What is Enterprise Investment Scheme? – EIS Explained
A Complete Guide to EIS Tax Relief for UK Investors
The Enterprise Investment Scheme (EIS) offers UK investors up to 50% income tax relief plus capital gains tax exemptions when investing in qualifying startups and small businesses.
Understanding the Enterprise Investment Scheme
The Enterprise Investment Scheme (EIS) is a UK government initiative designed to encourage investment in high-risk early-stage companies by offering substantial tax reliefs to investors.
Key Features of EIS:
- 30% income tax relief on investments up to £1,000,000 per tax year
- Capital gains tax exemption on profits from EIS shares held for 3+ years
- Loss relief if the investment fails
- Inheritance tax relief after 2 years of ownership
- CGT deferral relief on gains reinvested in EIS shares
Benefits of EIS Investing
EIS offers investors unique advantages when supporting UK startups and growth businesses:
Substantial Tax Relief
Claim back 30% of your investment against income tax liability.
Tax-Free Growth
No capital gains tax on profits if shares are held for 3+ years.
Loss Protection
Claim loss relief if the company fails, reducing your risk.
Diversification
Access to high-growth potential startups not available on public markets.
IHT Benefits
Shares qualify for Business Relief after 2 years, exempt from inheritance tax.
CGT Deferral
Defer capital gains from other assets by reinvesting in EIS.
EIS Eligibility Criteria
Both investors and companies must meet specific requirements to qualify for EIS:
Investor Requirements:
- Must be a UK taxpayer
- Cannot be connected to the company (with some exceptions)
- Minimum investment period of 3 years
- Maximum investment of £1,000,000 per tax year for 30% relief
- Additional £1,000,000 may qualify under Knowledge-Intensive Company rules
Company Requirements:
- Must be unquoted at time of investment
- Gross assets under £15m before investment (£20m for knowledge-intensive companies)
- Fewer than 250 full-time employees
- Trading for less than 7 years (10 for knowledge-intensive companies)
- Must be carrying out a qualifying trade
How to Invest Through EIS
- Identify EIS Opportunities – Research companies directly or through EIS funds
- Complete Due Diligence – Assess the business model and growth potential
- Make Your Investment – Purchase newly-issued shares in the company
- Claim Your Tax Relief – Complete EIS3 form and submit with your tax return
- Maintain Investment – Hold shares for minimum 3 years to retain benefits
Important: EIS investments are high-risk – you could lose your entire investment. Always seek professional advice before investing.
Considering an EIS Investment?
Our tax specialists can help you navigate EIS opportunities and maximize your tax benefits.
Email: eis@mhcandco.co.uk
Phone: +44 333 789 1010
Address: 54 Gloucester Road North, Bristol, BS7 0SJ, United Kingdom
