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Enterprise Investment Schemes can only rise in popularity as Venture Capital Trusts go into decline following punitive tax changes, according to Joanne Telford, head of investor services for Oxford Capital Partners.

Referring to recent changes announced in Treasurer Alistair Darling's 2008 Budget, Ms Telford said the government had enhanced available to EIS but had not made subsequent changes to VCTs building on the erosion of tax advantages to VCTs under previous budgets.

She said: "In 2006/2007 the EIS scheme brought in £550m alone and it has received real interest of late. We are seeing real appetite for this area as people look to mitigate the IHT liability particularly as more and more estates are becoming liable. An investor can claim IHT tax relief after two years and there is also an opportunity to operate CGT deferral.

"The announcement by the chancellor has only served to spur on this interest."

EIS versus CGT

Source: Oxford Capital Partners

Ms Telford said where an individual has a chargeable capital gain which arises within the period of three years before or one year after an investment is made in an EIS qualifying investment, a claim may be made to defer the CGT due on that gain.

She said: "Once the shares in the EIS qualifying investment has been sold, the deferred gain will fall back into charge to CGT in the year of disposal. This, in turn, creates an arbitrage opportunity."

Ms Telford did, however, stress the tax perks given on these types of investment served to compensate the higher risk an investor takes.

She said: "These are new, small companies so they are riskier. However this does not mean we put money into any old business that happens to come along.

"The average age of a business in which we invest is three to five years old already. We cherry pick the most interesting propositions and it offers great opportunities for people looking for an investment with a difference."

Talking about the average customer profile Ms Telford said it was not a case of EIS investments only appealing to high net-worth clients.

She said: "We have a range of clients of different financial backgrounds.

"For an adviser who wants to look into this area, I would recommend an examination of the EIS Funds currently offered by a number of leading fund managers. An EIS Fund offers investors diversification across a number of companies, making it much less risky than investing into a single company."