If you are running your own business, then you’re going to have to file taxes each year at the end of the tax year. If you have been successful in creating a profitable enterprise, then you might be eligible for EIS tax relief so that you can save some money on your tax bill and utilize your hard-earned funds to propel your company’s growth. Here are 10 things you didn’t know about EIS investment tax relief that will help your business prosper in today’s market.
The Enterprise Investment Scheme is a government-backed programme that allows investors to get tax relief on money invested in small and medium-sized companies. This makes it easier for start-ups and growth businesses to raise capital – if they are accepted onto the scheme. (All companies have to undergo a rigorous due diligence process.) The benefits for investors are twofold: not only do you make a decent profit, but you also receive income tax relief of 30pc on your investment.
2) Can I carry forward my losses?
EIS is one of the most fantastic investment opportunities in the UK for start-ups and entrepreneurs, but it does come with some restrictions. In fact, there are five main rules you must obey in order to benefit from tax relief through an EIS investment
3) How can I claim tax relief on income from an Enterprise Investment Scheme (EIS)?
If you received income from an EIS you will probably have to pay tax on it. However, you may be able to claim EIS tax relief if you invested in qualifying assets under one of HMRC’s incentive schemes, including a Seed Enterprise Investment Scheme (SEIS) or EIS. This can provide significant tax savings for your investment and is worth knowing about before making a decision on whether to invest in such a scheme.
4) How does a dividend qualify for income tax relief under an Enterprise Investment Scheme (EIS)?
In order to qualify for EIS tax relief, a company has to be eligible, have invested in shares or loans and declare that it’s applying for tax relief under an investment which is registered with HMRC. A minimum of £100,000 must be invested and only 10% of a company’s income can come from its other taxable activities. Investors are typically eligible for capital gains tax (CGT) or corporation tax (CT) relief on any profit made after two years.
5) When can I pay myself?
Paying yourself or other employees out of an EIS-funded business can be a bit tricky because, depending on your employment status, you may have to withhold tax from yourself. If you’re an employee and paid $600 or more in a year (for a company whose turnover is less than $5 million), you’ll need to pay income tax at your marginal rate. This can work out to 15 percent for people earning $60,000 to $80,000.
6) Is there any limit on how much investment I can make in an Enterprise Investment Scheme (EIS)?
Yes. The maximum amount which an individual can invest in any one eligible company is £1,000,000 in total for all tax years beginning on or after 6 April 2014.
7) How is Enterprise Investment Scheme (EIS) income taxed?
There are several things to bear in mind when it comes to how your income from an EIS is taxed. First, income from an EIS must be approved by HMRC for tax relief before you can claim it on your tax return. Second, there are two main types of EIS: venture capital trusts (VCTs) and enterprise investment schemes (EISs). Third, certain conditions apply to investments made through a company which is conducting its business as a separate entity.
8) Are all companies eligible for the Enterprise Investment Scheme (EIS)?
There are a few criteria that companies need to meet to be eligible for EIS, such as making sure you’re registered with HMRC as a company and you have no unpaid tax from previous years. If your company does not meet these basic requirements, it will not be eligible for EIS investment tax relief.