EIS (Enterprise Investment Scheme)
/ˈentəpraɪz ɪnˈvestmənt skiːm/
How does the Enterprise Investment Scheme work?
When UK investors put money into an EIS-qualifying company, they can claim back up to 30% of their investment as income tax relief against their UK tax bill.
Your company issues special EIS certificates to investors, which they then use to claim their tax benefits.
The scheme makes your startup more attractive to UK investors because they're essentially getting a discount on their investment through tax savings.
What are the main Enterprise Investment Scheme benefits for investors?
UK investors can get 30% income tax relief on investments up to £1 million per year, plus any gains they make are free from capital gains tax if they hold the shares for at least three years.
They can also offset losses against their income tax if things don't work out.
These benefits make early-stage investing considerably less risky for them.
What companies qualify for EIS?
Your company must be an unlisted trading company with fewer than 250 employees and gross assets under £15 million.
You need to be carrying on a qualifying trade (most normal businesses qualify, but things like property development don't), and your company must be less than seven years old from its first commercial sale.
Where would I first see EIS?
You'll likely first encounter "EIS" when speaking with potential investors based in the UK who ask whether your company qualifies for the scheme, as it offers them significant tax relief on their investment in your startup.
How do I apply for Enterprise Investment Scheme status?
You don't apply in advance - instead, you confirm your company meets the qualifying conditions, then issue shares to investors.
After the investment, you complete specific forms and submit them to HMRC (the UK tax authority), who then issue the certificates your investors need.
The process typically takes a few months.
What are the Enterprise Investment Scheme restrictions for my company?
Once you've raised EIS funds, you must use the money within two years for qualifying business activities.
You can't use it to buy another business or to repay existing loans.
Your company also needs to maintain its qualifying status - if you grow beyond the size limits or change to a non-qualifying trade, future investments won't qualify.
Can I raise multiple Enterprise Investment Scheme rounds?
Yes, you can raise multiple EIS rounds up to a lifetime limit of £5 million (or £10 million for knowledge-intensive companies).
Each round needs to meet the qualifying conditions at the time of investment.
Many startups use EIS for their seed and early funding rounds before moving to larger institutional investment.
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