Guide to EIS

All companies on Deepbridge Syndicate are EIS eligible.  The Enterprise Investment Scheme (EIS) is a government initiative designed to attract investment into small UK companies. EIS investments provide enterprise capital to small unlisted companies that might otherwise struggle to attract funding. The Government recognises the important role smaller businesses play in a successful economy and offers tax benefits to EIS investors in order to ensure funding is available. 


According to figures provided by HM Revenue & Customs (HMRC), up to the end of the 2015/16 tax year over 26,000 individual companies have raised investment through the scheme and over £15 billion of funds have been raised. 
HMRC data for the 2015/16 tax year shows that 787 companies raised a total of £1.65 billion via EIS, which is lower than the previous year (£1.8bn) but still the second highest amount ever raised since EIS began in 1993.


HMRC sets prescriptive EIS qualification criteria for companies:

  • Any investment must be purchasing new shares (rather than acquiring existing shares);
  • The company must have fewer than 250 employees
  • The company has gross assets of £15m or less before investment (or £16m after investment)
  • EIS investment in a singular company does not exceed £5m in any one year
  • The company must use the investment with 24 months
  • The company cannot be controlled by another company
  • A number of excluded industry sectors, predominantly in and around financial services and property


Investors may become eligible for potential tax benefits available through EIS as long as the investment is held for a minimum of three years, unless otherwise stated: 

 -  30% upfront income tax relief  - 

Deepbridge EIS investors may claim up to 30% income tax relief, provided the qualifying investment is held for at least three years. With a maximum investment of £1m per tax year, investors can claim up to £300,000 for the current tax year and up to £300,000 against their income tax liability for the previous year, as long as the amount of tax relief claimed is not more than the income tax paid. 

 -  Tax-free growth  - 

If a Deepbridge EIS investment increases in value, there is no capital gains tax (CGT) to be paid. 

 -  100% inheritance tax relief after two years  - 

As Deepbridge EIS shares are eligible for business relief (BR), there is no inheritance tax payable if held by the investor for at least two years and they are still held at the time of death. For advice regarding BR investors should contact their financial or taxation adviser. 

 -  100% capital gains tax deferral  - 

Any taxable capital gain (from thirty six months before an EIS investment or twelve months after) can be invested in a Deepbridge EIS qualifying company and the CGT will be deferred for the duration that investment is held. If the investment is still held when the investor dies the deferred tax is eliminated. 

 -  Loss relief  -

Although it is hoped that shares in the underlying investee companies within a Deepbridge EIS do not fall in value (Deepbridge EISs are designed to generate growth, rather than to maximise loss relief), investments can go down as well as up and investors may not get back the full amount invested. Losses from individual EIS investments can be mitigated as loss relief is available on each individual holding. So, investors can claim loss relief if shares in one company fall in value, even if the other shares in the investor’s EIS portfolio increase in value. Investors can set loss relief against CGT or income tax, depending which is the most beneficial for their personal circumstances. 



For a higher-rate taxpayer, an investment of £50,000 will attract an initial 30% income tax relief and capital loss relief (45% of 70p invested) which in total will mean your capital risk is just 38.5p for every £1 invested. Capital gains from EIS investment are free of tax.

Therefore, downside protection is 61.5p for every 100p invested.

NB. The above tax advantages can only be claimed at the time when the investment is made, rather than when an investor makes an initial pledge via Deepbridge Syndicate. 

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