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The lowdown on EIS

In the first in a new series on tax-efficient investing, Nimesh Shah explains how companies and investors benefit from the Enterprise Investment Scheme
The lowdown on EIS

The Enterprise Investment Scheme (EIS), and now the Seed Enterprise Investment Scheme (SEIS), are a critical source of funding for small private companies looking to attract capital. They are considered by many sophisticated investors to be the real success story in the evolution of funding for UK smaller companies due to the reasonable tax reliefs for investors. One great success story is the brand Innocent Drinks, which, with the assistance of some initial EIS funding, sold out a stake in the business to Coca-Cola for a reported £60m in 2010.

Introduced in 1981, the EIS evolved from the Business Expansion Scheme into today's form of investment. The industry sectors qualifying for relief have become more restricted over time, but the qualifying annual investment has increased to £1m per individual. The SEIS was introduced in 2012 for the smallest companies offering higher tax breaks.

Both the EIS and SEIS rules allow high-risk investments in small private trading companies to qualify for substantial tax reliefs. These reliefs reduce the net cost to investors and directly encourage investment in some of our riskiest 'start-up' companies.

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