Enterprise Investment Scheme (EIS)
Direct investment into qualifying smaller UK companies with 30% income tax relief, CGT exemption after 3 years, CGT deferral, and loss relief. Very high risk but generous reliefs.
How It Works
You invest directly in qualifying small companies or through an EIS fund. You get 30% income tax relief. If it succeeds, gains are CGT-free after 3 years. If it fails, claim loss relief against income tax. You can also defer other capital gains by investing in EIS.
Tax Treatment
30% income tax relief. Gains CGT-free after 3 years. Losses can offset income tax. Existing capital gains can be deferred by reinvesting into EIS.
Tax Advantages
- 30% income tax relief on up to £1m per year
- Capital gains are CGT-free if held 3+ years
- Loss relief against income tax if the company fails
- CGT deferral on gains reinvested into EIS
Who Is This Suitable For?
Sophisticated investors and high earners comfortable with individual small company risk. The combination of reliefs provides substantial downside protection.
Frequently Asked Questions
EIS vs VCT?▾
EIS is direct investment (higher risk/reward), VCTs are diversified funds. EIS offers loss relief and CGT deferral. VCTs offer tax-free dividends. EIS limit is £1m/year vs £200k for VCTs.
Can I invest in my own company?▾
Generally no. You cannot claim EIS relief if you own more than 30% of the shares or are an employee/director.
What is knowledge-intensive?▾
Companies spending 15%+ of operating costs on R&D with significant IP. These have a higher £2m annual EIS limit.