The Enterprise Investment Scheme (EIS) was designed as an incentive to encourage investment in high risk companies. EIS companies work in a number of industries. Currently open EIS opportunities include Power Amp Music EIS Fund and Ultimate Media Fund.
The scheme offers a number of tax breaks for those who choose to invest in EIS companies, all of which are unquoted – that is, not listed on a stock exchange. So, what reasons might one have for investing in an EIS company?
For investors with a stake in an EIS company of below 30%, they can reduce the amount of income tax they are liable to pay. Where an investment has been held for three years, the reduction in tax liability reaches 30% of the EIS investment.
The finer workings of EIS investment and the tax breaks investors are given by the government vary and are complicated at the best of times. Generally, however, investors can expect to be exempt from paying inheritance tax when they have held the EIS investment for two years or more.
Capital Gains Tax
The list goes on: Capital Gains Tax on assets disposed of within a fixed amount of time either side of the time of investment are deferred. There is no limit on the amount of gains to which this rule applies. Investors will essentially receive tax free capital gains should they choose to invest in an EIS company.
As well as all of the tax you can avoid by investing in an EIS company, investors can expect all of the regular benefits to investments. With such encouragement and governmental backing, many EIS companies are thriving. Investing is EIS companies can therefore not only save you money in tax breaks, but can make you a sum through profit.
The Time Is Right
On the right side of a recession, the UK economy is now looking for growth and recovery seems closer than it has done for a while. Given the current economic conditions, funding for small businesses is not easy to come by. Where growth is key and investment hard to find, investors will find themselves in a great position. This is now.
While all of these tax breaks might seem very attractive, investors should remain aware of the risks. Tax is key to the running of the country and governments are usually reluctant to create breaks. The breaks are, however, designed to off-set the high risk often involved in investing in these sorts of companies. Potential investors should seek professional advice from firms such as CSS Partners. While the tax breaks are maintained across all EIS companies, the risk will inevitably vary from one to another.
This article on the investment in EIS is brought to you by CSS Partners. CSS Partners assist investors with key investment decisions, such as involvement with EIS companies. For more information regarding their financial services, take a look at their web page.