EIS tax relief

The Enterprise Investment Scheme regime makes early-stage investing particularly attractive for UK-resident tax payers. MMC's EIS Fund is currently open for new investment.

Companies that qualify for EIS (criteria includes being based in the UK with fewer than 50 employees and gross assets of less than £7 million) can take up to £2 million of EIS funds in a twelve month period. From 6th April 2012 increases in the size limits have been proposed; for more information click here.

In the current tax year (2010/11), there are a number of tax benefits that taken together mean that an additional rate (50%) income tax payer risks no more than 35% of capital invested.  The current rate of income tax relief is 30%.

Below is a short summary of EIS tax relief, your tax adviser will be able to give more detail.

• Income tax relief, from 6 April 2011, of 30% of the amount invested up to a maximum investment of £1 million per tax year (provided the shares are held for three years and the income tax relief has not been withdrawn)
• Tax-free capital gains on the investment (provided the shares are held for three years)
• Deferral of tax on other capital gains (of any amount) made in the three years prior to and one year after the EIS investment
• Loss relief on any capital losses made on the EIS investment which may be offset against other capital gains or income
• Relief from inheritance tax (as long as the investment is held for two years prior to the relevant chargeable event)
• Investment can be carried back (made at any time within the tax year) and treated as if it were invested in the previous tax year