Risk warning: An investor’s eligibility to receive tax relief depends on their individual circumstances and on the company’s qualifying status, both of which may be subject to change. If you are unsure about your ability to claim certain tax reliefs, you should seek independent tax advice before making an investment.

You will notice that many of the investments listed on Capital Cell are marked as eligible for EIS or SEIS. This means that UK taxpayers may be eligible to receive a range of attractive tax reliefs when they choose to invest. 

EIS and SEIS are tax relief schemes, designed by the UK government to stimulate investment into small and early stage companies. Both can be “carried back” to the previous tax year.

 

What is EIS?

The Enterprise Investment Scheme (EIS) may be applicable when buying new shares issued by qualifying small trading companies.

Investors who are UK taxpayers with no link to company may be able to claim:

  •      Cash back. 30% of the cost of your investment will be returned as Income Tax relief.
  •      Tax-free profits. Profits are free from Capital Gains Tax.
  •      Loss relief. If the investment fails, losses can be set against Income Tax.
  •      Tax deferral. Capital gains which are re-invested into EIS investments can have their tax bill deferred.

Relief can be claimed on a maximum of £1 million of eligible investment per year, and shares must be held for a minimum of three years.

Full details of the EIS scheme can be found on the HMRC website:

Enterprise Investment Scheme

What is SEIS?

Seed Enterprise Investment Scheme (SEIS) may be applicable when buying new shares issued by qualifying small, early stage companies.

Investors who are UK taxpayers and have no link to the company may be eligible to claim:

  •      Cash back. 50% of the cost of your investment will be returned as Income Tax relief.
  •      Tax-free profits. Profits are free from Capital Gains Tax.

Relief may be claimed of a maximum of £100,00 of eligible investment per year, and shares must be held for a minimum of three years.

Full details of the SEIS scheme can be found on the HMRC website:

Seed Enterprise Investment Scheme

Which investments are eligible for tax relief?

Eligibility for EIS or SEIS depends on the types of shares issued and the types of trade and activities carried out by the company. When a company has received notice (advance assurance) that HMRC are satisfied that the company and proposed investment should qualify for a tax relief scheme, this will be indicated on their Capital Cell campaign page.

Once shares are issued, HMRC will confirm whether the requirements of the scheme have been met.

What do I need to do to receive tax relief?

As part of the process of investing through Capital Cell, you will be asked to indicate whether you are a UK taxpayer, and whether you would like to claim tax relief on qualifying investments. Once an eligible investment has been made, Capital Cell will provide you with a certificate which can be used to claim tax reliefs through your self-assessment tax return (form EIS3 for EIS, or form SEIS3 for SEIS). Claims can be made up to approximately five years after the investment is made.

Example EIS investment

  • You invest £10,000

  • You receive £3,000 in Income Tax relief
  • You hold the shares for at least three years

The company is successful. You sell your shares for £30,000

You gain £20,000 in profit (and owe no Capital Gains Tax) plus the £3,000 Income Tax relief

The company maintains its value. You sell your shares for £10,000

You receive back your £10,000 plus the gain of £3,000 Income Tax relief

The company fails. Your shares are worth £0, loss of £7,000

Your loss of £7,000 (£10,000 invested – £3,000 Income Tax relief), is awarded loss relief at your marginal tax rate. If you are in the 45% tax bracket your loss relief will be 45% x £7,000 = £3,150. This means your overall loss is just £3,850