Residents of the UK who are looking forward to starting a new business or who have been working in the initial stage with 250 employees working in their team should read about EIS. EIS is a famous scheme in the UK known for helping small to medium businesses attract potential investors who in turn can get tax relief. It is not a scheme meant for accumulating venture capital but allowing more investors to invest in your company’s shares and find relaxation in tax.
Before you look for applying in the scheme, here are certain crucial points you should keep in mind for better understanding. Keep reading below:-
What Is EIS?
EIS or Enterprise Investment Scheme is a special scheme launched by the UK government for encouraging small to medium enterprises to grow themselves. The scheme allows both individual investors as well as corporate investors to invest in the businesses under this scheme. While the former is eligible for gaining tax relief via scheme the latter is not. The program is meant to help the people running riskier businesses find certain benefits and stability. Through the plan, the business can attract more investors since the investors can get tax relaxation. It is important to keep in mind,
Below are listed some of the major features of the EIS scheme:-
- The company should have trading experience of a maximum of 7 years
- The maximum number of staff should be 250 or 500 for KIC
- Maximum investment= £12m or £20m for KIC
- Corporate Investors can invest in your company but they will not gain any tax relaxation
- Loss relief is provided
- Initially, you can expect 30 per cent tax relief
Eligibility For EIS
For applying for the Enterprise Investment Scheme, your business must be in its initial period with a maximum of 7 years of the trading period. It should be based in the UK. The company should be existing on its own or it should not proffer more than 50 per cent shares for another company. Also, the company should not have gross assets of more than £15 million at the time of issuing of shares. Accumulated funds under EIS should be used within two years.
Benefits Of EIS
There are certain benefits of EIS. The best benefit includes gaining 30 per cent income tax relief in the initial period on investment. Investors can balance any losses incurred against their earnings in any case the business fails. Thereby the EIS offers the most suitable position for investors to come and invest in their favourite budding business and support them further.
In addition, on investing in a said business, the investor can also get exemption from paying any kind of capital gains tax for the profits gained when those shares are sold in the future.
EIS is a very beneficial program for budding businesses to help them grow more and take risks. At the same time, one should read all the given points to get a better sense of clarity and more benefits.