Tax Benefits
Allen & Atherton can give you excellent advice on how to best utilise the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) schemes according to your specific circumstances.
The EIS has been created to help small companies gain funding by offering a tax relief incentive to any investor who purchases new shares of these types of companies. The VCT scheme allows investors to minimise risk by spreading their investment over a number of companies.
The VCT scheme works by allowing investors to subscribe for shares in VCTs. VCTs are companies listed on the London Stock Exchange. These are similar to investment trusts. Fund managers, who are usually members of larger investment groups, run these VCTs. These trusts sometimes realise investments and make new ones. To subscribe for shares in a VCT, individuals may now do so via a nominee.
Allen & Atherton can give you bespoke solutions on how to effectively take advantage of these government schemes. Below is an overview of the five current tax reliefs available for companies qualifying under the EIS.
Any amount invested on shares held for a minimum of three years is eligible for a 30% income tax relief. If the investor becomes a “Connected Person” or the company no longer qualifies for the EIS within three years of the shares being issued, then the maximum income tax relief can be withdrawn.
Any capital gains realised on EIS investments held for at least three years are exempt from taxation.
There is no limit on the investment amount for CGT deferral, as long as the investment into the other EIS company is made 12 months before and ending 3 years after the date of the disposal subject to CGT.
Inheritance Tax can be avoided, providing the shares were held at the time of the holder’s death and they’ve held it for at least two years.
Should your investment in EIS-eligible companies result in a loss after disposal, your losses can be offset against both income tax and capital gains tax.
