Before 6 April 2018, individuals may invest in companies that qualify under the Enterprise Investment Scheme (EIS) and treat that investment as having been made in 2016/17. The tax relief is 30% of the amount invested. So a £20,000 investment can reduce the 2016/17 tax liability by £6,000. Investing in a Seed EIS qualifying company is even better as there is a 50% tax relief. Such companies tend to be riskier than EIS qualifying companies. You should therefore obtain specialist advice from an IFA if you are considering such investments.
Investing in an EIS qualifying company can also enable you to defer capital gains tax. In order to do so you must reinvest the amount of the gain within the 3 years following the date of the disposal giving rise to the gain. (The investment could also be within 12 months prior to the disposal).
IMPORTANT: EIS and SEIS investments tend to be highly risky. Whilst we can advise on the tax reliefs we cannot advise on the investment decision. The tax reliefs broadly apply whether your investment is successful or not. Do remember that if the company you invest in fails then your loss of investment will always exceed the tax benefit.
This information is courtesy of 2020
As with all of our tax tips and web pages this information is necessarily summarised and of a general nature. If you would like detailed specific advice please contact us.