Enterprise Investment Scheme (EIS)

The Enterprise Investment Scheme (EIS) is one of four venture capital schemes, others of which include the Seed Enterprise Investment Scheme (SEIS), Social Investment Tax Relief (SITR) and Venture Capital Trusts (VCTs).

The EIS provides funding for newer businesses in the UK, as well as providing investors with an incentive, in the form of tax reliefs, to invest in businesses that may be high-risk. There are multiple different types of EIS reliefs available for investors, including income tax relief, capital gains tax exemption, and capital gains tax deferral.

If your business qualifies for the Enterprise Investment Scheme, you can raise up to £5 million each year, and a maximum of £12 million over the course of your company’s lifetime. This funding is an excellent way to help your business boost growth and development.

 

Does my business qualify for the Enterprise Investment Scheme?

In order to qualify for the Enterprise Investment Scheme, your business must meet wide a range of criteria. This includes the following (please note this list is not exhaustive):

• Your business must be permanently established in the United Kingdom
• The business must carry out a trade that qualifies for the scheme. There are certain trades, such as farming, property development and coal production, which are not eligible for the scheme (please note these examples are not exhaustive).
• Your business must have a maximum of 250 employees, unless your company is considered “knowledge intensive”, where this rises to 500
• You must have no more than £15,000,000 in gross assets
• Your business must not be listed on a recognised exchange
• Your business must be no more than 7 years old, or 10 if your business is considered “knowledge intensive”

Knowledge intensive refers to a business that is carrying out research, development or innovation at the time it is considering becoming part of an EIS.

Eligibility for income tax relief is restricted to companies with which you are not ‘connected’ at any time during a period beginning two years before the issue of the shares and ending three years after that date, or three years from the commencement of the trade if later.

As the Enterprise Investment Scheme requirements are continually subject to change, it is essential for you to contact a chartered accountant or tax specialist in order to ascertain whether your business is eligible.

 

What are the benefits of Enterprise Investment Schemes?

EIS investments benefit businesses by providing a larger incentive for investors, allowing businesses to access funds they may not have been able to without the scheme. These funds can go towards the growth and development of the business, helping to provide longevity in industries that may not already be well-established.

 

How Edwards Accountants can help

The EIS is subject to a number of rules, which are designed to ensure that investors are not able to obtain the full benefit of EIS reliefs if they receive value from the company during a specified period. If relief has already been given, it may be withdrawn. At Edwards Accountants, we can help you navigate these rules.

We have considerable experience in helping companies ensure that they are compliant in order to apply for the EIS. The EIS may be a useful way of attracting funds at a time within your company where it may be difficult to do so.

If this is something you would like to know more about, please contact our team today.

 

Get in touch with a specialist: