EIS guide

72 73 CASE STUDIES PROVIDERS IN FOCUS 1. High growth investment • £18bn invested in 28,000 companies • ‘Risk-to-capital’ requirement means focus in on investments with higher growth and risk potential 4. Rules for EIS investors • Minimum three year holding period • Shares must be full risk, new ordinary shares • No connected parties (for income tax relief) • No linked loans from the investee company • No receiving value from the investee company 2. Potential tax benefits • Up to 30% income tax relief • 100% CGT deferral relief • 100% IHT relief (via Business Relief) • Tax-free capital growth • Loss relief 3. Potential risks • Investment risk of smaller companies • Liquidity • Exit risk • Tax risks 6. Knowledge intensive companies • Benefit from more generous rules • £20m lifetime investment raise limit • £10m per company per year investment limit • 499 employee limit for investment company • 10 year age limit Final summary 5. Rules for EIS investee companies • £5m per company per year investment limit • £12m lifetime investment raise limit • £2m per year per investor limit (provided any amount above £1m is invested into knowledge-intensive companies) • 249 employee limit for investment company • 7 year age limit • Unquoted (other than AIM) • Qualifying trade GUY TOLHURST MANAGING DIRECTOR, INTELLIGENT PARTNERSHIP Closing Statement EIS celebrates its 25th birthday in 2019. It has changed importantly over recent years, most notably through the risk-to-capital condition introduced in the Autumn Budget 2017, which has refocused the market onto those investments that are at the riskier end of the spectrum. The latest government figures suggest resilience, with continued growth in investments for 2017-18. However, beneath the headlines, there are signs that the rule changes are beginning to leave their mark, with fewer advance assurance applications in 2018-19 than the previous year. The strong growth of previous years could see a slowdown when the next set of government figures are published. This does not mean that EIS should move to the margins of tax-efficient investment options. With a growing number of clients considering their investment options, advisers now more than ever need to be aware of the risks involved in EIS investments, while at the same time being cognisant of the potential benefits that they can offer to the right clients. I hope you have found that this guide has set the EIS regime in that context and provided a useful explanation of some of the basics that need to be considered when looking at these types of investment opportunities. While it will not be suitable for every client, EIS offers a potentially attractive option that plays to investors’ desire to combine the potential of higher growth and beneficial tax treatment, while at the same time supporting small businesses. We at Intelligent Partnership passionately believe that equipping advisers with the tools to support their clients is a vital cog in helping investors find appropriate homes for their money, in a way that can help small businesses across the country to grow and prosper. To that end, we provide a variety of guides and reports covering not only EIS but also markets such as Business Relief and Venture Capital Trusts, which together can provide advisers with a well-rounded basis on which to support their clients. FINAL SUMMARY