Advisers looking to place their clients into EIS funds as a way of tax mitigation should ensure they choose a provider capable of investing the cash quickly, according to Richard Hoskins, co-founder of Kin Capital.
Investors in EIS products can receive capital gains tax relief of 50 per cent for investing in early stage companies.
But, according to Mr Hoskins, the tax relief is only given once the money is invested in the underlying company.
The problem occurs with EIS managers that are unable to make the investments in a period of less than one year, he said.
The typical time period to fully invest a client's money is likely to be 18 months, meaning the adviser cannot always know in what tax year the underlying client will receive the tax break, making financial planning more difficult.
He said: "I am not sure how an adviser can do a suitability report in those circumstances. How quickly the capital can be invested is a key consideration, but of course it has to be invested in good companies as well.
"It is not unheard of for it to take two years for the money to be fully invested."
The rules governing tax reliefs for EIS investments contrast sharply with those governing venture capital trusts (VCT).
In the case of VCTs, the tax break take effect when the money is invested in the fund, so almost immediately.
Mr Hoskins said the changes to the rules governing EIS investments, announced last year, which mean EIS funds must invest in "knowledge intensive companies", means the managers of EIS funds must take more time to find suitable investments.
Andrew Aldridge, head of marketing for EIS provider Deepbridge, agreed the length of time it takes some EIS providers to make investments should certainly be a consideration” for those choosing EIS products.