Enterprise Investment Scheme (EIS)

By: Tim Haggard

Date: 7 October 2009

Start-ups, are you looking into angel investment as a finance option? You need to ensure you’re EIS compliant...

If you are raising capital for a start-up business and you plan to use angel investment, the investors will probably want to know whether the business will be EIS compliant.

The EIS is a government backed scheme that gives tax breaks to investors.

The benefits of investing in an EIS compliant business are principally two-fold:

  1. Investors get 20% of their investment back in the year they invest against their income tax bills
  2. If they hold the shares for 3 years, they will pay no Capital Gains Tax when they come to sell

There are a number of rules about the trade you will carry out and the investors who can make the claim. You accountant will be able to explain in more detail or take a look at the HMRC website for further information http://www.hmrc.gov.uk/eis.

If your planned start-up business ticks the boxes for EIS, make sure that you sell this to potential investors. The investors will feel more secure in the fact that it limits their downside risk and that they won’t have to pay capital gains tax when the business succeeds.

If I can help you further, I will - do get in touch.

Tim

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