Enterprise Investment Schemes

Enterprise Investment Schemes
Enterprise Investment Schemes (EISs) are a tax efficient investment product available to UK investors. They are particularly suited to those who are looking to defer capital gains or reduce potential inheritance tax.

These investments are not suitable for cautious or cautious/balanced investors. It is possible to lose all capital invested and even the tax relief could be clawed back. They may be considered to be appropriate for sophisticated investors who wish to include some high risk companies/funds within their overall portfolio.

Tax Advantages

There are currently five tax reliefs available:

  1. Income Tax relief (available to individuals who are not connected with the company only) – 30% on investments up to £1 million (this increased limit applies from 6th April 2012 – prior to that date the limits were £500 to £500,000 per tax year). Shares must be held for three years to retain the relief. There is a facility to carry back up to 100% of the investment to the previous tax year, subject to the limits per tax year not being exceeded. Maximum tax relief is based on the lower of these limits and the investor’s actual income tax liability in the tax year in which the investment is treated as being made (i.e. either current year or previous year if carried back).
  2. Capital Gains Tax (CGT) deferral relief (available to some trustees as well as individuals (individuals may be connected to the company)) – CGT on gains made on disposal of any assets (unlimited amount) can be deferred if the gains are re-invested into an EIS (the EIS investment must be made within the period 1 year before and 3 years after the disposal to which the deferred CGT relates). The deferred gains are brought back into account when the EIS shares are disposed of (but not on death). There is no minimum term for which the EIS must be held for the purposes of CGT deferral relief.
  3. CGT exemption - No CGT payable on the disposal of the shares as long as the investor received income tax relief on them (that hasn’t been withdrawn) and held them for at least three years.
  4. Loss relief - Losses made on the disposal of shares in an EIS (less the income tax relief received) can be offset against income in the year of disposal or previous year instead of against capital gains if required. 
  5. Inheritance Tax - EIS shares will usually qualify for 100% Business Property Relief (at least initially). This effectively provides a complete exemption from IHT for the value of shares in an unquoted trading company, provided those shares have been held for at least two years prior to the chargeable lifetime transfer or death. If shares in a company qualify for EIS relief they will also qualify for BPR - but remember that the conditions that must be satisfied in order to qualify for EIS relief need only be satisfied for three years, so an EIS company may change and become one that does not qualify for BPR therefore availability of this relief cannot be guaranteed.

Advance assurance of these ‘tax advantages’ by HMRC is granted on the basis of the information provided. Any inaccuracies in this information could prejudice the reliefs available, therefore suitably qualified advice should always be sought.

For more information about Jeffreys Henry Financial’s range of Savings & Investment options, please call 020 7371 5244 or email info@jeffreyshenryfinancial.co.uk

Contact Us

Jeffreys Henry Financial Services
5-7 Cranwood Street

Tel: 020 7371 5244
Fax: 020 8371 3112
E: info@jeffreyshenryfinancial.co.uk


Jeffreys Henry Financial Services Limited is an appointed representative of Vintage Wealth Management Limited which is authorised and regulated by the Financial Conduct Authority. Number 593380.  Incorporated in England and Wales.  Company number 03824520.  Registered Office: 5-7 Cranwood Street, London, EC1V 9EE. Financial Ombudsman Service is available to sort out individual complaints that clients and financial services businesses aren't able to resolve themselves. To contact the Financial Ombudsman Service please visit www.financial-ombudsman.org.uk.

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Tel: 020 7371 5244
Fax: 020 8371 3112
E: info@jeffreyshenryfinancial.co.uk