Five things to know about Enterprise Investment Schemes

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Written by:
25/04/2016
Enterprise Investment Schemes (EIS) were launched by the UK government in 1994 with the aim of getting more people to invest in shares of small, unlisted but high risk companies.

Over £9.7bn of private funding has been raised by EIS companies across the UK since the scheme began.

Here are five quick facts about EIS:

  1. You can claim 30% tax relief

Investing in these types of businesses is risky, so to alleviate the potential downside investors benefit from 30% tax relief on their initial investment. That means for every £10,000 invested in an EIS-eligible business, £3,000 is taken off the amount of income tax you’ll have to pay the year you invest. Investors can put up to £1m into EIS in any tax year.

  1. No capital gains tax is due on profits

Usually, investors have to pay CGT if they make a gain when they sell shares or investments not held within a tax wrapper. If you invest in an EIS, you do not have to pay any CGT on profits as long as you’ve held your shares for a minimum of three years.

  1. No inheritance tax is due on EIS shares

Investments in EIS fall outside your estate for inheritance tax purposes after they have been held for two years, leaving your beneficiaries with a smaller tax bill.

  1. You can ‘carry back’ your EIS investment to the previous tax year

You can ‘carry back’ all or part of the cost of EIS shares bought in one year to the previous tax year for income tax purposes. That means the shares are treated as though they were bought in the preceding year, which means you can mitigate your tax bill over a longer period.

  1. You can invest in interesting start-ups

Investing in EIS companies is high risk and not suitable for everyone. The value of your shares can fluctuate more than shares listed on stock exchanges. But more adventurous investors can get access to interesting and sometimes exciting early-stage companies and invest in a tax-efficient manner. EIS businesses span a huge range of sectors from renewable energy, to film, to biotech.

To learn more about Film Investment through Enterprise Investment Schemes click here

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