The EIS and SEIS

EIS & SEIS Tax Relief Summary

 

The key tax incentives offered in each scheme are as follows:

SEIS

(Maximum company can raise = £150,000)

EIS

(Maximum company can raise = £5,000,000)

50% Income Tax relief

50% CGT reinvestment relief

No CGT on investment growth

Share loss relief if investment fails

100% Inheritance Tax relief (subject to certain conditions)

£100,000 maximum individual investment

30% Income Tax relief

Capital Gains Tax deferral

No CGT on investment growth

Share loss relief if investment fails

100% Inheritance Tax relief (subject to certain conditions)

£1,000,000 maximum individual investment

The Enterprise Investment Scheme (EIS) was introduced by Sir John Major’s government in 1994 as a means to encourage investment into smaller private companies. Successive governments, both Conservative and Labour, have expanded the scheme over time, as the scheme has helped to raise over £10 billion of investment, and over £1 billion per annum in the last couple of years.

History of the EIS

In 2011, the Government announced the introduction of a new scheme, targeted at raising investment into start-ups or early stage companies, called the Seed Enterprise Investment Scheme.

Illustration of Benefits

 

The following illustration shows the effect of both EIS and SEIS on an investment that returns 1.25x. (a 25% gain)

Investment

Income Tax Relief

Net cost of investment

Investment Return

Net Return

Post-Tax Return

Equivalent Pre-tax Return*

£(100,000)

£0

£(100,000)

£125,000

£25,000

14%

25%

Ordinary Investment

Investment

Income Tax Relief

Net cost of investment

Investment Return

Net Return

Post-Tax Return

Equivalent Pre-tax Return*

£(100,000)

£50,000

£(50,000)

£125,000

£75,000

150%

273%

SEIS Investment

Investment

Income Tax Relief

Net cost of investment

Investment Return

Net Return

Post-Tax Return

Equivalent Pre-tax Return*

£(100,000)

£30,000

£(70,000)

£125,000

£55,000

79%

143%

EIS Investment

*Assumes Income Tax rate of 45%

Further, the combination of tax reliefs available to investors create an asymmetric risk / return profile for investors when compared to traditional private equity investing:

Planning Opportunities

 

As well as being excellent investment opportunities, EIS and SEIS offer a number of planning opportunities, including:

© Daedalus Partners LLP, 2017

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