We’ve given answers to some of the most common queries about EIS below. If you don’t find the answer you’re looking for below, please get in touch and we’ll do our best to help.
It is important to note that nothing in this document constitutes tax advice. Tax reliefs are not guaranteed, depend on the entities invested in maintaining their qualifying status and may be withdrawn at any time by HMRC. The tax treatment of the EIS scheme depends on the individual circumstances of each investor and may be subject to change in the future. Investors should seek professional advice regarding their personal circumstances.
How does EIS tax relief work?
Income tax relief. Eligible investors can claim 30% income tax relief against an EIS investment (e.g. £300 in tax relief on a £1,000 investment)
Loss relief. Should an EIS investment fail, up to 45% of the investor’s remaining investment (minus the 30% initial relief) is then available in loss relief and applied to either an investor’s income tax bill or capital gains tax bill.
Capital Gains Tax Exemption.Any capital gains generated by an EIS investment held for longer than three years are exempt from capital gains tax.
IHT Relief. Shares held in EIS companies are exempt from inheritance tax if the investment is held for at least two years prior to the death (and at the time of death) of the investor. For more information, please visit: www.syndicateroom.com/eis or HMRC’s website
How will I receive EIS certificates?
You will receive an EIS certificate (EIS3) for each investment you make, or for each underlying investment that a fund makes on your behalf.
For Access EIS investors these certificates will be saved to your Dashboard and can be used for separate or combined relief applications to HMRC. You will be able to download an Excel file containing the details of all your EIS investments, to easily attach to your HMRC self-assessment form.
How long do EIS certificates take to process?
The process of obtaining EIS certificates from HMRC is handled by the company you have invested in, or through the fund you have invested in. It can take around 15 weeks to obtain an EIS certificate from the point of shares being issued. On rare occasions, and owing to circumstances beyond the funds control, it can take longer. You will always be able to track the progress of each EIS certificate from your dashboard. EIS relief for ASA investments may take up to 6 months longer.
How long after I invest in the fund will I have all my EIS certificates?
When investing directly into a company you should expect to have your EIS certificate around 8 weeks after the funding round completes. When investing in a fund, the certificates will arrive around 8 weeks after each investment the fund makes.
Access EIS aims to build you a portfolio of at least 50 companies over a 12-month period (from the date of your investment into the fund, specifically investment completion). Therefore, it is realistic that you will have all of your EIS certificates 15 months after your initial fund investment.
How is my investment and EIS relief allocated in practice?
Fortunately, EIS relief can be carried back to one tax year earlier, but no further. For example:
An EIS-qualifying investor has a £3,000 income-tax bill for the 2019/20 tax year.
The investor makes a £20,000 investment into Access EIS on 1 December 2020.
Between 1 December 2020 and April 6 2021 approximately one quarter of the total investment amount (minus applicable fees) is deployed (as time elapsed equates to approximately one quarter of the fund’s deployment). Exact deployment levels vary month by month and will ebb and flow due to factors beyond of SR’s control. As such, it is important not to rely on any estimations and treat these figures as approximations.
An approximate total of £5,000 in investment into EIS-qualifying companies (minus applicable fees) was made in the 2020/21 tax year, earning approximately £1,500 in tax relief (30% income tax relief, per EIS rules)
The investor can either apply this tax relief to the 2020/21 tax year or carry it back to 2019/20.
The remaining fund investment of approximately £15,000 (minus applicable fees) will be made in the 2021/22 tax year, earning approximately £4,500 in tax relief (30% income tax relief, as per EIS rules) that can be applied to the 2021/22 tax year or carried back to 2020/21.
How do I know if I qualify for EIS?
If you’re not sure, seek advice from a professional tax advisor. Generally speaking, private individuals paying income tax or capital gains tax in the UK are eligible for EIS tax relief. The amount of income tax relief you can claim in any year will be dependent on how much income tax you pay. This is capped on investment of up to £1,000,000 per year through EIS - £2,000,000 if the companies you invest in are considered Knowledge Intensive.
What is considered a Knowledge Intensive company?
Knowledge Intensive Companies (KICs) are companies that are carrying out research, development or innovation at the time that they are issuing shares.
How will EIS loss relief be processed?
In the highly likely event that one or more of the investee companies fail, eligible investors could be able to claim additional EIS loss relief against the investment.You would be notified of the company’s failure via your Dashboard and be given instructions about how to claim EIS loss relief.
Are AIM shares EIS eligible?
Typically, IPOs on the main market are not EIS shares as the company making the IPO will likely be too developed and would not qualify. However, there are often IPOs on AIM where shares are EIS eligible.
What happens if a company exits before the three year holding period ends?
If a company exits before the end of the three year holding period, EIS investors who have claimed relief for this specific investment will incur clawback on the initial tax relief gained i.e. any relief previously claimed against the investment will need to be repaid. In this circumstance they would need to contact HMRC and inform them of the event, so that the repayable amount can be calculated.
How do I make a claim for loss relief?
You can claim the relief by making an entry in box 41 on page CG 2 of the SA108 Capital Gains Tax summary pages (or online equivalent). The relief has to be claimed within 1 year of 31 January following the year in which the loss occurred. An allowable loss made in 2016 to 2017 therefore has to be claimed on or before 31 January 2019.
What happens if I’ve deferred Capital Gains and the company goes on to exit?
If the company’s exit requires investors to sell their shares (in most cases, it does), this will count as a disposal under HMRC’s rules. To qualify for disposal relief on a gain on the sale of EIS shares, the shares need to be held for at least three years. If there is an exit and subsequent disposal when the shares have been held for less than three years, that gain will not qualify for disposal relief.