EIS Inheritance Tax relief

Each underlying investment should qualify for Business Property Relief (BPR). In the event of the death of the Investor, as long as the Investor has held the investment for at least two years prior to death, the investment should fall outside your taxable estate.  

Where an investment in Relevant Business Property is made as a replacement of Relevant Business Property previously sold, provided the combined periods of ownership (ignoring any period between the sale and replacement) amount to more than two years out of the five years immediately prior to death, the replacement property should likewise qualify for full relief from Inheritance Tax.  

For example, if shares in an unquoted Investee Company, qualifying as Relevant Business Property, were purchased and held for one year and then sold – and all the resulting cash held for two and a half years before being reinvested in shares in another unquoted Investee Company (or any other asset) qualifying as Relevant Business Property – that further investment would qualify for IHT relief were the Investor to die at least one year after the reinvestment.

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Example of inheritance tax relief

Mr Blogs invests £100,000 into 10 EIS qualifying companies through the MMC EIS Fund. By doing so, Mr Blogs is entitled to reduce his income tax liability by a maximum of £30,000 (30% of £100,000) in the tax year that the Fund subscribes for shares in the EIS qualifying companies.

Mr Blogs dies 2 years following his final investment in the MMC EIS Fund. His income tax relief is not clawed back and the full value of his investment passes to his beneficiaries free of inheritance tax.

 

Other tax reliefs available under the Enterprise Investment Scheme:

Income Tax relief

Capital Gains Tax deferral

Tax-free Capital Gains

Loss relief

 

Disclaimer

You should note that the favourable tax treatment outlined above may not continue in the future and that other taxes or costs may arise which are not paid through MMC or imposed by MMC. The information in this document has been drafted on the basis that each Investor is an additional rate taxpayer, the additional rate being and 45% for 2016/17. If you are in any doubt about your tax arrangements, you should contact a qualified tax adviser for appropriate tax advice.

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