United Kingdom
Enterprise Investment Scheme (EIS)
The Enterprise Investment Scheme aims to help unquoted companies attract equity investment by offering investors a range of tax incentives. AIM quoted and PLUS quoted companies qualify as well.
The EIS was introduced in 1994 to encourage individuals to invest in unquoted trading companies by offering tax reliefs. The EIS allows a company (a ‘qualifying company’) that meets certain conditions to raise funds by issuing full-risk ordinary shares to the individual investors previously unconnected with the company. It is particularly suitable where the investment project is risky, as the maximum a higher-rate taxpayer can lose is 48% of their investment. It also allows individuals to be paid directors in the companies in which they invest and yet retain the tax reliefs, provided certain conditions are met.
For all its advantages, the EIS has one major flaw – it is a highly complex set of tax laws.
EIS qualifying companies must:
- Be unquoted – although AIM and PLUS Quoted companies do qualify
- Be independent
- Have gross assets of less than £7m before the EIS share issue, and £8m afterwards
- Have less than 50 employees
- Raise no more than £2m per year from a combination of the EIS, venture Capital Trusts and the Corporate Venturing Scheme
- Be trading companies – though certain types of trade are prohibited. See The Enterprise Investment Scheme for details
We can help your company attract equity investment by guiding you through the minefield of tax legislation, helping you obtain Advance Approval from HM Revenue & Customs and dealing with the compliance side of the process.
Click here for details of the tax reliefs available under the EIS.
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To find out more you can also contact your local BDO adviser.