The pros and cons of EISs

This article is part of
VCT and EIS Investing - January 2013

Yet good companies with successful products or services are still seeking investment capital to grow and we are being offered more and better opportunities than ever before.

Many investment specialists believe this combination of market opportunity and the enhanced terms around the EIS regime mean there has seldom been a better time to invest in well-run EIS funds.

In spite of this, it is important to note that no investment of this nature is guaranteed. Loss relief limits the downside, but investors may lose money.

Susan McDonald is chairman of Calculus Capital

EIS: The Tax Benefits

The government wants people to invest and has made significant moves to help make it more attractive to do so. The tax benefits of EISs are as follows:

- Income tax relief at 30 per cent in the financial year when the underlying investment is made (was previously 20 per cent)

- No capital gains tax (CGT) on profits after three year holding period

- 100 per cent inheritance tax relief after two years

- CGT deferral relief

- Up to 65 per cent loss relief (for 50 per cent taxpayers on losses made in the current tax year). When the new 45p top rate of income tax comes in the maximum loss relief will be 61.5 per cent. This can be taken against income tax or CGT

- You can now invest up to £1m in any tax year (up from £500,000)