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Income & Capital Gain Tax Relief

Enterprise Investment Scheme

The Enterprise Investment Scheme (EIS) is a government scheme that provides a range of tax reliefs for investors who subscribe for shares in qualifying companies. Although no investment decision should be based on tax relief, some of these serve to potentially enhance investor returns, such as the capital gains tax relief.

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Reduce You Tax Bill

30% Income Tax Relief

When investing into an EIS qualifying company investors can claim 30% income tax relief on the amount invested against their income tax liability. It is possible to ‘carry back’ all or part of the investment to the preceding tax year as long as the limit for relief is not exceeded for that year. Investments will need to be held for three years for the tax reliefs to be retained.

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Tax Free On The Way Out

Capital Gains Tax Relief

In an event of a profitable exit there is no CGT due on the proceeds, provided the investment is held for a minimum of three years. If an investment of £100,000 were to double in value on an exit, investors would normally incur a 20% capital gains charge on the £100,000 profit based on current tax rates. Under EIS, this £20,000 is not payable.

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Delay Your CGT Charge

Capital Gain Tax Deferral

Capital gains made three years preceding or 12 months after investment can be deferred utilising EIS qualifying companies and could potentially be further reduced by other tax allowances over time. This could include timing disposals in order to utilise annual CGT allowances and inter-spousal transfers to maximise tax efficiency.

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Reducing The Risk

Loss Relief

Loss relief applies in the event that an investment becomes crystallised as a loss. Investors can claim further income tax against the loss based on their highest marginal rate of tax. For example, an investment of £100,000 would have received 30% income tax relief already creating a net adjusted investment of £70,000. Should a loss occur, the investor can claim further income tax relief. An additional rate taxpayer could claim a further £31,500 income tax relief (£70,000 x 45% = £31,500).

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Great For Estate Planning

Inheritance Tax Relief

Shares that have been held in an EIS qualifying investment for two years or more at the point of death will qualify for 100% inheritance tax relief. This gives a potential saving of 40% on the full value of the shares.

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Business Investment Relief

A UK resident, non-domiciled individual can remit ‘clean capital’ (i.e. offshore funds that do not represent income or gains that would be taxed on remittance) to the UK without a tax charge.

The investment must be made within 45 days of the offshore income or gains being remitted in a UK qualifying company.

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