Enterprise Investment Scheme (EIS) Relief Extended - Ad Valorem

Overview

The Enterprise Investment Scheme (EIS) was due to end in April 2025 however HMRC have recently confirmed that both of these schemes will be extended until April 2035. This is great news for new businesses which are looking for investment.

HMRC also announced an extension to the Venture Capital Trust (VCT) scheme until April 2035.

What is the Enterprise Investment Scheme (EIS)?

The EIS scheme was designed to encourage investment into new or young companies through tax-relief incentives, encouraging innovation, creating jobs and stimulating economic growth.

Investments qualifying for EIS relief receive a tax reducer of 30% of the amount subscribed on the first £1 million (or £2million in knowledge intensive companies) of investment in the tax year.

Additionally, provided the shares are held for at least 3 years, any later disposal at a gain is free of Capital Gains Tax, if the disposal is at a loss, this loss can be offset against the individual’s gross income, such as their salary, in the year of disposal.

The EIS scheme can help your business attract investment due to the tax relief the scheme offers. By seeking advanced assurance from HMRC that an investment will qualify for the relief, your company can use this badge of approval when pitching to prospective investors.

What investments qualify for relief?

There are a number of conditions which must be met in order for an investment to qualify for the EIS relief, both for the company and the investor.

Broadly, the company must be an unquoted trading company which is less than seven years old and carries out a qualify trade and meets various requirements as to it size such as number of employees and it’s gross assets.

The company cannot raise more than £5 million per year via the EIS scheme or £12 million in it’s lifetime.

For the investor, they cannot already hold shares which were not subscriber shares or acquired under the SEIS or EIS schemes. They also cannot usually be an employee or director of the company. Finally, they cannot hold over 30% of the shares in the company (including their spouse, business partners and certain relatives). 

How Can Ad Valorem Help?

Our tax team at Ad Valorem can support your business throughout the entire process of the EIS investment, from seeking advanced assurance from HMRC that the investment will qualify for relief right through to the issuing of the EIS certificates to the eligible investors.