10 October 2017 #Commercial
The Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) are schemes run by the government offering generous tax breaks to encourage SME growth and investment in such companies.
Needless to say, investing in smaller, unknown companies can generally be a riskier move than investing in household names, such as a social media giant or an international bank. Add this to the fact that selling off shares in a relatively unknown company a few years down the line is likely to make the decision to invest in such companies less appealing. Unless there might be some tax advantages, that is!
Provided certain criteria are met, the EIS helps SMEs raise finance by offering tax relief to those who invest in it by acquiring new shares. Investors can invest up to £1m in a tax year and receive 30% tax relief on their income tax liability.
By the same token, SEIS encourages seed investment in even smaller companies that need the kick start, and it provides even more generous tax reliefs than EIS. Under SEIS, Investors can obtain a tax break of 50% of an investment up to £100,000 and a capital gains exemption for any gains made on the shares when selling them on in the future.
Click here for a summary of the criteria and key points to note in EIS and SEIS.
Please note that the contents of this article are intended for guidance only. Specialist advice should be sought for your specific circumstances.