Entrepreneurs and Enterprise Investment Schemes

After the recession and the credit crunch preceding it, Britain like many other giant economies worldwide suffered a hair-raising experience that many would like to forget. However, immediately after the period a new wave of investment and entrepreneurialism has risen, so significant to the point that the country has been able to recover rather well. In 2014 alone, there were over 500,000 business start-ups, a record number, meaning that the critical nature of small business is in the heart and psyche of the nation. Enterprise Investment Scheme (EIS) is an encouragement to invest in the diverse successful businesses of the next generation.

Entrepreneurs and EIS

As an entrepreneur looking forward to attracting as much investment as possible through EIS you must understand a number of things. Firstly, prior to approaching any investor, you might want to obtain an advance assurance first offered by HMRC (HM Revenue and Customs). This indicates that your company, including its shares and trade are eligible for EIS purposes. It’s also important for the company to have its permanent residence within the UK with zero control by another company.

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EIS is an encouragement to invest in the diverse successful businesses of the next generation.

At the same time, EIS qualification requires the company’s assets to be below £15 million prior to issuing the shares with a fulltime workforce of less than 250.  Your company could raise a total of £5 million from venture capital schemes in any one year period. Such schemes include VCTs (Venture Capital Trusts), and SEIS.  Remember the £5 million limit takes into account any investment raised for the company within the relevant period of 12 months, such as grant finance, family funds or money from friends.

Investor Benefits

With the EIS comes a lot of tax incentives in diverse capital gains tax and income tax reliefs for those investors investing in unquoted, smaller trading businesses. This include primary tax relief through income tax reduction at a specific flat rate relating to the new shares cost. Tax relief also went up to 30 percent from 20 percent by April 6, 2011. Also, EIS investment does not come with a minimum amount investment in a single company, which was £500 until 2012/2013 when it was scrapped. Nonetheless, a maximum investment has been put at £1 million since 2012, an increase from £500,000 between 2008 and 2012.  Remember that the maximum investment amount any qualifying business could receive still stands at £5 million in a single year.

As a potential investor interested in EIS, use providers who have the skill and expertise to recognise a great business worth investing in, with a strong focus on the quality and value of the investment opportunity. Changes made on EIS made them highly attractive in terms of tax and it’s important to avoid being exploited with the guise of tax opportunities without concrete understanding of the niche or investment you are undertaking.

EIS investments are fully established now and the industry has finally matured. This comes with lots of professional fund managers and advisors able to demonstrate powerful track records that a successful investment has, including an exit if the need be.