The Enterprise Investment Scheme has been available for investments since 1994. It is a tax efficient scheme which was introduced to encourage equity investment in new and small companies. The EIS offers tax reliefs to individual investors who buy new shares in the new company.

A company's shares will be eligible to participate in the scheme if the company meets various conditions.

The rules surrounding the EIS are fairly specific but essentially, to qualify, a company needs to carry on a trade with a view to making a profit. The investment must be used for a qualifying trade - most trades will qualify, including any research and development which will lead to a qualifying trade. Some companies and areas of business are excluded, for example, those that deal in land, goods or shares. Companies that have significant asset backing or contractual revenue streams have most recently been excluded.

What are the tax breaks?

Investors can potentially benefit from a combination of upfront and ongoing EIS tax reliefs:

• Up to 30% income tax relief

• Tax-free growth
• Capital gains deferral
• Inheritance tax relief
• Loss relief on exit

What is the Seed Enterprise Investment Scheme (SEIS)?

The Seed Enterprise Investment Scheme is a scheme introduced by the Government in 2012/13 following the success of – and to complement – the EIS.

The purpose of the SEIS is to help smaller businesses raise funds and grow. As with EIS, an investment in an SEIS-qualifying can result in access to certain tax reliefs.

SEIS is targeted towards start-ups and very early-stage companies, while EIS can be used by larger and more mature companies – though these are still relatively small and young in the context of the business and corporate landscape in the United Kingdom.

If you or your business require information regarding anything in this blog or generally about your business or any other corporate matter, please call Sarah Ward, head of our corporate team, on 07889 589596 or e-mail Sarah at sward@georgegreen.co.uk for advice and assistance.