The Enterprise Investment Scheme ('EIS') allows small and medium-sized companies to raise capital by allowing them to attract external investors, up to a maximum of a 30% shareholding, who in return will obtain income tax relief of 30% of their investment. Investors can dispose of their shareholding after three years completely free of capital gains tax.
Changes to EIS are to be introduced from 6 April 2012, assuming that state aid approval can be granted. These are intended to ensure that larger businesses will be able to attract EIS and VCT funds. The key changes are:
- The employee limit will be raised from 50 to 250, to bring the EIS rules in line with the EMI limit
- The gross asset threshold - which is tested before an investment is made - will be increased to £15m - at the moment the limit is £7m
- The maximum amount which can be invested into a company will be increased to £10m
- The annual amount which an individual can invest in an EIS company is doubled from £500K to £1m
The Government is also proposing to introduce a new scheme (Business Angels Seed Investment Scheme - BASIS) aimed at smaller companies and start ups. A consultation is currently underway to consider what this should include.
Sterling Partners tax can help you:
- Structure the business so as to satisfy EIS criteria
- Understand the minefield of tax legislation
- Obtain advance approval from HM Revenue & Customs
- Deal with the compliance side of the process
