The Enterprise Investment Scheme
In the share offer document for our third share offer we outlined the opportunity for those who had invested before 30 November 2015 to benefit from the Enterprise Investment Scheme (EIS). This is a government-backed scheme designed to encourage investment in smaller companies.
To qualify for EIS, an investor must be an individual registered for tax in the UK.
EIS provides a number of benefits:
- Income Tax relief is available at 30% of the sum invested. So, for example, a person investing £10,000 who has a personal tax bill at the end of the year of say, £5,000, would be able to claim back £3,000.
The tax can be reclaimed against tax paid in the tax year the shares were purchased or the previous tax year. The tax relief is restricted to the amount of tax the tax payer has paid in the relevant years. If you have paid little or no tax you will receive little or no tax relief.
- Once the shares have been held for at least two years they are designated as ‘business property’ for the purposes of Inheritance Tax. This means they are 100% exempt from IHT.
- Capital Gains Tax Deferral. If a taxpayer has a capital gains tax liability, taxable gain can be deferred by having reinvested an equivalent amount in this BEC share offer.
With EIS, investors must keep their shares for three years from date of issue for the tax relief to be retained. For further details about the scheme, please contact your financial advisor or visit the HMRC website www.hmrc.gov.uk/eis
How to claim EIS Relief
This is a three step process:
1. BEC applies to HMRC for EIS, and includes details of qualifying investors who have subscribed for shares in the company. Once HMRC has authorised the application, it sends BEC a “Form EIS3” for each investor. This is essentially a certificate that sets out the amount invested and states that the investment is eligible for tax relief. BEC receives these forms generally 4 -6 months after the initial investments were made.
2. BEC sends the EIS3 forms to each investor.
3. The investor uses the information in the EIS3 to make their claim for tax relief. This is done in one of two ways:
a) Investors who normally complete a tax return make their claim on their tax return.
b) Investors who don’t normally complete a tax return make their claim by completing an additional section in the EIS3 form, and returning that part to HMRC.