Enterprise Investment Schemes are complex investments and are not suitable for everyone, you should seek independent financial advice before entering into this type of investment.
Levels and bases of and reliefs from taxation are subject to change and their value depends on the individual circumstances of the investor.
The value of the investment can go down as well as up and you may not get back as much as you put in.
Enterprise Investment Schemes - (EIS)
Enterprise Investment Schemes are a relatively new type of investment introduced by the Government to encourage investment into smaller companies in need of additional finance as start-up capital or to expand the business.
As these companies tend to be relatively small and start-ups, these investments can be in a higher risk bracket than ordinary investments into equities.
To encourage investment into these companies, major tax incentives and benefits were introduced with the investments. The Enterprise Investment Scheme offers a different and complementary set of tax breaks to those offered by VCTs particularly. The EIS scheme is now the only UK tax efficient scheme to offer Capital Gains Tax ("CGT") Deferral. The scheme also offers income tax relief at 30%, capital gains free growth and, through Business Property Relief, relief from Inheritance Tax ("IHT") if the shares are held for more than two years. *
It is important to remember that these are long term, illiquid investments, which carry a high risk of loss of capital and, as such, are only likely to be suitable for sophisticated, wealthy investors as part of a diversified portfolio.
New tax changes announced in Budget 2011 (changes in future years)
Legislation will be introduced in Finance Bill 2011 to increase the rate of income tax relief given under EIS from 20 per cent to 30 per cent of the amount subscribed for shares, subject to State aid approval.
Subject to State aid approval legislation will be introduced in Finance Bill 2012 to increase:
- the thresholds for the maximum size of qualifying company for both EIS and VCTs;
- the maximum annual amount that can be invested in an individual company; and
- the annual amount that an individual can invest under the EIS.
These changes will apply from 6 April 2012.
The Government will bring forward and consult on further changes to the schemes including proposals to give additional support through the EIS for seed investment.
Legislation will also be introduced in Finance Bill 2012 providing that companies whose trade consists wholly or substantially in the receipt of Feed-In Tariffs (FITs) or similar subsidies will only be eligible for the two schemes where commercial electricity generation commences before 6 April 2012. Shares issued before 23 March 2011 will not be affected.
Legislation to be included in Finance Bill 2012 will increase:
- the employee limit to fewer than 250 employees;
- the size threshold to gross assets of no more than £15 million before investment;
- the maximum annual amount that can be invested in an individual company to £10 million; and
- the annual amount that an individual can invest under the EIS to £1million.
These changes will, subject to State aid approval, apply to shares in investee companies that are issued on or after 6 April 2012.
For more information please click on the link below
* Subject to meeting certain criteria
Single Investment Calc
Monthly Investment Calc
Annual Investment Calc