EIS – what’s it all about and how could you benefit when you invest in Enterprising Limpsfield? Financial advisers, Grant Pickering and David Rye are on hand to answer your questions…
EIS is a government backed scheme run by HMRC, set up to encourage investment in small business in the UK. Small business is after all what helps to drive the economy. Investment in start-ups and small businesses can carry a higher risk than larger companies and those listed on the stock exchange, so the EIS scheme was devised to offer investors some incentive to counterweigh those risks. These incentives are in the form of tax relief.
Only certain companies are eligible for EIS and Enterprising Limpsfield has received advance assurance (Feb 2017) of qualifying for the Enterprise Investment Scheme (EIS).
Grant Pickering and David Rye, local financial advisers realise that you may not be entirely familiar with all the main benefits of EIS schemes and have provided some further information about the key benefits below.
What is a EIS?
- Enterprise Investment Schemes are designed to encourage private investment in small and medium-sized companies.
- An EIS offers a host of legitimate tax benefits subject to qualification criteria, these being:
- Income Tax Relief up to 30%
- Capital Gains Tax Relief and Deferral
- Business Relief (to help reduce Inheritance Tax)
- Loss Relief
“What a great opportunity to invest and share in the success of your local community, as a long-term resident of Oxted I think this initiative is something truly special to keep our local villages local,” says Grant Pickering.
If you would like to explore investment in Enterprising Limpsfield Ltd further, then Grant and David have kindly offered to answer any questions you may have free of charge.
Grant Pickering: 07956590471 or firstname.lastname@example.org
David Rye 07841 847882 or email@example.com
Learn more about EIS at http://www.eisa.org.uk , where there are some very good worked examples of how the tax benefits can work in practice – saving you money.
The following are expanded points on EIS investment that we have taken from various sources. Please feel free to chat these through with Grant or David.
A brief summary of the tax benefits:
- 30% upfront Income Tax relief, which can be carried back to the previous tax year. The maximum subscription is currently £1,000,000 per investor per year, yielding a potential reduction in tax liability of £300,000 per annum (assuming the investor has sufficient income tax liability).
- Capital Gains Tax (CGT) deferral – an investor can defer capital gains realised on a different asset, where disposal of that asset was less than 12 months before the EIS investment or less than 36 months after it. This relief is limited to the amount being invested into the EIS and can be claimed by investors whose interest in the company does not exceed 30%. It is available to individuals and trustees. Where gains arise on the EIS investment, taper relief is available.
- No CGT to pay on any gains made when the investment is realised after three years (five years for investments made before 6 April 2000), provided the EIS initial income tax relief was given and not withdrawn on those shares.
- Tax relief from investment losses – if EIS shares are disposed of at any time at a loss, such loss can be set against the investor’s capital gains or income in the year of disposal, potentially limiting a total loss to 38.5% of an investor’s capital
- Shares do not form part of the estate for Inheritance Tax purposes, provided the investments have been held for at least 2 years at time of death and the company qualifies for Business Property Relief (“BPR”).
- The investor may not have more than a 30% interest in the company
- No partner or associate of the investor (including spouse, relations, prior business contacts) may have other interests in the company
- The investor must not have any form of preferential shares
- The investor must not have any other form of controlling interest in the company
- The scheme must not be used for the purposes of avoiding tax
Learn more about EIS www.eisa.org.uk