The Enterprise Investment Scheme: What It Is & How You Can Benefit?

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The UK government introduced a new investment scheme in 1994 to boost investment in emerging businesses, and they named it the Enterprise Investment Scheme. It was created to help upcoming and emerging companies to attract investment by offering investors some excellent benefits. It may not be an ideal investment vehicle for everyone, but it is worth investigating if it suits your investment portfolio. Below is some more information about this scheme and its benefits that may interest you and want to find out more.

Some Benefits Of Investing In An EIS Scheme

A significant benefit of this type of investment is the EIS tax relief you can enjoy when choosing this type of investment, and you can enjoy 30% tax relief on your investment, making it appealing to many investors. You will also enjoy not having to pay capital gains tax on your investment profits, and you can also defer previous capital gains. If your investment turns sour, you can also offset your losses against your earnings, offering investors some protection on their investments. You can also bequeath your investment in your will, and the recipient will not have to pay inheritance tax on the investment, making it an excellent heirloom.

Some Rules & Requirements

There are stringent rules in place for businesses to qualify for the EIS scheme, and there are some industries which cannot take advantage of it, including:

  • Hotels
  • Property Development
  • Coal & Steel
  • Energy
  • Farming & Forestry
  • Banking
  • Legal
  • Insurance

Any company that wants to take advantage of this scheme must be based in the UK, and they are not allowed to trade on any of the recognised stock exchanges. Before the share issue, the company is not allowed to have more than £15 million in gross assets and must have fewer than 250 full-time employees or the equivalent. For those companies that qualify for this scheme, it can be an excellent way of raising funds and taking their business to the next level for the benefit of their shareholders.

Getting Involved In The EIS Scheme

You can get involved with this type of investment in a couple of ways, and you will need to consider which one you prefer. The first way is to make a direct investment in your chosen company and see how you get on and how successful it is. The second way is to pool your money with other investors and use a specialist fund manager to manage the investment for everyone.

You can invest up to £1 million each year in an EIS scheme, but this can go up to £2 million if you invest in ‘knowledge intensive’ investments. You will want to take financial advice before rushing into this type of investment and get the opinion of a financial expert as to what you are best to do. They may have some different EIS opportunities you are unaware of, and they can help you make a sound financial decision that will benefit your financial portfolio and hopefully be profitable for you.

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