The Enterprise Investment Scheme has been around for many years, but there is still a lack of awareness of the tax benefits it offers – particularly the opportunity for tax-free capital growth.
EIS was specifically designed to help smaller trading companies raise finance. Because these companies tend to be higher-risk investments, the government offers attractive tax breaks for people who choose to invest in them.
Enterprise investment scheme tax relief
There are three main tax reliefs available:
- Income tax: 30% relief up front
- Capital gains tax: Tax-free capital growth
- Tax deferral
- Loss relief
- Inheritance tax: Up to 100% IHT relief on death
One of the most attractive aspects of EIS is that when shares are ultimately sold, any capital gain is exempt from CGT. However, to obtain the CGT exemption, two specific conditions must be satisfied.