What is the enterprise investment scheme?
Answered 11 March 2026
The Enterprise Investment Scheme (EIS)
What the law says
The Enterprise Investment Scheme (EIS) provides EIS income tax relief, defined as entitlement to tax reductions in respect of amounts subscribed by individuals for shares. The statutory basis for EIS relief is Part 5 of the Income Tax Act 2007 (ITA 2007), starting at s.156, and has effect only in relation to shares issued on or after 6 April 2007.
The capital gains aspects of EIS are governed by ss.150A and 150B of the Taxation of Chargeable Gains Act 1992 (CGT exemption on disposal) and Schedule 5B to TCGA 1992 (deferral of chargeable gains).
EIS replaced the Business Expansion Scheme (BES) from 1 January 1994.
HMRC guidance / practice
Purpose The EIS is intended to encourage individuals to subscribe for shares in new, small, higher-risk trading companies that would otherwise struggle to raise finance to support their growth and development. It forms part of a broader suite of "venture capital schemes" alongside SEIS and VCT.
Tax reliefs available EIS offers investors a range of tax reliefs:
- Income tax relief – calculated at 30% of the amount subscribed for qualifying shares (e.g. a £5,000 subscription generates £1,500 of relief).
- CGT disposal relief (exemption) – gains on disposal of EIS shares are exempt from CGT, subject to conditions.
- CGT deferral relief – a gain on disposal of any asset can be deferred by reinvesting the proceeds into EIS shares.
- Share loss relief – losses on disposal of EIS shares can be relieved against income.
Basic qualifying rule An individual is eligible for income tax relief if they subscribe in cash for, and are issued with, full-risk ordinary shares in a qualifying company. The legislation sets out requirements for: (i) the individual investor; (ii) the investment itself; and (iii) the way the company raises and uses the money.
Conditions and compliance Both the company and the investor must meet ongoing conditions for at least three years after the investment. If conditions are breached, relief will not be given or will be withdrawn. An investor cannot claim EIS relief until the company issues a compliance certificate (form EIS3), which HMRC must first authorise following submission of a compliance statement (form EIS1) by the company.
Administration HMRC's Venture Capital Reliefs (VCR) Team decides whether a company and share issue qualify, and monitors ongoing compliance. Companies may seek advance assurance from HMRC before inviting share subscriptions.
Citation sources
Identify the amount due for relief using the guidance in the Venture Capital Schemes Manual (VCM) at VCM10000 onwards. Enter that amount in IABD (PAYE130025) and NPS will calculate the coding allowance regardless of the rate at which the individual is liable to pay tax. For example, for an individual who has subscribed to qualifying shares £5,000, EIS relief will be calculated for the current year as £5,000 multiplied by 30 and divided by 100 = £1,500. Update IABD with the full subscribed qualif
Part III Income Tax, Corporation Tax and Capital Gains Tax Chapter I Income Tax and Corporation Tax The enterprise investment scheme and venture capital trusts Other changes to EIS etc. 74 1 Schedule 13 to this Act, which amends the provisions mentioned in subsection (2) below, shall have effect. 2 The provisions are— a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b sections 150A and 150B of the Taxation of Chargeable Gains Act 1992 (EIS relief in respect of chargeable gains);
Part 5 Enterprise investment scheme Chapter 1 Introduction EIS relief Meaning of “EIS relief” and commencement 156 1 This Part provides for EIS income tax relief (“EIS relief”), that is, entitlement to tax reductions in respect of amounts subscribed by individuals for shares. 2 In this Part “EIS” stands for the enterprise investment scheme. 3 In accordance with section 1034(3), this Part has effect only in relation to shares issued on or after 6 April 2007. This is subject to Schedule 2 (transit
The Enterprise Investment Scheme (EIS) is intended to encourage individuals to subscribe for shares in new, small, higher-risk trading companies that would otherwise struggle to raise finance to support their growth and development. Individuals whose investments meet the scheme conditions are eligible to a range of tax reliefs. Investors should be aware that the company has to observe certain rules, not just at the time of the investment but for at least three years afterwards. If it fails to me
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The Enterprise Investment Scheme (EIS) makes relief from Income Tax available to individuals in certain circumstances. The legislation is at Part 5 Income Tax Act 2007 starting at ITA07/S156. The basic rule is that an individual is eligible for the relief if he or she subscribes in cash for, and is issued with, full-risk ordinary shares (see VCM12020) in a qualifying company (see VCM13010). The legislation sets out: requirements to be met by the individual investor (see VCM11000+), ‘general’ req
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