Congratulations to Springfield Director, Vanessa Townshend, and Chartered Financial Planner, Phil Rogers, who have recently taken and passed the EIS Diploma course – a specialist qualification focusing on Enterprise Investment Schemes and Seed Enterprise Investment Schemes.
What is an Enterprise Investment Scheme?
An Enterprise Investment Scheme (EIS) is designed to encourage investment in small growing businesses.
The main attraction for the government is the contribution that small businesses make to the UK economy, by creating jobs and generating tax, whilst the main attraction for investors is the chance to invest in the newest and most exciting businesses, all with the added benefit of tax relief.
Since EIS was launched in the 1993-94 tax year, 26,355 individual companies have received investment and almost £16.2 billion of funds have been raised.
What are the benefits of investing in an EIS?
- Up to 30% income tax relief is available, either against the current year’s tax bill or last years via a carry back facility.
- Ability to defer capital gains made elsewhere, by investing these in an EIS
- Loss relief – if EIS investments don’t work out, it’s possible to offset the losses against income or capital gains tax
- An investment made in an EIS will be free from inheritance tax, if the EIS is held for at least two years and you still hold it on your death.
Whilst the tax advantages are significant, the decision to invest in an EIS should be based on the merits of the investment itself, rather than just the tax benefits.
To retain the tax benefits of an EIS, you need to hold it for at least three years and the investment must remain qualifying.
Who might consider investing in an EIS?
EIS are suitable for investors who are not reliant on the amount that they invest and who are able to tie up their capital for the longer term. It’s also imperative that you must be able to accept the risk as you could lose some or all of your investment!
Some typical EIS investors may include those clients:
- with a large income tax bill
- who are affected by the reduced pension contribution and lifetime allowances
- who have sold a business, investment property or shares and want to defer paying tax on a capital gain
- who have received a tax-free lump sum from a pension and want to reinvest that lump sum and obtain further tax relief
Get in touch to find out more about our range of financial planning services
For further information and advice on investing in an EIS, please contact Vanessa or Phil on 01772 729742 or fill out our online enquiry form.