Examples of Enterprise Investment Scheme Calculations


Income Tax Relief

Accolade EIS 30% Income Tax Relief

Example

  • Gross investment in shares £10,000
  • Less Income Tax relief at 30% = £3,000
  • Net cost of EIS investment £7,000

Qualifying investors can credit the amount of funds subscribed for eligible shares against their total liability to Income Tax for the tax year that shares are issued.  

Relief is available against a United Kingdom Income Tax liability, irrespective of whether or not the investor is resident in the UK. 

Please note, the amount of relief given cannot exceed an investor's tax liability.

A qualifying individual can claim to 'carry back' up to £500,000 of their Enterprise Investment Scheme investment to the previous tax year, thereby enabling Income Tax already paid to be reclaimed. 

'Carry Back' allows that, if no investment had been made in the previous tax year, up to £1,000,000 could be invested in the current tax year.


Capital Gains Tax Relief Accolade EIS Capital Gains Tax Relief

Example

  • Realised value of shares after 3 years £25,000
  • Less original gross investment £10,000
  • Profit; free of Capital Gains Tax £15,000

Any capital gain accruing to the original investor on disposal of their shares is exempt from Capital Gains Tax if the shares have been held for at least 3 years. 

Please be aware that if no claim to Income Tax relief is made, then subsequent disposal of the shares will NOT qualify for exemption from Capital Gains Tax.


Capital Gains Tax Deferral Accolade EIS Capital Gains Tax Deferral

Example 

  • Gross investment £100,000 
  • Less Income Tax relief (30% of £100,000) £30,000
  • Cost of investment £70,000
  • Capital Gains Tax liability deferred * £28,000
  • Net initial cost of investment £42,000

* CGT assumed at 40%, the gain is deferred until there is a chargeable event, such as a disposal of EIS shares or, if earlier, a breach of the E.I.S. rules. 

The liability to Capital Gains Tax arising on the disposal of any asset may be deferred by investing the gain in eligible EIS shares. Investment must be made within the period beginning one year before and ending three years after the event which gives rise to the gain being deferred. 

Although there is a limit of £1,000,000 for Income Tax relief and Capital Gains Tax relief there is NO LIMIT on the amount of gains that can be deferred.

There are no minimum or maximum amounts for deferral. Nor does it not matter whether the investor is connected with the company. Unconnected investors may claim both Income Tax relief and Capital Gains Tax deferral relief.

There is no minimum period for which shares must be held. The deferred capital gain is brought back into charge whenever the shares are disposed of (or are deemed to have been disposed of under EIS legislation).


Loss Relief (worst case scenario) Accolade EIS Loss Relief

Example

  • Realised value of shares £0 (nil) 
  • Gross investment in shares £10,000
  • Less: Income Tax relief at 30% £3,000
  • Loss before tax relief £7,000
  • Tax relief at 40% * £2800
  • Net cost of investment (loss) £4,200

*Assumed net loss offset against other income taxable at 40% as opposed to chargeable gains which are taxable at 28%.

If an original investor disposes of their shares at a loss, the net loss (after EIS Income Tax relief) may be set against other taxable income or chargeable gains (at the election of the investor).


*** Accolade Enterprise Investment Scheme closed to investors in March 2014 ***

*** Please phone 0844 414 26 77 to check availability of other 30% tax saving EIS ***


No amount of tax 'sweetener' can turn a bad investment into a good one...only lessen the bitterness when it turns sour. Avoid having your tax relief withdrawn. Choose a company that understands and complies with complex E.I.S. regulations. Whilst there can be no pre-arranged agreement for realising mature EIS shares, it will be some consolation to know that Accolade has a viable investor exit strategy.


For users of the above notes: 

This material is published for information only. It provides an overview of the regulations in force at the date of publication, but no action should be taken without consulting the detailed legislation or seeking professional advice. 

Therefore, no responsibility for any loss occasioned by a person acting (or refraining from action) as a result of the material can be accepted by the author(s) who compiled the data. Accolade Partnership Ltd, 11th Apr 2012. 


An Enterprise Investment Scheme is by far the best way of exploiting tax breaks

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EIS relief takes the edge off your tax bill

Inaccessible Pinnacle 
Sgurr Dearg 
Isle of Skye 
Scotland

Photo taken by Bill Gray, 
Managing Director @ Accolade, 
Sunday May 1st 2011

"He either fears his fate too much,
Or his deserts are small,
That puts it not unto the touch, 
To win or lose it all."

Extract from 'My Dear and Only Love' written in 1643 by James Graham, Marquis of Montrose.












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Original images have been pixellated with a pattern that makes them identifiable as the unique copyright property of Accolade Partnership Ltd. © applicable within all legal jurisdictions, worldwide.

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Accolade EIS is an appropriate investment for UK income tax payers who can self-certify that they are sophisticated investors
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