The EIS Scheme: A Guide for SMEs and Investors in the UK in 2023

A Guide for SMEs and Investors in the UK in 2023

The Enterprise Investment Scheme (EIS) is a UK government initiative to support small and growing businesses by providing tax relief to individual investors who invest in eligible companies. The scheme is designed to encourage investment in high-risk, high-potential companies and help them raise the capital they need to grow and succeed.

Here’s how the EIS scheme works in 2023 for SMEs and investors:

For SMEs:

• The company must be a UK-registered business that has not traded for more than 7 years.
• The company must have fewer than 250 employees and gross assets worth less than £15 million.
• The company must seek to raise less than £15 million in investment.
• The company must be working on a new business idea with high growth potential.
• The company must not be involved in prohibited activities like property development.

For Investors:

• The investor must be a UK taxpayer.
• The investor must subscribe for new ordinary shares in the company.
• The investment must be made into a company that meets the EIS criteria.
• The maximum investment that can be made is £1 million per tax year.
• The investor can receive 30% tax relief on the investment, which means that if they invest £10,000, their liability will be reduced by £3,000.
• In addition, any gains made on the investment will be exempt from capital gains tax.

Statistics:

• Since its introduction in 1994, the EIS scheme has supported over 25,000 companies and raised over £20 billion in investment.
• The average investment per company is £1 million, and the average investment per investor is £50,000.
• In the 2019/2020 tax year, over 50,000 individuals claimed EIS relief, with a total of £1.3 billion in relief claimed.
• Eligible SMEs can apply for funding through the EIS scheme by meeting the criteria outlined above.
• Investors can receive significant tax benefits by investing in eligible companies through the EIS scheme.
• The EIS scheme has a proven track record of supporting small businesses and raising investment.

Eligible SMEs can apply for funding through the EIS scheme by:

• Being a UK-registered business that has not been trading for more than 7 years.
• Having fewer than 250 employees and gross assets worth less than £15 million.
• Seeking to raise less than £15 million in investment.
• Working on a new business idea that has high growth potential.
• Investors can receive tax benefits by:
• Being a UK taxpayer.
• Subscribing for new ordinary shares in the company.
• Investing in a company that meets the EIS criteria.
• Receiving 30% tax relief on the investment.
• Having any gains made on the investment exempt from capital gains tax.

* Please check for updates to the scheme