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Funds – EIS

What is the Enterprise Investment Scheme?

The UK government introduced the Enterprise Investment Scheme (EIS) in 1994 to encourage investment in riskier small companies. Investors in the scheme can get a range of tax benefits, including relief from income tax, inheritance tax and capital gains tax. In addition, any losses can be offset against earnings and/or capital gains, which is known as loss relief.

What are the benefits of investing in an EIS?

  • Access to investments in early-stage companies
  • 30% income tax relief, provided investment is held for a minimum of three years
  • Potential for 100% relief on inheritance tax (available after holding investment for two years provided shares are still held at time of death)
  • Opportunity to defer a capital gain and eliminate it entirely if EIS shares are held at death

What are the risks?

We always recommend you seek professional financial advice before deciding to make any investment. The risks and uncertainties described below may be considered material risk factors facing an investor:

  • Investment value can fluctuate: EIS-funded companies are high-risk. The value of any investment can rise or fall and you might not get back as much as you invest.
  • Smaller company shares can be more volatile: The shares of the smaller companies we invest in could fall or rise in value more than shares listed on the main market of the London Stock Exchange. They may also be harder to sell.
  • Long-term investment: If you sell your EIS shares before the three-year minimum holding period ends, you will have to repay any income tax relief you have claimed. So you should think of an EIS as a long-term investment. It may also be difficult for you, or a fund manager, to find a buyer for your shares in the future. Often, the companies that an EIS invests in aren’t listed on a stock market, so you may have to wait until the company is sold or has large enough cash reserves to buy back its shares from investors.
  • Status may change: The degree to which you can benefit from the EIS tax reliefs will depend on your particular circumstances. There is no guarantee that companies will always be EIS qualifying. If a company no longer qualifies for an EIS, you may have to repay any tax relief claimed. HMRC may also change the rules on EIS tax relief in the future.

For more information, please see our product brochure and guides. These, and our website content, are not intended to constitute investment, tax or legal advice. In addition, please read our Guide to risk. If you are still unsure about this type of investment, please speak to a financial adviser.

Please note that the comments above are for illustrative purposes only and any tax benefits are not guaranteed. Please seek independent tax advice. Taxation depends on individual circumstances

Our EIS Product

The Colman Equity EIS – invests in smaller, unquoted UK companies which have the potential for significant capital growth.

Want to find out more?

If you would like a copy of the Colman Equity EIS brochure and application form, or if you would like to find out more about our EIS or other tax-efficient investment products or investments you already hold with us, please call 028 41798123 or email clientrelations@colmanequity.com. Further information about EIS funds can be found on the HMRC website.

 

Our products place your capital at risk and you may not get back the full amount invested. Tax treatment may be subject to change and depends on the individual circumstances of each investor. The availability of tax reliefs also depends on the investee companies maintaining their qualifying status. Neither past performance or forecasts are reliable indicators of future results and should not be relied upon. Unquoted or smaller company shares are likely to have higher volatility and liquidity risks than other types of shares quoted on the Main Market of the London Stock Exchange. Website content is not intended to constitute investment, tax or legal advice. We recommend you seek independent advice before investing in our products. Colman Equity is an Appointed Representative of Sapia Partners LLP, a firm authorised and regulated by the Financial Conduct Authority (FCA). (Reference number: 728727).

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