20 June 2012

Thinking of investing in a business or do you require business investment?

The Enterprise Investment Scheme (EIS) has been with us for some time and available to provide Income Tax and Capital Gains Tax relief to an investor taking less than a 30% stake in a trading company.

Not yet law although passing through parliament in the Finance Bill is the Seed Enterprise Investment Scheme (SEIS) the main attractions being:-

• Income Tax relief is available up to 50% of the amount invested to a maximum of £100,000
• If you dispose of any asset in 2012/13 the gain is tax free up to the amount reinvested (maximum £100,000)
• Provided you have received income tax relief the gain on the shares in which the investment is made is also free of tax when sold

The headline restrictions are:-

• Shares must be held for a minimum of three years
• The shares cannot be bought from another individual, subscription must be made to the company
• The investor cannot be employed by the company although he can be a director
• The company cannot be a membership of a partnership and therefore not an LLP
• The trade being conducted must be less than two years old.
• There are many trades which do not qualify which are principally property ownig business such as Hotels, Residential Homes or property development businesses

Naturally there are more detailed rules to consider where an investment is secured and this summary is a guide in case an investment is being considered.