The Enterprise Investment Scheme (EIS) and Other Tax-Advantaged Venture Capital Schemes

• There are many numerical examples to aid understanding of potential tax exposure, for example, showing the effect of income tax and CGT of a clawback of relief where EIS shares are not held for the minimum qualifying period.
• Tax traps are highlighted throughout the enterprise investment scheme training course, often by reference to recent cases where companies or investors have expected tax breaks to be available but have found that they weren’t, due to a breach of conditions.

For each tax-advantaged venture capital scheme, this enterprise investment scheme course will explain to delegates:

• The main qualifying conditions for both the company and the investor
• The income tax reliefs available and the circumstances in which they are clawed back
• The availability (or otherwise) of capital gains tax (CGT) exemption on the shares
• The difference in CGT reinvestment relief between EIS and Seed EIS investment schemes
• Common compliance problems, evidenced by reference to case law
• How the principles are demonstrated in practical case studies

The background of the venture capital schemes and the differences between them

• The EIS tax relief for each scheme

Enterprise Investment Scheme (EIS) relief

• Qualifying companies
  • The definition of unquoted companies with reference to AIM companies
• Qualifying trades and excluded activities
  • The nuances of the legislative definitions and the issues which can arise
• Qualifying investors
  • Including the impact of being ‘connected’ to the company
  • The business angel exemption for directors
• ‘Knowledge-intensive’ companies
  • How a company is categorised as such
  • The impact of being a KIC
• EIS ‘risk to capital’ condition
  • The growing importance of understanding this condition and how the Courts are looking at this
• The tax breaks
  • Income tax relief on investment
  • CGT exemption on qualifying gains
  • When EIS scheme reliefs are clawed back
  • Reinvestment relief, allowing gains on other assets to be deferred
• Common compliance problems, including reference to recent tax cases and examples of HMRC challenges
• The potential use of capital losses against income where companies fail
• A case study of the overall tax advantages of investing over the life of an EIS company

Seed Enterprise Investment Scheme (EIS)

• Qualifying companies
• Qualifying investors
• The tax breaks
  • EIS Income tax relief on investment
  • CGT exemption for qualifying gains
  • When reliefs are clawed back
  • Reinvestment relief, giving some capital gains tax (CGT) exemption rather than deferral
• The interaction between EIS and SEIS
• A case study of the overall tax advantages of investing over the life of an SEIS company

Overview of compliance procedures

• Advance assurance
  • When will HMRC refuse to give advance assurance
• EIS1 and SEIS1 forms and how to complete these

Venture Capital Trusts (VCTs)

• Qualifying conditions, in particular, the restrictions on how they invest their funds
• The tax breaks 
  • Income tax relief on the investment and when it is clawed back 
  • Capital gains tax (CGT) exemption on the shares
• How do the tax breaks compare to the EIS funds?

Social Investment Tax Relief

• A brief overview of the relief highlighting situations where it might be used

Inheritance tax

• Business Property Relief (BPR) - availability on venture capital investments

The trainer started her career with HM Inland Revenue as a Fully Trained Inspector before gaining qualification as a Chartered Tax Advisor whilst still working for the department.  She worked in the Large Business Office and in the local District network covering all aspects of direct tax.

She left in 2000 to become a consultant before setting up in business providing training and consultancy.  The training involves CPD seminars, exam training, mentoring, and bespoke in-house training for all levels of accountants and tax specialists.  The consultancy involves accountants and businesses in all aspects of tax planning as well as dealing with tax disclosures, HMRC enquiries and Tribunal cases.  All aspects of direct tax and Stamp Duty Land Tax are covered.

The trainer believes the interaction between the training and consultancy is vital to providing the highest quality service in both areas.  The consultancy allows the training to be practical by focusing on real cases where problems have been encountered and solved.  The experience of providing consultancy allows the training to be interactive with delegates encouraged to participate and discuss their own cases.  

Unquoted companies are often a very high risk for investors, yet they form the ‘engine’ of the economy. To encourage investors to provide the finance to allow these companies to grow, there are a plethora of often very generous tax breaks available for those who are willing to invest, in particular via the EIS or Seed EIS. However, whenever there are generous tax breaks, there are always very detailed compliance conditions that have to be met and that hold traps for the unwary.

This enterprise investment scheme course will inform participants of the key tax rules affecting these venture capital tax incentives. There is a multitude of income tax and CGT issues to be aware of, as well as other key factors that may affect investment decisions, such as whether interest on a loan to finance the investment will qualify for seed EIS tax relief. Some of these tax breaks are extended to companies (such as AIM-listed stocks) that do not have a full listing.