EIS / SEIS Tax Relief

EIS / SEIS Tax Relief 2017-03-13T16:31:30+00:00

Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS)SEIS and EIS relief remain as highly tax efficient ways of investing in shares in smaller companies.  The tax benefits are considerable, and HMRC statistics show annual EIS share issues of around £1.5 billion (£160 million for SEIS).

Enterprise Investment Scheme (EIS) & Seed Enterprise Investment Scheme (SEIS) Tax Relief

The Enterprise Investment Scheme (EIS) provides a tax efficient way to encourage investment into smaller unlisted companies. EIS is intended to help these small companies raise finance by allowing tax relief on new shares.

  • Investor can put in up to £1,000,000 per tax year
  • Investor receives 30% income tax relief
  • Tax free exit after 3 years

Introduced in April 2012, the Seed Enterprise Investment Scheme (SEIS) is an even more generous offshoot of the Enterprise Investment Scheme (EIS). The SEIS aims is to encourage seed investment in early stage companies. The maximum total that can be raised for a company is £150,000.

  • Investor (incl. company Directors) can put in up to a £100,000 per tax year
  • Investor receives 50% tax relief
  • Investor receives Capital Gains Tax (CGT) exemption for any gains on the SEIS shares
  • Tax free exit after 3 years

Further details on EIS and SEIS can be found on our blog: Save Tax With EIS and SEIS Relief

Comparison: Shares sold at a profit

Below is an example comparison of EIS, SEIS and no relief, to illustrate the tax savings – with shares sold at a profit.

EIS

£30,000Cost Of Shares
  • Income tax relief = £9,000
  • Capital gains tax relief (on sale of other assets) = n/a
  • Net cost of shares = £21,000
  • Sale proceeds (after at least 3 years) = £100,000
  • Capital gains tax on sale = n/a
  • £79,000Net Gain

SEIS

£30,000Cost Of Shares
  • Income tax relief = £15,000
  • Capital gains tax relief (on sale of other assets) = £4,200
  • Net cost of shares = £10,800
  • Sale proceeds (after at least 3 years) = £100,000
  • Capital gains tax on sale = n/a
  • £89,200Net Gain

No Relief

£30,000Cost Of Shares
  • Income tax relief = n/a
  • Capital gains tax relief (on sale of other assets) = n/a
  • Net cost of shares = £30,000
  • Sale proceeds (after at least 3 years) = £100,000
  • Capital gains tax on sale = £14,000
  • £56,000Net Gain

Comparison: Complete Loss

Below is an example comparison of EIS, SEIS and no relief, to illustrate the tax savings – with a complete loss.

EIS

£30,000Cost Of Shares
  • Income tax relief = £9,000
  • Capital gains tax relief (on sale of other assets) = n/a
  • Net cost of shares = £21,000
  • Proceeds = Nil
  • Income tax relief on loss = £9,450
  • £11,550Net loss on failed investment

SEIS

£30,000Cost Of Shares
  • Income tax relief = £15,000
  • Capital gains tax relief (on sale of other assets) = £4,200
  • Net cost of shares = £10,800
  • Proceeds = Nil
  • Income tax relief on loss = £6,750
  • £4,050Net loss on failed investment

No Relief

£30,000Cost Of Shares
  • Income tax relief = n/a
  • Capital gains tax relief (on sale of other assets) = n/a
  • Net cost of shares = £30,000
  • Proceeds = Nil
  • Income tax relief on loss = £13,500
  • £16,500Net loss on failed investment

* Income tax relief on loss may be restricted (non SEIS/EIS shares only)

Looking for specific EIS or SEIS advice or help? Why not contact one of our specialist tax advisors.

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