There are six main tax reliefs for investors in EIS qualifying companies :
An investor can reduce his or her income tax liability by an amount equal to 30% of his or her share subscription. The maximum allowable per investor is £500,000 per annum (EIS relief).
Investment in an EIS-qualifying company provides Capital Gains Tax (CGT) protection providing the underlying investment is held for a minimum period of 3 years.
Investment in an EIS-qualifying company provides Inheritance Tax (IHT) exemption provided the underlying investment is held for a minimum period of 2 years.
Investors with a Capital Gains Tax liability or one that has been paid, arising from gains realised in the previous three years (or in the year following the investment), can defer this liability by investing the amount of the capital gain in EIS Qualifying Companies. The liability will recrystallise on disposal of the investment, unless there is a further CGT deferral.
No Capital Gains Tax payable on disposal of shares after three years, provided the EIS initial income tax relief was given and not withdrawn (Exemption from CGT).
If EIS shares are disposed of at any time at a loss, such loss can be set against the investor’s capital gains or his or her income in the year of disposal or loss (loss relief).
Please note that the above is subject to current legislation. For more information on the EIS please check the HMRC website at www.hmrc.gov.uk/eis/
