The Enterprise Investment Scheme offers tax reliefs for qualifying investment in new shares in eligible trading companies. The investor, the company and the shares must each meet the relevant conditions.
A company’s involvement in EIS does not automatically establish an individual investor’s entitlement.
Distinguish the reliefs
EIS can involve Income Tax relief on a qualifying subscription, deferral of a separate capital gain and exemption of a qualifying gain on the EIS shares.
These have different conditions. Deferring a gain does not extinguish it: a later disposal or other event may bring it back into charge.
Check the official EIS investor guidance for current limits and claims.
Check the investment
The share issue, use of funds and company’s activities matter. Restrictions apply to matters such as company size, qualifying trade and the investor’s connection with the company.
Employment, directorships and holdings of connected people can affect the analysis. Review them before subscribing.
Keep eligibility under review
Holding conditions apply, and relief can be withdrawn if the shares, company or investor cease to meet the rules. Receiving value from the company may also affect relief.
Retain the compliance certificate and supporting subscription documents. A claim should be based on the appropriate evidence, not an expectation that a certificate will eventually arrive.
EIS involves investment risk. We can advise on the tax questions; the commercial suitability of the investment needs its own assessment.