EIS
Both advisory and discretionary clients will usually look to invest in tax efficient vehicles. This normally entails utilising the benefits of the Enterprise Investment Scheme (EIS) or the corporate venturing scheme (CVS). These schemes are broadly similar and the rules are complex, but their purpose is to help certain types of smaller companies raise capital. In broad terms the schemes can give investors various tax breaks. The rules of EIS qualification for companies seeking investment have been tightened in recent times and most companies listed on AIM do not now qualify.
The following pages detail the different tax breaks available:
The table below illustrates these types of benefits available to three different types of clients, each making an investment of £10,000.
Client A does not benefit from any EIS tax relief
Client B pays income tax and claims relief on that income tax at 20%
Client C is a higher rate tax payer who claims income tax relief of 20% and has chargeable gains of £10,000 after using all other reliefs available
| Client A | Client B | Client C | |
|---|---|---|---|
| Investment | £10,000 | £10,000 | £10,000 |
| Income tax relief (20%) | Nil | (£2,000) | (£2,000) |
| CGT deferral | Nil | Nil | (£4,000) |
| Net cost of investment | £10,000 | £8,000 | £4,000 |