The well-known Enterprise Investment Scheme (EIS) provides 30% tax relief on investments in unquoted companies. This is to be supplemented from 6 April 2012 by a new Seed Enterprise Investment Scheme (seis) which will give up to 50% tax relief.
As you can imagine there are a host of anti-avoidance rules, which I can’t cover in detail in this note, but the schemes are still very generous. Some of the key requirements to qualify for the relief are:
The investment must be in ordinary shares and cannot exceed 30%.
Relief can be claimed up to a maximum of £500,000 (£100,000 for seis) invested in such shares, providing you have sufficient income tax liability to cover it. (Note that this relief cannot be set off against dividend income).
The company (or parent if a group) is also subject to a number of rules: gross assets cannot exceed £7 million (£200,000 for seis); fewer than 50 full-time employees (25 for seis) and a “qualifying trade” which is very broad.
In addition to the income tax relief the shares are exempt from Inheritance tax and capital gains tax when sold.
These tax reliefs are administered by a special unit within HM Revenue and Customs that is helpful and seems to be actually trying to give the relief rather than restrict it.
It is easy to forget that these tax reliefs will not turn a poor investment into a good one but they will reduce investor risk. Investments that are “winners” are free of tax, and in addition, investors can claim tax relief under a separate set of rules on their “losers” thus favouring multiple investments.
We have an opportunity at the moment: our client has created a new product for the leisure sector and more specifically for swimmers. First round funding was completed in 2010 enabling product development to be completed and customer trials to be launched. Results are very encouraging and the company has just had a small rights issue to fund the launch of nationwide marketing. All investors followed their money except for one individual who has retired from investing and hence a small (£10k) amount is available.
We are looking for a couple of investors to come in at £5k each ideally with contacts or expertise in the leisure sector.
Please do have a look at the Opportunities section of our website to see investment opportunities and at the Portfolio section to see how our business angel backed investee companies are performing.