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How far back can I claim EIS relief?

How far back can you claim EIS relief?
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    You may have invested in an Enterprise Investment Scheme (EIS) fund and want to know if you can claim tax relief. If so, there are some specific rules in place to determine your ability to do so and they may vary depending on the kind of investment you made.

    If you’re trying to determine how far back you can claim enterprise investment scheme relief, it largely depends on when you made your initial investment. You can claim up to 5 years after the 31st January after the tax year that you made the first investment. So you’ve got a significant amount of time to claim back this relief.

    The Enterprise Investment Scheme (EIS) relief is a form of venture capital scheme that provides tax relief to individuals as a way to incentivise investing in companies outside of the stock exchange. EIS allows you to directly invest in certain companies or enterprises using a venture capital scheme.

    There are several different things you can claim for in an EIS, such as:

    • Income tax relief against your investment.
    • Income tax relief against any loans offered to social enterprises.
    • Capital Gains Tax relief on any gains made from your investment.
    • Capital Gains Tax relief if you choose to reinvest a gain into the scheme.

    One way to enjoy relief is by investing in new shares or by offering loans to social enterprises. You’re also free to invest in other companies and in different schemes, provided you keep under certain limits.

    With EIS, you can invest £1 million directly or £2 million if it’s going towards a knowledge-intensive company. From here, you can claim back up to 30 % of your investment through EIS relief.

    What time limits apply to EIS relief?

    There is a five-year time limit for claiming relief. Relief must be claimed within the first five years of issue. Otherwise, you will not be able to claim EIS relief.

    However, if you are unable to claim within this timeframe, any shares that were issued before 31 March 2023 may still qualify for relief, and you can still make a claim for these shares up until 31 March 2024.

    If your company issues new shares after 31 March 2023 then they will not qualify for EIS relief.

    Can I get EIS relief for shares bought in the past?

    If you have held the shares for at least three years, then you will be able to claim EIS relief. If you have held shares for less than three years, but over six months, then you will still be able to get some tax relief.

    If you have not held the shares at all or if your company has not started trading yet, then unfortunately, no EIS relief can be claimed.

    What are specific rules in place for EIS eligibility?

    As mentioned above, there are specific rules in place to determine your ability to claim tax relief, and they may vary depending on the kind of investment you made. What’s more, these time limits may have changed since their original publication.

    The Enterprise Investment Scheme (EIS) is a scheme that allows individuals and businesses to invest in new or growing companies and receive income tax relief in return. The scheme was introduced by the then Chancellor Gordon Brown in 1994 as part of his economic programme for Britain and has been revised several times since then.

    There are two broad categories under which investments fall: ‘qualifying’ and ‘non-qualifying’. Any qualifying investments must be held for at least three years from the completion date before any proceeds can be withdrawn from them; no such restriction applies to non-qualifying investments which can be withdrawn within one year from the completion date, provided that there is an adequate security arrangement in place over such proceeds until those funds are eventually returned to investors.

    When you won’t receive tax relief on investments

    There are a number of stipulations that factor into EIS relief, so it’s not a universal form of income tax relief. For example, you can’t receive relief if you’re directly connected to the business.

    This means that you and your associates cannot be:

    • Employed at the company or any parent/subsidiary companies (except as a director).
    • Hold over 30 % of the company shares, rights to assets or voting rights.

    Associates in this context could mean a few different people, including relatives, spouses, business partners or trustees.

    Conclusion

    If you want to claim EIS relief, make sure you understand the rules and keep records of your investment. EIS is a tax relief that can be claimed by individuals and businesses who invest in qualifying companies.

    If you need some help understanding the intricacies of EIS, or if you’d like expert support for tax advisory matters, get in touch with our team at WIS Accountancy today.

    Frequently asked questions about claiming EIS relief

    Can EIS income tax relief be carried back?

    Yes, you can carry back EIS income tax relief under certain circumstances. You can carry back all – or part of – your investment for the previous tax year, provided that you haven’t reached the limit for relief for that year.

    What happens if I sell my shares within 3 years?

    If you decide to sell your EIS shares within 3 years of their issuance, then any income tax relief you receive from those will either be partly or completely withdrawn. Any gains on this loss will be charged via Capital Gains Tax.

    Can I claim EIS loss relief on my tax return online?

    Yes, you can. If you’d like to claim your EIS loss relief in your self-assessment tax return, you can claim any losses as part of income tax or Capital Gains Tax. To do this, fill out the SA108 form which is a part of the SA100 form.

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