ENTERPRISE INVESTMENT SCHEMES
A direct investment in an unquoted company which satisfies certain
criteria to do with size and type of trade carried on. In return for
keeping the shares for three years, investors receive tax benefits.
Changes were made to the EIS from 6 April 1998 when the EIS and the
reinvestment relief scheme were combined. Subsequent changes have
improved the relief available.
Tax Benefits: The new EIS offers investors four tax benefits:
20% Income tax relief on new ordinary shares up to 400,000 per tax
year. Shares must be held for three years. Relief is against the tax
liability in the year the shares are issued but part can be carried to
the previous year for shares issued before October 6.
Exemption from capital gains tax for any gains made on EIS qualifying
shares held for three years or more.
Loss relief against income or capital gains for losses made on
disposing of qualifying EIS shares after three years.
Unlimited capital gains tax deferral. CGT on gains can be deferred if
the EIS share subscription is made within one year before or three
years after the date of disposal which gave rise to the gain. Only
400,000 of investment per tax year qualifies for income tax relief and
exemption from CGT on disposal.
NOTE:
Dividends are not tax free
Exit is via trade sale, flotation or liquidation.
Qualifying companies must have gross assets of no more than £7m
immediately before investment.
Since 6 April 2004 , VCTs no longer provide CGT deferral. Hence, EIS
is, for most investors, the only means of deferring capital gains tax
liabilities.
How It Works:
The combination of income tax relief and CGT deferral works as
follows:
|
EIS share investment |
10,000
|
|
Less income tax relief at 20% |
(2,000)
|
| Less CGT
deferral at 40% |
(4,000)
|
|
Net cost |
4,000
|
In effect the taxman gives an interest-free loan of the CGT which is
payable when the EIS shares are sold.
ENTERPRISE INVESTMENT SCHEMES PORTFOLIOS
A discretionary portfolio service run by a fund manager and investing
in shares qualifying for EIS reliefs.
Aimed at investors with large capital gains to shelter. Investor
receives tax relief at point of investment by the fund manager in
stocks.
ENTERPRISE INVESTMENT SCHEME (APPROVED)
A fund run by a fund manager and investing in shares qualifying for
EIS reliefs.
Aimed at investors wishing to build up an EIS portfolio but not
wishing to stock pick themselves. An offering that offers tax relief in
the year of investment by the investor; the fund then has six months
in which to invest 90% of the sums raised in qualifying companies.
Investors who are interested in investing in an EIS product are
advised to contact us on 0800 - 33 99 99, or to
send an e-mail to
us requesting more information
|
Current
VCTs