Showing posts with label Enterprise Investment Scheme. Show all posts
Showing posts with label Enterprise Investment Scheme. Show all posts

Friday 5 February 2016

Does your Company Operate in an Enterprise Zone?

If your company is located in one of the 30 or so enterprise zones, there are significant Government incentives to encourage investment. 

100% first-year allowances for companies investing in new plant or machinery will be extended for a further 3 years to 31 March 2020.

The government has announced 18 new Enterprise Zones and extended 8 zones late last year.

HMRC have added maps to their online guidance, showing sites within enterprise zones that offer 100% first-year allowances for companies. This 100% allowance is in an addition to the normal £200,000 Annual Investment Allowance.


New maps for Tees Valley, Wirral, Black Country, Wilton, and Southbank enterprise zones have been added to the Gov.uk website.
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Monday 30 November 2015

Tax Relief Under The Enterprise Investment Scheme (EIS)

The Enterprise Investment Scheme allows unconnected investors to obtain a 30% set off against their income tax liability up to £1,000,000 investment each tax year. So a £10,000 investment reduces the investor’s income tax liability by £3,000.  In addition, provided those shares are held for at least 3 years, the gain on disposal of those shares is tax free.


However, as illustrated in a recent tax case, the capital gains exemption is only available where the investor has made a claim for income tax relief. In Ames v HMRC (2015) the taxpayer, Mr Ames, invested £50,000 in a new company but unfortunately had very little income that year so did not claim EIS income tax relief. When he sold the shares several years later for £333,000, he found that the exemption did not apply and the gain was taxable!

Note that Seed EIS for small start-up companies provides 50% income tax relief and the same CGT exemption when the shares are sold.

The connected persons rule means that existing employees, paid directors and their associates are not entitled to these reliefs. Shareholders with more than 30% of the company’s shares, together with their associates, are also excluded.

Note that these exclusions do not apply where the investor is merely seeking to defer capital gains tax via their EIS investment.

The rules for EIS and Seed EIS are very complex so please get in touch with us to discuss the tax implications if you are considering making such an investment.

Feel free to contact us for further advice.
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