EIS

EIS Main Facts

Q: WHO COULD FIND AN EIS INVESTMENT USEFUL?

This investment may be suitable for people who are looking to:

  • Take advantage of the growth potential of smaller companies and are comfortable with the risks that they involve
  • Take advantage of income tax relief
  • Defer, and potentially eliminate, payment of capital gains tax
  • Shelter investments from inheritance tax
  • Harness the potential for significant tax-free capital growth
  • Diversify their existing investment portfolio
  • Looking for ways to manage the tax impact of drawing down on their pension

Q. WHO IS ELIGIBLE TO INVEST?

• Any UK taxpayer may be eligible for the tax breaks. The initial tax relief is limited to the amount of tax the individual pays

Q. HOW MUCH CAN I INVEST?

You are allowed to invest any amount. However, some investment companies set a minimum investment level for an EIS. The amount of income tax relief you can claim is limited to £300,000 for each tax year but you can make claims relating to both the current and previous tax years. So the largest EIS investment you can claim income tax relief on is £2 million, which could bring you a total of £600,000 in tax relief.

Q. AM I ALLOWED TO INVEST IN MY OWN COMPANY?

No. You can’t claim tax relief if you have a financial interest in the company or its subsidiaries, or if you hold more than 30% of its shares. You can’t control the company or be a partner, director or employee.

Q. WILL I BE INVESTING IN THE EIS OR THE COMPANIES?

You buy shares in the companies, not the EIS. You shouldn’t confuse an EIS with managed funds. With an EIS you have a selection of investments in individual companies rather than owning shares or units in a fund.