1 . Enterprise Investment Scheme The Enterprise Investment Scheme ( EIS ) offers tax incentives to individuals who subscribe for shares in qualifying companies . For companies looking to raise equity capital , the benefits of EIS can help to attract funds . The scheme is subject to detailed conditions . Odiri Tax Consultants can advise you on the conditions that need to be satisfied and can prepare the necessary forms for submission to HM Revenue & Customs .
2 . EIS income Tax Relief EIS income tax relief is available at the rate of 30 % to an individual who makes a cash subscription for shares in a ‘ qualifying company ’. The maximum qualifying investment is £ 1 million per tax year .
The investor can make a claim for relief to be given in the tax year preceding that in which the shares were issued . The shares must be fully paid up ordinary shares that are not redeemable and do not have certain prescribed types of preferential right .
EIS income tax relief is not available if the investor receives a loan which is linked with the share subscription or if the investor is ‘ connected ’ with the issuing company at any time within the period beginning two years before and ending three years after the issue of the shares , or three years from the date the qualifying trade commences if later ( the ‘ three-year termination date ’).
For purpose of EIS an individual is connected with a company if : � he / she holds ( either alone or with defined associates ) more than 30 % of the ordinary share capital , issued share capital or voting rights in the issuing company or any subsidiary of the issuing company ;
� subject to an exclusion for ’ business angel ‘ directors , he / she or an associate is an employee , director or partner of the issuing company , any subsidiary of the issuing company , or various other related companies .
With effect from 18 November 2015 , in order to benefit from income tax relief , an investor must not hold any other shares in the company or a qualifying subsidiary at the time of investment , unless those shares are “ risk finance investments ” or “ founder shares ” ( broadly , shares issued on incorporation ).
“ Risk finance investments ” are generally shares issued under EIS , the Seed Enterprise Investment Scheme ( SEIS ) or Social Investment Tax Relief ( SITR ). If the disposal of shares qualifying for EIS income tax relief results in a capital loss , and the shares have not ceased to qualify , the investor may be able to elect for the loss ( which is determined after deducting the EIS income tax relief given ) to be set against other income of the tax year of disposal and / or the previous tax year .
3 . Capital gains tax reliefs A gain on the disposal of shares on which EIS income tax relief has been given ( and not withdrawn ) is free of capital gains tax ( CGT ) provided the disposal takes place after the three-year termination date .
Where a capital gain arises on the disposal of another asset a taxpayer who is resident in the UK can make a claim to defer liability to CGT on the gain where the taxpayer subscribes for shares in an EIS qualifying company within the period beginning one year before and ending three years after the disposal .
The deferred gain crystallises when the shares are disposed of , or on certain other events ( such as the EIS company ceasing to qualify ) if earlier . Unlike EIS income tax