Tax relief under the enterprise investment scheme
Where the company qualifies under the Enterprise Investment Scheme (EIS) or Seed EIS, the subscribers potentially qualify for even more generous tax reliefs. Where the investor is not connected with the company, they are entitled to tax relief based on 30% of the amount invested (EIS) or 50% in the case of Seed EIS. This relief is deducted from the investor’s income tax liability for the year, or the previous year in the case of EIS investment. The shares need to be held for at least 3 years to retain the income tax relief and the shares would also be exempt from CGT when disposed of.
Should the EIS or Seed EIS shares be disposed of at a loss, then the capital loss arising (net of income tax relief given) can be set against the investor’s income as set out above.
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