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The Enterprise Investment Scheme (EIS) is designed to help smaller higher risk companies raise finance by offering a range of tax reliefs to investors.

Under the EIS, tax relief is available to individuals who subscribe for shares in an EIS company. Income tax relief is given at a rate of 30% on the cost of the shares, subject to a maximum investment of £1,000,000 per person per year. The shares must be fully paid up. The income tax relief is therefore worth up to £300,000 to the investor. The investor can also benefit from capital gains tax and loss reliefs.

Although an individual connected with the company cannot generally obtain income tax relief on the purchase of shares, the EIS helps companies raise finance. For the relief to be available to investors, the company that issues the shares must meet certain conditions regarding the type of company that it is, the trading activities that it carries on, the amount of money it raises and how that money is used. HMRC’s Small Company Enterprise Centre can advise a company whether it meets the conditions for a qualifying EIS company.

Becoming an EIS company can help a company attract external investment.