Editing Enterprise Investment Scheme (section)

==Purpose==
Investment in companies that are not listed on a [[stock exchange]] often carries a high risk of loss of capital, and low [[liquidity|market liquidity]] means that it may be difficult or time consuming to sell or realise the investment. The tax reliefs available under the EIS are intended to offer investors some incentive to counterweigh those risks.<ref name=":0" />

===Provision of tax relief===

The EIS offers several different kinds of tax relief, available both to direct investors and investors through a managed EIS fund or portfolio service. They are conditional upon the company receiving investment being a qualifying company under the scheme.<ref name="Introduction to EIS - gov.uk">{{cite web|title=Introduction to the Enterprise Investment Scheme|url=https://www.gov.uk/government/publications/the-enterprise-investment-scheme-introduction/enterprise-investment-scheme|website=gov.uk|accessdate=17 January 2017}}</ref> A brief summary of the tax benefits is as follows:

* 30% up front [[Tax_rates_in_Europe#United_Kingdom|income tax]] relief, which can be carried back to the previous tax year. The maximum subscription is currently £1,000,000 per investor per year (this rises to £2,000,000 per year if the companies are deemed 'knowledge intensive'), yielding a potential reduction in tax liability of £300,000 per annum (assuming the investor has sufficient income tax liability).<ref>{{Cite web |date=2023-05-25 |title=Tax relief for investors using venture capital schemes |url=https://www.gov.uk/guidance/venture-capital-schemes-tax-relief-for-investors |access-date=2023-05-26 |website=GOV.UK |publisher=HM Revenue & Customs |language=en}}</ref><ref>{{cite web|url=http://www.ft.com/cms/s/2/2616e96e-5557-11e0-87fe-00144feab49a.html#axzz1SIAeMwts|title=Budget 2011: what it means for you|last=Powley|first=Tanya|author2=Vincent, Matthew |author3=Ross, Alice |author4=Lodge, Steve |author5= Moore, Elaine |date=23 March 2011|publisher=The Financial Times|accessdate=15 July 2012}}</ref><ref name="Introduction to EIS - gov.uk" />
* [[Capital_gains_tax#United_Kingdom|Capital gains tax]] (CGT) deferral – an investor can defer capital gains realised on a different asset, where disposal of that asset was less than 12 months before the EIS investment or less than 36 months after it. This relief is limited to the amount being invested into the EIS and can be claimed by investors whose interest in the company does not exceed 30%. It is available to individuals and trustees. Where gains arise on the EIS investment, taper relief is available.<ref>{{Cite web|first=Ajit|last=Singh|title=The Human Heath EIS: Capital gains tax relief |url=https://o2hventures.com/|website=o2h ventures}}</ref>
* No CGT to pay on any gains made when the investment is realised after three years (five years for investments made before 6 April 2000), provided the EIS initial income tax relief was given and not withdrawn on those shares.<ref name="Introduction to EIS - gov.uk" />
* Tax relief from investment losses – if EIS shares are disposed of at any time at a loss, such loss can be set against the investor's capital gains or income in the year of disposal, potentially limiting a total loss to 38.5% of an investor's capital<ref>{{cite web|url=https://www.wealthclub.co.uk/eis-tax-relief/|title=EIS tax savings|publisher=Wealth Club|accessdate=15 June 2017}}</ref>
* Shares do not form part of the estate for [[Inheritance_Tax_(United_Kingdom)|inheritance tax]] purposes, provided the investments have been held for at least two years at time of death<ref>{{cite web|last=|first=|date=|title=EIS|url=https://www.syndicateroom.com/eis|access-date=|website=SyndicateRoom}}</ref> and the company qualifies for business property relief (BPR).<ref>{{cite web|title=Enterprise Investment Schemes|url=http://www.enterpriseinvestmentschemes.co.uk}}</ref>