The scheme also offers up to 62.5% loss protection on your investment. If you claimed EIS Income Tax relief when you subscribed for the shares, the amount of Income Tax relief must be deducted from your loss. That means the value of your investment, and any income from it, can fall as well as rise and you may not get back the full amount you invest. To qualify for loss relief the investment value must be less than this figure. Finally, if shares are eventually sold at a loss, the investor may offset the loss against their capital gains tax. For a 45% taxpayer, this reduces the loss as follows: EIS cash subscription. Loss Relief – If EIS shares are disposed of at any time at a loss (after taking into account income tax relief), such loss can be offset against the investor’s capital gains or income in the year of disposal or the previous year. If a loss is made on the disposal of EIS shares at any time, the loss, net of income tax relief, may be claimed against either current year or future capital gains, or, by election, against income of the current or previous tax year. You invested £1,000 in a qualifying EIS scheme and are therefore entitled to receive tax relief in an amount of £300. Here's a guide our support team have put together to outline the benefits. 3) Am I correct in thinking that at the date of liquidation my client can claim loss relief for the original value of the investment of £25,000, less the income tax relief given of £7,500. £100,000. This guide deals mainly with making a claim against your taxable income. To try to explain the process of claiming EIS tax relief through self-assessment in as straightforward a way as possible, we've broken the process down into the steps below. Just as with SEIS, if the EIS eligible company you invest in fails and your investment is worth nothing, or you sell your shares at a loss, you can claim loss relief. Unfortunately we are not able to offer legal or tax advice, but we hope this guidance issued by HMRC may be helpful: goo.gl/6c88R6 Samantha decides to invest in a company that qualifies for both SEIS and EIS as she wants to avail of the tax relief opportunities. Samantha invests £100,000 into JMG Technologies which have qualified for both EIS and SEIS. This helpsheet explains how to claim Income Tax relief under the Enterprise Investment Scheme. What types of companies are eligible for SEIS & EIS? 1) Individual claimants. No Capital Gains Tax is payable on disposal of the shares after 3 years as long as the initial EIS income tax relief was given and not withdrawn. You can claim back up to 30% of the value of your investment in the form of income tax relief. Yes. If this is your first time completing a self-assessment form, you will need to create an account. Well investors who rode the very short Skunkworks wave have now been informed that the EIS relief promoted on Crowdcube as being available - isnt. Most trades do qualify for SEIS and EIS funding, but a number are excluded from the schemes entirely. – Loss relief (if paying income tax at 45%) = £6,300 Total returns = £12,300. We strongly recommend you take advantage of EIS (and also SEIS, a similar scheme, but focused on even smaller, younger companies). Click to learn more. After applying the tax relief, you only owe £4,700. EIS reinvestment relief is more flexible than gift relief, in that it allows the gain on any asset to be deferred, as long as the proceeds are reinvested in qualifying EIS shares. The interaction with Entrepreneurs’ Relief (ER) In general, investors can potentially benefit both from the deferral of gains which can be reinvested under EIS and from ER on those same deferred gains when they come back into charge. Please note that when computing your loss, you must reduce the amount you invested in the company by the amount of any previously claimed income tax relief. Well, you can claim income tax relief of 50% on investments (T&Cs apply). How to claim EIS tax relief on your paper tax return. Risk Warning. Inheritance Tax Relief: EIS qualifying companies will generally qualify for Business Property Relief for Inheritance Tax. Whilst EIS loss relief is a welcome buffer against investment loss, investors should still bear in mind that they can lose money – in the main – if your EIS investment fails. It also gives some guidance on the circumstances in which an investor is eligible to make a claim. To benefit from loss relief the value of the EIS investment at the time of sale must have fallen below the effective cost. The value of the relief will be between 20% and 45% of your loss, depending on the rate at which you pay tax. You will need to complete the “Additional information” sheet and enclose it with your return. What are the benefits of investing in businesses with EIS and SEIS available? Loss Relief. Yesterday at 12:10 AM. Will receiving a reward for my investment affect EIS? The tax relief claimed will reduce the amount of tax that must be paid to HMRC. Tax treatment depends on individual circumstances and is subject to change in future. https://bit.ly/36WW2Cc Two options for EIS investment . In this example, instead of losing the total amount of your £20,000 investment, EIS tax relief means your loss is reduced to £7,700 due to both the income tax relief on your initial investment (£6000) and the loss relief (£6,300). Crowdcube. So a higher rate taxpayer who pays 40% income tax can claim 40% of the net loss in loss relief. In these instances there is EIS or SEIS available for a portion, but not all, of the raise. PLEASE NOTE: The availability of any tax relief, including EIS and SEIS, depends on the individual circumstances of each investor and of the company concerned, and may be subject to change in the future. When you dispose of EIS shares at a loss, the Share Loss Relief rules allow you to deduct the amount of the loss either from capital gains or from your taxable income1. Loss relief. How to invest in EIS companies. Loss relief. EIS is a tax relief scheme created by the UK Government to encourage investment into startups and early-stage businesses. In case the company fails, you will benefit from the income tax bill reduction (50% of your investment) and the loss relief, which is 45% of your at-risk capital. Our investment products may place your capital at risk and the value of them may go down as well as up and an investor may not get back the amount they invest. Loss relief when EIS shares are disposed of at a loss, either by being set against the investor’s capital gains or set against the income tax bill in the year of disposal; Carry-back: applying tax relief to a previous year; Reduction or elimination of Inheritance Tax on eligible EIS shares held for two years. EIS tax relief is available to UK investors, and EIIS tax relief is available to investors in Ireland. So instead of losing just £700 of their £1000 investment - they will now lose over £1000. Well, you can claim income tax relief of 50% on investments (T&Cs apply). This equates to a potential 45% value to those in the highest tax bracket. Assume you owned £5,000 in taxes. https://bit.ly/36WW2Cc See More. Loss relief. Here's a guide our support team have put together to outline the benefits. Head to www.tax.service.gov.uk and sign in. Additional reliefs . This is still the case even if you claim loss relief. EIS investments have to be in small, early stage and high risk companies. Samantha would like to invest in an early stage company. If your shares in an EIS company become worthless, because of company failure, the net loss after the income tax relief is removed can be applied against your taxable income in the year the loss is realized or in the previous year to the loss. Yesterday at 11:00 PM. In box 2 ("Subscriptions for shares under the Enterprise Investment Scheme") of the “Other tax reliefs” section, on page Ai 2, please write the total amount of all your EIS subscriptions on which you wish to claim tax relief. 100% Inheritance Tax Relief: the inherited shares get full IHT relief in case of the investors death after 2 years. Relief can be up to 100% after two years of holding the shares. Crowdcube. EIS Tax Relief EIS Loss Relief : N/A: Total Profit/(Loss) (including tax reliefs) Investing in a company or portfolio using the EIS makes you 0 better off than not using the EIS. Further information on this is available from the Crowdcube platform once it goes live. Example 4. Top Tax Bracket 100% Loss Case Study. This business is eligible for EIS relief - providing qualifying investors with income tax relief of 30% of their investment and certain other tax reliefs. The effective cost is calculated by taking the investment amount and taking away the amount of Income Tax relief claimed. However here we provide information on how to claim SEIS/EIS loss relief in a simple case without complications. So, even though you have pledged £10,000 in a business that has failed, you will lose only £2,750* . 3. 100% Loss Relief: your net losses can be set against your Income or Capital Gains Tax. This loss relief is equivalent to the rate at which you pay income tax. So 30% income tax relief claimed by them will now have to be repaid with interest - plus the possibility of an IR inquiry into why they claimed it. For example, if a business raising £100,000 might have only £20,000 of that raise as EIS-eligible, then the page will display 'EIS … If you sell your EIS shares at a loss, you can choose to set the loss amount, less any Income Tax relief already given, against your income. If the market value of the reward exceeds £1,000 it may affect your ability to claim tax relief. *How we calculated it: £10,000 – (£5,000+£2,250)=£2,750. EIS loss relief example? There may, however, be CGT loss relief available on the EIS investment to soften the blow. The mechanism is designed to cushion your portfolio rather than eradicate any impact whatsoever. However, any taxpayer – not just those in business – can take advantage of EIS reinvestment relief. Approval for Advance Assurance can take anywhere from a few weeks to a few months . For a raise to be listed as offering SEIS or EIS tax relief we would like to see either your Advance Assurance or an S/EIS2 document that has been issued within the last 12 months. What are the benefits of investing in businesses with EIS and SEIS a... vailable? Calculating the allowable loss. Gift relief only applies if the individual is disposing of a business asset. Further information on this is available from the Crowdcube platform once it goes live. Loss Relief – If EIS shares are disposed of at any time at a loss (after taking into account income tax relief), such loss can be offset against the investor’s capital gains or income in the year of disposal or the previous year. You can still lose money overall, even if you claim loss relief . So, a loss arises in the 2016/17 year of £17,500 which can be offset either against income tax or capital gains tax.