Longbow Capital LLP, the specialist venture investor urges investment advisers seeking end-of-tax-year planning strategies to consider the generous tax benefits and deferral reliefs offered by the Enterprise Investment Scheme (EIS).
As one of the few remaining tax perks open to investors, EIS has been classed the “the last great tax break” because of the depth of its tax benefits. EIS can offer opportunities for investors to mitigate across several different brackets including income tax, inheritance tax and capital gains tax, as well as providing generous CGT deferral relief which permit qualifying investors to carry forward tax liabilities.
Owing to enhancements made in a recent Budget announcement, investors can also carry back to the previous year 20% income tax relief on up to £500,000, effectively giving the investor £1,000,000 of relief across two years to a maximum of £500,000 in each year. With minimum investments as low as £10,000, EIS can offer a tax-efficient alternative to Individual Savings Accounts (Isas).
In summary, by investing in Inland Revenue approved EIS fund, investors can benefit from:
- 20% Income Tax relief on up to £500,000 invested in a single year or £1,000,000 of relief across two years.
- Tax-free gains on any profits with no limit on sum attracting 100% CGT relief.
- Capital Gains Tax deferral relief on gains generated up to three years before or one year after the EIS investment
- 100% Inheritance Tax exemption through 100% Business Property Relief (BPR) subject to a minimum holding or qualifying period of two years.
EIS was launched by the Government in 1994 to encourage private individuals to invest in UK companies focused on enterprise and innovation.
Attractive tax benefits reflect the investment risks inherent in such companies but although riskier than most traditional quoted investments, successful EIS companies also have the potential for strong growth and superior returns.
Julian Hickman, partner, Longbow Capital LLP, says:
“EIS offers a surprising collection of tax benefits and over a much shorter timeframe than a Venture Capital Trust. It is perhaps not surprising that over the last few years there has been a steady decline in VCT sales and the emergence of EIS in its place. ”
“We know that advisers are increasingly looking for places to mitigate their client’s tax and the attractive tax bundle and lower holding period make EIS an attractive proposition. There are a number of reasons that people could consider an EIS scheme, whether that’s someone who has exceeded their capital gains tax allowance for their year and wishes to defer their CGT bill or to invest in UK enterprise and innovation. As the Isa season approaches, EIS could also be a good option for an adviser seeking tax-efficient investments for their high net worth clients.”
';