The Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs) provide valuable tax reliefs to encourage new investment in smaller trading companies.
When an individual subscribes for shares which qualify under the EIS they can obtain income tax relief at up to 30% on a maximum investment in the tax year of £500,000 (increasing to £1 million from 6 April 2012). Income tax relief is available at the same rate for investments in VCTs of up to £200,000 in a tax year. VCT investments have the added attraction of tax free dividends. Subject to meeting the relevant conditions, gains on the disposal of both EIS and VCT shares are free of capital gains tax.
EIS re-investment relief allows individuals to postpone the recognition of capital gains arising on the disposal of other assets when they re-invest the proceeds by subscribing for qualifying shares. There is no limit to the amount of re-investment relief.
Given how generous the reliefs are, it is not surprising that EIS and VCT investments are subject to complex rules.
If your company is looking to raise new funds, and would like to enhance your investment proposition by offering these reliefs, we can help you by:
- reviewing eligibility;
- advising on the conditions which will have to be met to avoid the withdrawal of relief;
- obtaining clearance from HMRC; and
- assisting with the administration required to enable investors to make the relevant claims.
If you are an individual who would like to shelter income and gains, we can advise you on your eligibility and the eligibility of potential investments. For more information please contact Jacquelyn Kimber or your nearest Moore Stephens business tax adviser.