An Overview of
EIS Investments

Enterprise Investment Scheme

The Enterprise Investment Scheme (EIS) is a government-backed initiative designed to provide tax reliefs to investors acquiring new shares in qualifying companies.

To safeguard investors, the government provides essential tax incentives under the Enterprise Investment Scheme, mitigating the impact of unsuccessful investments and amplifying the gains of successful ones.

It is crucial to bear in mind that tax rules are subject to change, and the benefits hinge on individual circumstances.

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Benefits of EIS

Investing in small companies through the EIS can return large profits if companies flourish, however others might face challenges or even fail.

An investment of £100,000 could result in a saving of £30,000 on the annual income tax bill.

To qualify, investors must have sufficient income tax liability and hold the shares for at least three years.

Investors can contribute up to £1 million per tax year, or up to £2 million if anything above £1 million is invested in knowledge-intensive companies.

Investors can “carry back” contributions to the previous year, potentially offsetting the tax relief against the prior year’s tax bill.

Realizing EIS shares typically incurs no Capital Gains Tax (CGT) if income tax relief has been claimed and the companies still qualify.

Investors can defer capital gains tax by investing in EIS-qualifying investments.

Investing in an EIS-qualifying company may provide 100% relief from inheritance tax, given that the investment is held for two years at the time of death.

In case of losses, investors can choose to offset the loss, less the income tax relief received, against their income tax bill.


Investing in an Enterprise Investment Scheme (EIS) carries inherent risks that investors must consider.

The capital invested is subject to fluctuations, with the possibility of not fully recovering the initial amount.

The tax treatment is contingent on individual circumstances, leaving it vulnerable to potential changes in the future, and tax reliefs rely on companies maintaining their EIS-qualifying status.

While investors are required to hold shares for a minimum of three years to retain claimed tax reliefs, a more extended holding period may be necessary for optimal growth and exit strategies. 

The nature of smaller companies introduces heightened volatility, with values rising or falling more sharply compared to established counterparts.

Liquidity concerns may arise as smaller company investments could be more challenging to sell promptly.

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EIS Investment FAQs

Introduced by the government back in 1994, the EIS aims to facilitate the growth of small businesses by providing them with funding opportunities. When individuals invest in companies eligible for EIS, they can potentially benefit from substantial tax advantages.

EIS-qualified companies are typically small, often privately held entities. They generally have assets valued at less than £15 million and fewer than 250 employees. However, there are now more relaxed criteria for firms engaged in knowledge-intensive activities.

Companies eligible for EIS investment come from various sectors and industries. However, they must meet specific criteria, such as being actively involved in trade with the goal of generating profits. Certain exclusions apply, including businesses dealing in land, commodities, or shares, as well as those with significant asset backing or contractual revenue streams.

Additionally, there are limitations based on a company’s size and age, although knowledge-intensive enterprises enjoy certain exemptions.

This term generally refers to innovative, often young businesses engaged in research, development, or innovation activities. For instance, a company working on the development of new pharmaceuticals might fall into this category, while a retail chain expanding its physical locations typically would not. Approval for knowledge-intensive (KI) EIS funds was granted in March 2020.

KI funds must allocate at least 80% of their portfolio to such companies. Investors in KI funds receive a single EIS5 certificate once the fund invests 90% of its capital within 24 months of closing. In contrast, investors in non-approved funds receive individual EIS3 certificates per investee company.

Investors in EIS can benefit from a range of upfront and ongoing tax reliefs, including up to 30% income tax relief, tax-free growth, capital gains deferral, inheritance tax relief, and loss relief on exit. However, these benefits are subject to certain conditions and the company maintaining its EIS status.

Income tax relief can typically be claimed after shares are allotted and an EIS3 certificate is received, a process that usually takes around six months. For KI approved funds, tax relief can be claimed for the tax year the fund closes, upon receipt of the EIS5 certificate, which may take up to 24 months.

The maximum investment is £1 million per tax year or £2 million for knowledge-intensive investments, with the option to carry back excess investments for tax relief purposes. Minimum investment amounts vary but are typically around £10,000.

EIS investors can elect to treat shares acquired in one tax year as though they were acquired in the previous year, allowing them to offset tax relief against income tax from that year.

EIS returns primarily come from capital growth rather than dividends, with target returns varying widely depending on the investment. However, higher targets generally indicate higher risks.

EIS fees vary, with managed portfolios typically charging initial and annual fees, as well as potentially a performance fee. It’s essential to review fee structures carefully.

It is very easy to make an EIS investment on the GrowthInvest platform.  Speak to your adviser or visit our offers page.  Here you will find an offer for almost every single fund available in the market.  Go ahead and read our offer page and learn about the differences in strategy of the various managers.  When you decide what to invest in, contact your adviser or simply click the Invest button on the offer, you and you adviser will receive a digital application form to start the process.

EIS investment are long term and your funds are committed until the fund manager delivers exits on the portfolio.  This can take from five to ten years in some cases.  During that time you will not be able to access or liquidate your investment.  EIS fund managers have various exit strategies on their funds, but all source exits on portfolio companies via a mixture of trade sales, management buyouts of refinancing.

This service, offered by HMRC, confirms that a company’s proposed share issue would qualify for EIS tax relief based on provided information. It doesn’t guarantee qualification, which is confirmed after shares are issued.

EIS investments are suitable for experienced or wealthy investors seeking growth opportunities, particularly those with large income tax bills or capital gains tax liabilities.  Speak to your adviser to see if you are deemed suitable for these types of investments.

Like all investments, EIS carries risks, including the potential for loss of capital, lack of liquidity, and failure to meet qualifying criteria, which could result in the loss of tax benefits. EIS investments are long-term and not suitable for everyone.

While both invest in similar companies, VCTs and EIS differ in tax reliefs, investment limits, liquidity, and dividend structures, among other factors. VCTs offer tax-free dividends and greater liquidity but lack certain tax benefits and flexibility compared to EIS.

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