Queen Elizabeth II 1926 - 2022

Enterprise Investment Schemes (EIS) and Venture Capital Trust (VCT) investments can provide a useful tool in income tax planning, profit extraction and capital gains tax and inheritance tax (IHT) planning. Similarly, IHT schemes can allow investments that qualify for business property relief (BPF) to be passed on IHT-free upon death.

EIS and VCT schemes are designed to encourage investors to buy shares in smaller, higher-risk companies, enabling them to raise finance for growth.

VCT investments provide:

  • up to 30 per cent income tax relief on the amount subscribed (up to a maximum of £200,000 per tax year) provided the shares are held for at least five years
  • tax-free dividends
  • tax-free capital gains on the disposal of shares.

Benefits of EIS include:

  • income tax relief of 30 per cent
  • capital gains tax deferral benefits, provided the shares are held for the time specified in EIS rules
  • up to 100 per cent business property relief for IHT purposes when they have been held for the appropriate time.

Benefits of IHT schemes include:

  • Investments that qualify for BPR can be passed on IHT-free upon the investor’s death
  • this applies if the shares have been owned for at least two years at the point of death.

The level of tax treatment depends on your individual circumstance. Tax breaks exist under current legislation and are subject to change. Tax breaks alone should not be the sole reason to invest into tax efficient investments. Investment in private companies carries a high risk: it is highly speculative and there is no recognised market for these shares. For advice in this area please speak to our financial planners for further guidance.

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