EIS - Share Offer Information

CYBER THEATRE structure funding by qualifying for a UK Government regulated tax shelter, namely the Enterprise Investment Scheme (EIS) which is integrated within bespoke finance structures, alongside various other sources of industry finance.

By using this scheme our investors are able to benefit from massive reductions to their Income and Capital Gains Tax liabilities while investing in a dynamic and glamorous sector with potentially explosive tax free returns.

Please see the table below for a full breakdown of the tax reliefs available to you:


Amount Invested 20% EIS Income Tax Relief (Up to) EIS 40%Capital Gains Tax Deferral Relief Combined Reliefs Net Cost
£5,000 £1,000 £2,000 £3,000 £2,000
£10,000 £2,000 £4,000 £6,000 £4,000
£20,000 £4,000 £8,000 £12,000 £8,000
£50,000 £10,000 £20,000 £30,000 £20,000
£100,000 £20,000 £40,000 £60,000 £40,000
£200,000 £40,000 £80,000 £120,000 £80,000
£400,000 £80,000 £160,000 £240,000 £160,000

Please click here to visit HMRC.gov.uk for more details on EIS.

This is intended for guidance only and does not attempt comprehensive or detailed coverage of the rules of the EIS.

The information contained in this website  is believed to be correct, it is presented for illustrative purposes  and no warranty is given as to its correctness. Independent investment advice should always be taken when considering whether to make an EIS investment .

The Reliefs Available

The reliefs available under the Corporate Venturing Scheme may only be claimed by a qualifying investing company (an ‘Investing Company’) which subscribes for new eligible shares (‘Eligible Shares’) in a qualifying issuing company (an ‘Issuing Company’).

The main reliefs comprise:

  • Investment relief
  • Loss relief
  • Deferral relief

Investment relief is provided by way of a reduction in the Investing Company’s liability to corporation tax in the accounting period in which the investment is made.

The reduction in the corporation tax liability is equivalent to 20% of the amount subscribed for the shares (or the amount of the corporation tax liability if lower).

Loss relief may be available on a subsequent disposal of the shares. The loss, net of investment relief may be offset against chargeable gains in the normal way or, under the Corporate Venturing Scheme, against the income of the current and previous accounting period. This assumes that gains and losses on the disposal of the shares are not otherwise exempted under the substantial shareholder provisions of Section 192A and Schedule 7AC of the TCGA 1992.

Deferral relief may be available where a chargeable gain is realised on the disposal of shares on which investment relief was received. The chargeable gain may be deferred by way of investment into other shares qualifying under the Corporate Venturing Scheme.

 

1. If I am claiming Income Tax Relief or Capital Gains Tax Deferral (CGT) how does it work?

After subscribing for your EIS shares, within the first few months you will be sent a tax certificate. This needs to be sent to your tax office, if it is received after the end of the tax year then you can send it with your tax returns.

2. How much can I initially offset with the combined reliefs?

Up to 60 pence in the £1.

3. If I have paid Capital Gains Tax (CGT) in the last three years am I able to obtain CGT Deferral?

Yes.

4. If after three years I sell my shares at a profit, what will happen?

Each share is sold at £1, presuming after 3 years the shares were sold for £2.25 the tables below illustrate how this would work for the investor.

Income Tax Relief 20%
£25,000 original investment £20,000 Net cost of investment assuming 20% income tax relief.

Investment of 25,000 shares sold at £2.25

£56,250 Capital received Tax Free.
Income tax 20% and CGT 40%
£25,000 original investment £10,000 Net cost of investment assuming 20% income tax relief and CGT deferral 40%.
Investment of 25,000 shares sold at £2.25 £56,250 Capital received Tax Free.

5. If after 3 years I were to actually lose money, what would happen?

If the shares are disposed of at a loss, you can elect that the amount of the loss, less any income tax relief given, can be set against income of the year in which they were disposed of, or any income of the previous year, instead of being set off against any capital gains.

6. How does the EIS compare to typical investments?
The combination of reliefs offered by the EIS scheme substantially increase returns whilst mitigating risk. The following three example scenarios illustrate this point. The examples assume the investor is a higher rate taxpayer, who has utilised his annual CGT exemption and will therefore pay tax on any capital gains, or, where he has an overall loss and that he has no other gains against which to relieve the loss. Taper relief is ignored.

EIS Reliefs Compared with typical investments

The combination of reliefs offered by the EIS scheme substantially increase returns whilst mitigating risk. The following three example scenarios illustrate this point. The examples assume the investor is a higher rate taxpayer, who has utilised his annual CGT exemption and will therefore pay tax on any capital gains, or, where he has an overall loss and that he has no other gains against which to relieve the loss. Taper relief is ignored.

Scenario 1 - Enhanced Returns: +25% return

Assume that of six investments three double in value and three halve in value. The overall investment return on the Fund is therefore +25%.

  ISA Unit/Investment Trust EIS Fund
Portfolio Return % 25% 25% 25%
Income Tax Rebate % - - 20%
Loss Relief % - - 6%
Capital Gains Liability % - (10%) -
Total Return 25% 15% 51%

Scenario 2 - Enhanced Returns: 0% return

Assume that of six investments two double in value and four halve in value. The overall investment return on the Fund is therefore zero.

  ISA Unit/Investment Trust EIS Fund
Portfolio Return % 0% 0% 0%
Income Tax Rebate % - - 20%
Loss Relief % - - 8%
Capital Gains Liability % - - -
Total Return 0% 0% 28%

Scenario 3 - Loss mitigation: -25% return

Assume that of six investments one doubles in value and five halve in value. The overall investment return on the Fund is therefore -25%.

  ISA Unit/Investment Trust EIS Fund
Portfolio Return % (25%) (25%) (25%)
Income Tax Rebate % - - 20%
Loss Relief % - - 10%
Capital Gains Liability % - - -
Total Return (25%) (25%) 5%

The five separate EIS Tax Reliefs:

1. Income tax relief, (20%) is available to individuals (counting husbands and wives separately) in respect of the amount subscribed for eligible shares in a qualifying company at 20%, on a maximum of £400,000 for any one tax year.

2. Capital Gains Tax Deferral. (40%) Where an individual has a chargeable Capital Gain, a claim may be made to defer the assessment of that chargeable gain, or any part of it, which arises within the period of three years before or one year after an Investment has been made in an EIS company.

3. Capital Gains Tax Freedom. There is no CGT payable on gains in respect of Investments made in an EIS Company.

4. Inheritance Tax Exemption. If the investment has been held for at least two years before death, the investment should, in most cases, be entirely free from Inheritance Tax and with the other benefits of the EIS, the effective cost of investment may be reduced to zero.

5. Loss Relief. If any investment in an EIS Company realise capital losses, then loss relief applies (net of initial income tax relief). This loss can be offset against income tax of the same year or a preceding one, or against capital gains of the same year or carried forward.

CLICK HERE FOR MORE INFORMATION ON THE EIS FROM THE HMRC

 

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