The Enterprise Investment Scheme (EIS)

Through the Enterprise Investment Scheme (EIS), eligible investors can claim up to 30% income tax relief on investments up to £1 million per tax year. This extends to by a further £1 million for investment in knowledge-intensive companies.

The Enterprise Investment Scheme (EIS) is a longstanding UK government scheme, designed to help smaller higher-risk trading companies raise finance, by offering a range of tax relief to investors who purchase new shares in those companies. Where a business is listed as 'EIS' on Crowdcube, this tax relief will be available to qualifying investors.

The benefits of EIS tax relief

Income tax relief

Up to 30% income tax relief on investments up to £1 million. An additional £1 million is eligible if invested in knowledge-intensive companies

CGT disposal relief

Any gain is Capital Gains Tax (CGT) free if the investment is held for at least three years.

Loss relief

If the shares are disposed of at a loss, you can elect that the loss be set against any income tax of that year or of the previous year.

CGT reinvestment relief

All Capital Gains Tax can be deferred if the gain is re-invested in EIS-qualifying shares.

What EIS tax reliefs are available?

1. Income Tax Relief

There is no minimum investment through EIS in any one company in any one tax year. Tax relief of 30% can be claimed on investments (up to £1,000,000 in one tax year) giving a maximum tax reduction in any one year of £300,000, provided you have sufficient Income Tax liability to cover it.

An additional £1,000,000 is eligible for the same 30% tax relief if it is invested in “knowledge-intensive” companies. HMRC has a strict definition of “knowledge-intensive”, with conditions that include a minimum spend on innovation and a minimum proportion of the workforce actively working on research. You can find the full conditions here.

EIS allowances are allocated individually. For example, a married couple could separately invest up to £2 million each tax year and be eligible for Income Tax relief.

The main limitation is that all shares must be held for at least three years from the date of issue or the tax relief will be withdrawn.

2. Capital Gains Tax disposal relief

Any capital gain is CGT free if the shares are held for at least three years and the income tax relief on the shares was claimed. Shares can be held for much longer and potentially allow you to accrue a CGT exemption over a long period of time, which can be a great attraction.

3. Loss relief

If shares are disposed of at a loss, the investor can elect that the amount of the loss - less Income Tax relief - can be set against income of that year or the previous year. This avoids a situation where the loss is set against capital gains, allowing far more flexibility.

4. Capital Gains Tax reinvestment relief

Payment of CGT can be deferred if the gain is reinvested into shares of an EIS-qualifying company. The investment must be made one year before or three years after the gain arose, whether or not the investor has a connection to the company (see “Who can claim EIS relief” for more on what “connected” means). Unconnected investors are eligible for relief from both Income tax and CGT deferral relief.

Examples of EIS relief in action

Here’s a few examples of how EIS tax relief works. To make the maths easy, let’s assume you invest £10,000 in each case and you’re in the 45% tax bracket.

Which companies may be EIS eligible?

Companies may qualify to raise funding through EIS if they:

  • Made their first commercial sale less than 7 years ago

  • Have less than £15 million in gross assets

  • Have less than 250 employees

Companies that are considered as “knowledge-intensive” differ in that they can be up to 10 years old. They also have more stringent criteria for eligibility, which you can find here.

Frequently Asked Questions

Please note:

The availability of any tax relief, including EIS and SEIS, depends on the individual circumstances of each investor and of the company concerned, and may be subject to change in the future. If you are in any doubt about the availability of any tax reliefs, or the tax treatment of your investment, you should obtain independent tax advice before proceeding with your investment.

Please visit the HMRC website for further information on EIS tax relief.

Risk warning

Investing in start-ups and early-stage businesses involves risks, including illiquidity, lack of dividends, loss of investment and dilution, and it should be done only as part of a diversified portfolio. Crowdcube is targeted exclusively at investors who are sufficiently sophisticated to understand these risks and make their own investment decisions. You will only be able to invest via Crowdcube once you are registered as sufficiently sophisticated. Please click here to read the full Risk Warning.

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Investment opportunities are not offers to the public and investors must be eligible Crowdcube members. Please seek independent advice as required as Crowdcube does not give investment or tax advice.