Entrepreneurs Week booklet digital - Catalog - Page 39
Entrepreneurs Week
2019
2.
If you are investing as
a ‘business angel’
3.
If you want to invest in
a high risk business
Investors’ Relief (IR)
Enterprise Investment Scheme (EIS)
What does it do?
IR is a newer form of capital gains tax
relief modelled loosely on ER. However,
whereas ER is targeted at those in a
‘hands on’ position running the business,
IR is instead aimed at external investors.
What does it do?
EIS relief is a tax incentive designed to
promote early stage equity investment in
higher risk companies. The EIS regime is
more highly regulated than ER and IR and
care must be taken, both from the investor
and the business, to implement the right
scheme structure.
IR reduces the rate of tax applicable to
the gain on a sale/IPO from 20% to 10%
and it applies to each investor’s first £10
million of qualifying capital gains. This
£10 million IR limit is separate to the £10
million ER limit, so it can be used even
after an entrepreneur has exhausted their
ER allowance.
Tax incentives
• Investors may deduct an amount equal
to 30% of the money invested from their
total UK income tax liability for the tax
year, up to an annual limit of £1 million
(or £2 million in the case of knowledge
intensive companies, such as those
whose trade involves development of
intellectual property)
• Any capital gain made on the disposal
of the business may be exempt from
capital gains tax
• If the business is sold at a loss, relief is
given which can be used against either
income profits or chargeable gains
• Capital gains tax otherwise due on the
sale or transfer of other assets may be
deferred by investing the proceeds in an
EIS business.
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