You can apply if you are:
Along with the advantages, it's critical to comprehend the risks associated with investing in EIS-qualifying shares. Investing in smaller EIS-qualifying enterprises at an early stage is dangerous and should only be undertaken by investors who are willing to take big risks.
Here are some important things to consider before investing in EIS-qualifying shares:
It is likely that investments could drop in value, possibly losing some or all of your initial investment. This puts the capital of the investors at risk.
EIS shares are unquoted. This means the company cannot be listed on the London Stock Exchange or any other recognised stock exchange. The Alternative Investment Market (AIM) is not treated as a recognised market under EIS rules. This makes the shares harder to sell.
EIS tax reliefs need a three-year holding period from the date of investment in each company. However, investors should expect to keep their money for a long time, possibly ten years or more.
EIS tax reliefs and tax allowances are based on current legislation. The tax rules, as well as HMRC's interpretation of them, may evolve in the future. There's no certainty that the businesses in which you've invested will remain EIS-qualifying. You may be requested to refund the income tax benefit you received if the company loses its EIS-qualifying status within three years of your investment.
As an investor, you can invest up to £1 million per tax year in the EIS scheme. You can invest up to £2 million provided that anything above £1 million are 'knowledge intensive' investments.
No, you are not able to hold shares in an ISA according to the Enterprise Investment Scheme (EIS) rules.
Yes, you can transfer EIS shares to your partner if you are married. There is no tax to be paid if you give shares to your spouse. The spouse will be subject to capital gains tax when they sell the shares in the future.
The EIS relief can be maintained if the new company buys 100% of the company's stocks. There are, however, some requirements that must be met:
EIS investments come with a “carry back” option. You can elect to treat all or part of your EIS shares purchased in one tax year as if they were purchased in the prior tax year.
EIS has the potential for a higher, but longer-term return on investment, but it does not pay dividends on a regular basis.