Enterprise Investment Schemes (EIS) is a way to boost financial support to early-stage companies. EIS schemes offer various tax benefits and capital growth opportunities to high-net-worth investors in exchange for supporting the companies financially.

You can invest in EIS schemes by exploring various EIS funds managed by a multitude of fund managers. You can either consult a financial advisor for guidance, or based on your eligibility, weigh the available choices and select the one that best suits your preferences.

EIS funds offer several tax benefits to high-net-worth investors. However, it is important to note that these benefits are subject to specific conditions and holding periods.

1. Income tax relief – You can claim 30% of income tax relief on the investments in EIS funds, provided it is held for at least three years.
2. Capital gains tax exemption – Any profits made from selling EIS shares are tax-free.
3. Capital gains deferral – Investors can defer capital gains tax on profits from selling other assets by reinvesting those gains in EIS funds.
4. Inheritance tax relief – Inheritance tax is exempted if EIS investments are held for at least two years and still held at the time of death.
5. Loss relief – Investing in high-risk, small, unquoted companies carries inherent risk. So if things go unplanned, you can claim loss relief on the investment made.

Remember that these tax reliefs depend on your individual situation and may change, so consulting a financial advisor is a good idea.

Income tax relief can be claimed after shares are allotted and you receive your EIS3 certificate from the company in which you have invested in.

Yes, EIS investments can help reduce your capital gains tax liability. When you sell your EIS shares after holding them for the required period, you may be eligible for exemption of capital gains tax on any profits made from that investment.

You can carry back EIS tax relief to the previous tax year in certain cases. This may provide you with an opportunity to apply the relief retroactively and optimise your tax situation. However, specific rules and limitations apply, so it’s advisable to consult with a financial advisor for guidance.

To qualify for all the tax reliefs, eis investment needs to be withheld for a minimum of three years. Usually, EIS investments are illiquid in nature and may require a commitment of three to seven years.

A knowledge-intensive EIS fund invests in Knowledge-Intensive companies – a status given by HMRC. Knowledge-intensive companies highly focus on research & development activities, intellectual properties, etc. Thus KI EIS funds invest in companies focused on R&D activities and innovation.

Investing in a Knowledge-Intensive EIS fund offers an opportunity to support highly innovative companies involved in developmental activities. In addition to this, there are added tax benefits to a regular EIS fund, which are discussed in the next question.

Investing in Knowledge-Intensive EIS funds has several added benefits over regular EIS funds. Common Benefits (shared with regular EIS) Similar benefits in EIS Added Benefits of investing in Knowledge-Intensive(KI) EIS funds. 

1. Higher Investment Limit – You can invest up to £2 million per tax year, which is higher than the £1 million limit for a regular EIS fund.
2. Greater tax predictability – Shares in KI EIS funds are issued on the fund’s closing date rather than deployment which ensures greater tax predictability.
3. Carry-back tax relief – In addition, there is a surety on Carry-back tax relief to the previous year due to the fixed closing date of the funds.
4. Hassle-free Certificate – A single EIS5 Certificate rather than multiple EIS3 certificates in regular EIS funds to claim income tax relief.

Investing in small, unquoted companies is usually of high risk but with necessary due diligence and with a trusted partner you can mitigate your risk. But note that – Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you are unlikely to be protected if something goes wrong. Take 2 mins to learn more.

To invest in a knowledge-intensive EIS fund, please visit o2hventures.com/funds, explore the available investment opportunities, and reach out to our team for the guidance and to know more.