Enterprise Investment Scheme To Raise Money For Your Company

Posted by Bettina Cabana on December 23rd, 2022

Today's businesses must be agile, adaptable, and responsive to succeed in an increasingly competitive market. To do this, however, they need access to the right kind of funding. Many companies turn to venture capital, angel investors, and other sources of external capital, but one of the most useful ways to raise money is via the Enterprise Investment Scheme (EIS).

The Enterprise Investment Scheme (EIS) is a government-backed funding program designed to help small and medium-sized businesses access the capital they need to grow. It provides investors various tax incentives, including income tax and capital gains tax breaks.

Companies eligible for EIS must meet certain criteria, including having fewer than 250 employees and either recently starting up or having been in operation for fewer than seven years. In addition, businesses must also plan to invest the money raised in developing their operations instead of simply buying assets or paying off existing loans.

The EIS provides a range of tax benefits to investors, including income tax and capital gains tax reliefs. Investors can claim up to 30% of their investment as a tax reduction, while capital gains on the money raised can be deferred until the investors dispose of the shares.

In addition, the EIS also provides several other attractive benefits, including:

• Capital gains tax deferral on the sale of assets

• Investors do not pay tax on dividends received

• Investment funds can be used as loan collateral

• Companies can carry forward any unused EIS allowances for up to four years

For many companies, the EIS is a great way to raise the capital needed to get off the ground or expand operations. It allows companies to access start-up funding in the UK without giving up a significant portion of their ownership.

The scheme does, however, carry some risks that potential investors should be aware of. For example, the shares issued through EIS are not listed and are not actively traded, so there is no guarantee the investor will be able to sell the shares quickly or get their money back in the short term. In addition, the amount of tax relief available is subject to change, so it is important to stay informed of any legislative changes that may affect the scheme.

Ultimately, the Enterprise Investment Scheme is an excellent way to raise funds for your company. Provided the company qualifies, the EIS can provide access to capital with very few strings attached and a range of tax benefits. Of course, investors should consider the associated risks and seek professional advice if necessary.