an investor is generally able to claim Inheritance Tax relief of 100%. 

Any liability for Inheritance Tax is reduced or eliminated in respect of such shares. It is important to note, however, that relief is not available if the shares are listed on a recognised stock exchange.

The Seed Enterprise Investment Scheme (SEIS)

The Seed Enterprise Investment Scheme (SEIS) is another of the UK government’s four venture capital schemes; you may even see it mentioned when reading information about EIS. This is because it’s similar to EIS, but for even younger companies that are still at a very early stage in their growth. 

For investors, it works in the same way as EIS in the sense that it offers tax relief, however, there are criteria that companies must meet in order to qualify for SEIS that differ to those that must be met for EIS. 

In order for a business to qualify for SEIS it must not have gross assets over £200,000 when the shares are issued, not be a member of a partnership, and have less than 25 full-time employees in total when the shares are issued.

It must also meet some other requirements.

Knowledge-intensive companies

You’ll often read about ‘knowledge-intensive’ companies in reference to the different rules that apply to them under EIS in comparison to non-knowledge-intensive companies. 

Knowledge-intensive companies are those that focus on research, development, and innovation and meet a few additional criteria. They are likely to be found in the science and technology sectors, although this is not a requirement.

Whether a company is knowledge-intensive or not is significant because it may be eligible for more favourable funding allowances.

For example, you can raise up to £20 million of investment for your company in its lifetime, rather than £12 million for a standard company under EIS. It also allows investors to buy more shares in your company. 

A business does not necessarily need to apply as a knowledge-intensive company even if it would qualify as such. It should only do so if it needs to raise more money than EIS allows, the company is older than the usual scheme limits allow, or an investor wants to make use of the higher investor limits.


Films4U is a specialised film funding, production, and distribution company. Our investors make use of the benefits provided by EIS, and enjoy consistent, significant returns on their investments in UK film. 

To chat to one of our account managers about EIS and investment in film, contact us or call us directly on 08082 750 904.

The information contained on this website should not be taken as financial advice or as a personal recommendation by Films4U. Before investing you should always seek appropriate legal and financial advice from an authorised person specialising in investments of this kind.

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