EISs are special single company investments based on a scheme set up by the Government in 1994 to encourage investment in early stage, fast growing UK companies.

They have similar tax advantages to Venture Capital Trusts and can be useful in deferring capital gains tax liability and in inheritance tax planning due to their additional tax benefits.

Unlike VCTs, EISs generally do not pay dividends.

What are the main tax benefits of EISs?

• 20% income tax relief on the cost of the investment for the year in which the shares were issued, on condition that the shares are held for at least three years.
• No capital gains tax on disposal after three years.
• Capital gains on assets sold in the previous 3 months or the following 12 months can be deferred by investment of the equivalent amount into an EIS.
• No inheritance tax if held for 2 years before death.

© John Bramwell 2005
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