Thanks!

What is the Enterprise Investment Scheme?

Investors in an EIS portfolio own shares directly in a portfolio of early-stage companies. EIS typically appeals to experienced investors who want to back companies with high growth potential. Investors can claim generous tax reliefs because of the risks involved, which include loss relief when an underlying investment returns less than they invested.

What are the reasons to invest?

High growth potential

Access to high-risk opportunities with the potential for high growth.

Tax reliefs

Reliefs include upfront income tax relief, tax-free growth, loss relief, capital gains tax deferral, and inheritance tax relief.

Diversification

Access early-stage companies investors wouldn’t hold in a mainstream investment.

Points to consider

An EIS portfolio invests in small early-stage companies. The combination of tax reliefs available makes an EIS-qualifying portfolio a compelling structure through which to target high growth. 

Investors must hold shares for a minimum of three years to keep any tax reliefs claimed and should be prepared to hold their shares for significantly longer to allow time for growth and liquidity. 

If your client is looking for relief from inheritance tax, please consider the longer time horizons and additional risks that come with EIS investments. In some cases, EIS investments will not be the most suitable option for a client planning for inheritance tax, especially if they wish to target predictable returns.

What are Venture Capital Trusts?

Venture Capital Trusts invest in a diversified portfolio of early-stage companies. Investors benefit from the VCT owning small stakes in a large number of companies across different sectors. 

What are the reasons to invest?

Income tax relief 

Investors can claim upfront income tax relief equal to 30% of their investment up to the first £200,000 invested each tax year. 

Tax-free dividends 

The tax-free dividends paid by a VCT can create an additional income. 

Diversification

VCTs give investors access to smaller companies they may not otherwise hold. 

Points to consider

VCTs were created by the UK government to fund the growth of early-stage companies by encouraging investment into UK high growth small businesses. They’re a long-term investment and clients should be prepared to hold their shares for a minimum of five years, otherwise any tax reliefs claimed will need to be repaid. 

This advertisement is not a prospectus. Investors should only subscribe for shares based on information in the prospectus and Key Information Document (KID), which can be obtained from octopusinvestments.com.