EIS funds - investments with a difference

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What Is An EIS ?

In the Budget speech of November 1993, the Chancellor announced the intention to provide a targeted incentive for investment in unquoted companies.

The Enterprise Investment Scheme (EIS) was established on January 1st 1994 as a successor to the Business Expansion Scheme (BES).

Although much of the BES legislation (contained in ICTA 1988 and TCGA 1992) was adopted, there were significant differences, and several budgetary changes have been made over the years.

Traditionally viewed as a single-company investment (as opposed to the collective structure of VCTs), the original legislation allowed for EIS Funds to be created.

The EIS Scheme plays a significant role in the provision of venture capital for small business – according to HMRC figures, the scheme has raised £6.1bn and invested in over 14,000 companies.

Such small enterprises are a key driver in raising productivity through innovation but often find difficulty accessing relatively modest amounts of capital because of the ‘equity gap’. The tax incentives are intended to help bridge that gap by encouraging investment in young and potentially risky enterprises.

Our booklet, "EIS Explained", now in its third edition and incorporating scheme changes that were introduced in the Budget of March 2008, is available for you to download; hard copies can be requested using our contact page.

Your attention is drawn to the important notice on p20 – this booklet is intended as a brief overview rather than a comprehensive analysis of the EnterpriseInvestment Scheme.

For more detail, refer to the EIS section of the HMRC website.