Enterprise Investment Scheme

View our EIS Factsheet

    Enterprise Investment Scheme (EIS) explained

    Since 1994 investors have been benefiting from tax efficient investments through
    The Enterprise Investment Scheme. 

    INTRODUCED IN 1994

    The Enterprise Investment Scheme (EIS) is a tax-efficient investment that was Introduced by the UK Government in 1994 to incentivise investment into smaller UK companies. Investors are incentivised with relief on Income Tax, Capital Gains Tax and Inheritance Tax.

    OVER £20BN RAISED

    2017-2018 demonstrated another bumper year for EIS with fundraising reaching record highs and for the first time, potentially topping the £2Bn mark in a single tax year.

    OVER 33,605 INVESTORS

    EIS continues to be a success story in helping entrepreneurs, start up and scale up
    businesses achieve their funding needs.

    HMRC reported in May 2019 that over 33,600 investors claimed EIS tax relief in the tax year; 2017-2018.

    ABOUT THE SCHEME

    THE ENTERPRISE INVESTMENT SCHEME (EIS)

    The Enterprise Investment Scheme (EIS) is a government sponsored investment scheme, offering a range of tax relief benefits to investors who invest in smaller high-risk companies which are not listed on the stock exchange.
    It’s been designed to encourage investment into younger, companies.

    KEY FEATURES OF EIS

    Tax relief provides a key benefit for qualifying investors of EIS, below are some of the key features. 

    INCOME TAX RELIEF

    Provided an EIS qualifying investment is held for no less than three years from the date of issue. Individuals can reduce their income tax liability by an amount equal to 30% of the amount invested.

    CGT EXEMPTION

    No Capital Gains Tax is payable on the disposal of qualifying shares after three years (or until three years from the commencement of trade, if later), provided the EIS initial income tax relief has not been withdrawn.

    LOSS RELIEF

    Lowered risk as any Losses can be offset against income tax, the net effect is to limit the investment exposure to 42p in the £1 for a 40% tax payer or up to 38.5p in the £1 for a 45% tax payer. 

    INHERITANCE TAX EXEMPTION

    EIS are generally exempt from Inheritance Tax after 2 years of holding the investment. After the disposal of an EIS, an individual has 2 years to reinvest the capital to retain the Inheritance Tax exemption.

    EIS LOSS RELIEF

    Loss relief allows investors to offset a loss made on an EIS investment against either their Capital Gains Tax bill or their Income Tax bill, depending on which better suits their individual needs.

    They can claim loss relief either in the tax year when they realise the loss or the following tax year. This is in addition to other EIS tax reliefs.

    As EIS allowances are allocated individually, a married couple could be eligible to claim EIS tax relief of up to £2m in a single tax year (or up to £4m if investing in qualifying knowledge-intensive businesses).

    Income Tax relief is given at 30% of the investment, regardless of what your top rate of tax is.

    The shares must be held for at least three years from the date of issue – tax relief will be given at the outset, but can be clawed back if you dispose of the shares before the three years are up.

    EIS Examples

    RISK MITIGATION

    To date, our distribution partner have not lost money on any film, however in the unlikely event of this happening the following scenarios would be relevant :

    SCENARIO 1

    COMPANY FAILS TO MAKE RETURN AND BREAKS EVEN
    TOTAL GAIN: £3,000

    You sell your shares for £10,000 after 3+ years

    SCENARIO 2

    COMPANY FAILS INSPITE OF RISK MITIGATION
    TOTAL LOSS: £3,850*

    The company in which you invested goes bust. Your shares are worth £0, but you receive loss relief

    *You receive loss relief from the government equal to your at-risk capital (in this case the £10,000 invested – £3,000 received in Income Tax relief), multiplied by the percentage tax bracket you belong to. At a tax bracket of 45%, the loss relief would be £7,000 x 45% = £3,150. So, for £10,000 invested, your real loss is £7,000 – £3,150 = £3,850

    HOW TO CLAIM EIS TAX RELIEF

    As with many official HMRC processes, applying for EIS tax relief can be difficult for people who haven’t done it previously. Our Account Mangers are on hand to guide investors through the process – step by step.
    Before you can claim EIS tax relief you must have received an EIS3 form from the company in which you have invested. This form confirms the amount you invested and states that the investment is eligible for tax relief. HMRC may ask to see your EIS3 form even after your taxes have been processed, so be sure to keep it safe.
    Your claim can be made on the Self-assessment tax return for the tax year in which the shares were issued. If the shares were issued in a previous year, and/or if the claim is for capital gains deferral relief, the claim part of the form must also be completed and sent to your tax office.

    Claims for relief can be made up to five years after the first 31 January following the tax year in which the investment was made.

    Carry back is possible on all or part of the investment to the preceding tax year if the limit for relief has not already been exceeded

    For a full guide on how to claim Tax Relief please view our comprehensive guide below:

    Claiming Tax Relief Guide

    View the HMRC Enterprise Investment, Statistics Report here

    Get Started!

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