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The Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) are designed to help smaller, higher-risk trading companies raise finance by offering a range of tax reliefs to investors who purchase new shares in those companies. The reliefs can provide the investor with a significant income tax break, and also provide the opportunity to defer capital gains.

EIS tax relief

EIS has been around since the 1990’s, and is a well-established part of the UK tax landscape for investors. Since its inception, the scheme has promoted nearly £15 billion of private investment.

With an EIS investment, you can take advantage of the following reliefs:

  • Income Tax relief of up to 30% of your investment up to £1 million per year. This can be used in the year of investment or carried back one year.
  • Exemption from Capital Gains Tax on profits earned on shares held for a minimum of three years
  • Capital Gains Tax deferral on gains realised on the disposal of any asset which is reinvested in an EIS eligible company
  • Loss relief, should the company you’ve invested in fail
  • Exemption from Inheritance Tax on shares held for a minimum of two years
SEIS tax relief

This success of EIS led to the introduction of SEIS in 2012. It is designed for investing in even smaller companies and providing even more generous tax breaks. It focuses on smaller, early-stage companies preparing or carrying on a new trade.

With an SEIS investment, you can take advantage of the following reliefs:

  • Income Tax relief of up to 50% of your investment up to £1 million per year. This can be used in the year of investment or carried back one year.
  • Exemption from Capital Gains Tax on any gains arising on a disposal of the shares held for a minimum of three years
  • Capital Gains Tax deferral of 50% on gains reinvested in an SEIS eligible company
  • Loss relief, against Capital Gains Tax and possibly Income Tax, should the company you’ve invested in fail
  • Exemption from Inheritance Tax on shares held for a minimum of two years

Get advice

The rules around  EIS and SEIS tax relief are extremely complex, and depend on the individual circumstances of both the investor and company concerned. It is essential that you receive tax advice before proceeding with any investment.

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