- Income Tax Rebate - Inheritance Tax Relief - C.G.T. Deferral -
No Capital Gains Tax to Pay on Growth in Value of Your Shares
An Enterprise Investment Scheme lets you to mitigate your tax liabilities by buying shares in a company that has received EIS approval from HM Revenue & Customs.
As a UK tax payer, you can claim back 30% Income Tax by an HMRC approved EIS.
£3,000 Income Tax back for every £10k invested in an E.I.S.
There are limits...£1million*; returning £300,000 of Income Tax that you've already paid. More than enough for most of us...so browse these pages to learn about EIS.
Income Tax Relief is claimed as a rebate through your Self-Assessment tax return. When Form EIS3 is issued by the company simply forward it to Revenue & Customs.
E.I.S. approval status transforms a business into a compelling share purchase for people who pay too much tax.*42.85% total return on investment is generated by virtue of tax relief alone. This is equivalent to an annualised compound return of 12.62% p/a when the E.I.S. shares are sold on for the same price after just 3 years. Investors should gauge the likely market for their mature EIS shares and favour firms with a credible investor exit strategy. This could be a Staff Share Purchase Plan providing incentives for employees to buy shares because their bonus pay is linked to dividend values.
* Dividend income boosts this exceptional 42% return on your investment *
Growth is free of CGT, so for yet more Income Tax back, recycle your investment. To roll over an EIS shareholding, there needs to be a viable 'investor exit strategy'. If so, you may get a 30% tax rebate...on the same capital...every 3 years !!
Enjoy On-Shore tax breaks with an Enterprise Investment Scheme Roll-Over...
By investing the proceeds from other gains into an EIS, you'll benefit from unlimited Capital Gains Tax deferral until you sell the EIS shares. Deferral relief is unlimited on a previously realised asset. It can be claimed by both individuals or trustees whose interest in the invested company exceeds 30%. There is a 4 year 'window of opportunity' for an investment in EIS to defer a gain.
And you benefit from Inheritance Tax relief on your investment after just 2 years. EIS shares generally qualify for Business Property Relief for IHT purposes. Nor is there any claw-back of Income Tax or Capital Gains Tax deferral relief upon death.
Free of CGT and IHT
Enterprise Investment Scheme shares must be held for at least 3 years to retain all tax concessions. The company must also continue to qualify during this period.
An Enterprise Investment Scheme also permits an investor to participate in the running of a business and to receive reasonable remuneration from it.
An investor cannot be 'connected' to a company by owning more than 30% of it. A trading relationship is allowed, provided that transactions are not on terms better than for other customers.
For instance, an investor purchasing office products for their own business could buy from a company in which they hold less than a 30% shareholding. This could be on 60-day credit, or even on a consignment stock basis, if those terms were available to other customers. Prices have to be competitive to ensure compliance.
As a minority shareholder, you can be paid as a Non-Executive Director of a firm that supplies to your other business...and benefit from EIS tax reliefs.
Recently, Tax Tribunals have decided against at least two taxpayers, resulting in EIS relief being withdrawn. These HMRC cases (Skye Inns and Benson Partnership) illustrate why it is prudent to invest in a business that has a 'weather-eye' on all matters pertaining to Enterprise Investment Schemes...a company like Accolade!
Even a failed EIS investment attracts favourable Income Tax and CGT treatment; tax payers @ 40% risk 42% of the sum invested; those on 50% tax only 35%. An E.I.S. loss can be set against CGT liability or Income Tax due in year of disposal.
An Enterprise Investment Scheme is by far the best way of exploiting tax breaks
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