Currently, an individual can claim income tax relief on 30% of the amount invested up to the first £500,000 of qualifying investments in any one tax year, provided the individual subscribes for at least £500 of shares in that tax year. This can be spread over several qualifying subscriptions.
What are the conditions?
The company raising the funds must:
• have a permanent establishment in the UK
• be unquoted (which includes AIM-listed companies)
• use the funds raised itself (or a qualifying 90% subsidiary can do so in carrying out qualifying business activities).
From 6 April 2012, the annual investment limit will be increased to £1 million, so individuals can claim up to £300,000 relief per tax year. This has recently been approved by the EC, under the State aid rules and is expected to be legislated for in the Finance Bill 2012.
The Government also plans to increase the company limits, subject to state aid approval, so individuals investing in larger qualifying companies can qualify for the relief. The proposed limits from 6 April 2012 are:
• fewer than 250 employees
• EIS or VCT investment of up to £10 million per tax year
• gross assets of up to £15 million before investment.
There are a number of complicated restrictions which can preclude companies and investors from meeting the fine print of the EIS scheme. If you are contemplating raising additional capital in this way please check with us to ensure that you will qualify.
Disclaimer – Please note: The ideas shared with you in this article are intended to inform rather than advise. Taxpayers’ circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.
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