The Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS), and Venture Capital Trusts (VCTs) are all investment schemes in the UK designed to encourage investment in small and early-stage businesses by providing various tax incentives to investors.
Each scheme targets different stages of business development and offers various advantages, but below are some common benefits that sit across all three schemes:
Tax Incentives: Investors can receive substantial income tax relief on their investments, making them more attractive.
Capital Gains Tax Relief: Gains from the sale of shares in qualifying companies are typically exempt from capital gains tax.
Inheritance Tax Benefits: Under certain conditions, shares held for at least two years may be exempt from inheritance tax.
Support for Growing Businesses: By attracting investment, these schemes help small and growing businesses access the capital they need to expand and create jobs.
So, how do you know which scheme is right for you? To help clarify, we’ve detailed the specific criteria associated with each one alongside the different individual benefits below:
Enterprise Investment Scheme (EIS):
Company Essentials:
- UK-based.
- Not listed on a recognised stock exchange.
- Not have gross assets exceeding £15 million before the investment and £16 million after the investment.
Investor Benefits:
- Income Tax Relief: Investors can receive income tax relief of up to 30% on the amount invested (up to a maximum annual investment of £1 million).
- Capital Gains Tax Relief: Gains from the sale of EIS shares are usually exempt from capital gains tax.
- Inheritance Tax Exemption: Shares held for at least two years may be exempt from inheritance tax.
Seed Enterprise Investment Scheme (SEIS):
Company Essentials:
- UK-based.
- Not listed on a recognised stock exchange.
- Have gross assets of £200,000 or less before the investment.
Investor Benefits:
- Income Tax Relief: Investors can receive income tax relief of up to 50% on the amount invested (up to a maximum annual investment of £100,000).
- Capital Gains Tax Relief: Gains from the sale of SEIS shares are usually exempt from capital gains tax.
- Inheritance Tax Exemption: Shares held for at least two years may be exempt from inheritance tax.
Venture Capital Trust (VCT):
VCT Essentials:
- VCTs must invest in a portfolio of smaller, unlisted companies.
- At least 85% of income must be distributed to shareholders.
Investor Benefits:
- Income Tax Relief: Investors can receive income tax relief of up to 30% on the amount invested (up to a maximum annual investment of £200,000).
- Tax-Free Dividends: Dividends received from VCTs are usually tax-free.
- No Capital Gains Tax on VCT Sales: Gains from the sale of VCT shares are usually exempt from capital gains tax.
Overall, there are lots of options to consider – many more than we’ve listed here, so it’s essential to seek financial advice before pursuing an investment route.
The specific requirements and benefits of these schemes can also change over time, so always speak to an expert for the most up-to-date information and guidance.
At Bernard Rogers & Co, we can assist your company with EIS and SEIS advanced assurance as well as with the application itself.
Get in touch to find out more.
