EIS
Are you looking to raise money for your business?
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Investing in Enterprise Investment Scheme (EIS) can offer significant advantages for both investors and companies seeking funding. Here’s a breakdown of the key points for both parties:
EIS for Investors:
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Under current regulations, investors can allocate up to £1 million* per tax year for new shares in EIS-qualifying companies, enjoying a 30% income tax relief on the invested amount. To retain this relief, shares must be held for a minimum qualifying period of three years.
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After this period, capital gains tax disposal relief may apply to any shares sold at a profit. Losses on share disposal can be offset against capital gains or income, subject to certain conditions.
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Investors and their associates must not be closely connected to the company by employment, with a stake of no more than 30%. Directors may qualify under specific circumstances. Existing non-EIS shares in the company could impact the eligibility for new EIS tax relief, and anti-avoidance rules apply.
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An existing capital gains tax charge can be deferred by reinvesting the gain in EIS-qualifying shares.
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HMRC certification is required to claim most of these reliefs, ensuring the company and share issue meet stipulated criteria throughout the three-year qualifying period.
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*Note: This limit was raised to £2 million from April 6, 2018, with amounts exceeding £1 million applicable to ‘knowledge-intensive’ companies.
EIS for Companies:
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For companies to qualify for EIS investment, they must meet specific conditions, including:
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Fewer than 250 employees (or fewer than 500 for ‘knowledge-intensive’ companies).
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Gross assets not exceeding £15 million at the time of investment.
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Not listed on a recognised stock exchange.
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No control by another company.
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Generally, trade not exceeding seven years old (ten years for ‘knowledge-intensive’ companies).
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Group-wide application if part of a larger group.
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EIS-issued shares must be ordinary non-redeemable shares with specific rights. A company can’t raise more than £5 million in a 12-month period (except ‘knowledge-intensive’ companies, which can raise £10 million since April 6, 2018). Total funding, including EIS and Venture Capital Trust investment, must not exceed £12 million (or £20 million for ‘knowledge-intensive’ companies).
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Funds raised via EIS must be utilised within two years for qualifying trading activities or research and development benefiting such trade. Investments post-March 15, 2018, must satisfy the ‘Risk to Capital’ condition.
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While most trades qualify, some don’t. Our expertise in navigating the intricacies of EIS ensures a seamless experience.
Whether you’re an investor seeking optimal opportunities or a company striving to meet EIS eligibility, our knowledgeable team is here to guide you through the process. Contact us to explore the benefits and possibilities that EIS presents for your unique situation.
