What tax reliefs are available under the enterprise investment scheme?

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# Tax Reliefs Available Under the Enterprise Investment Scheme (EIS)

## What the law says

The EIS provides the following distinct tax reliefs, all found in or connected to Part 5 of ITA 2007 and related TCGA 1992 provisions:

### 1. EIS Income Tax Relief
Part 5 of ITA 2007 provides for **EIS income tax relief**, described as "entitlement to tax reductions in respect of amounts subscribed by individuals for shares". The relief rate is **30%** of the amount subscribed (amended from 20% for tax year 2011-12 onwards by substituting "30%" into s.158(2A) ITA 2007). For shares where EIS relief was obtained for tax year 2007-08 or earlier, the rate remains 20%.

### 2. Capital Gains Tax Exemption on Disposal
Under **s.150A TCGA 1992**, where an individual disposes of EIS shares after the relevant holding period and there would otherwise be a **gain**, that gain shall **not be a chargeable gain**. This exemption is proportionally reduced where the income tax relief obtained was less than the full amount.

### 3. EIS Deferral Relief (CGT Reinvestment Relief)
**Schedule 5B to TCGA 1992** provides relief in respect of the **re-investment under EIS of the proceeds of assets disposed of in circumstances where there would otherwise be a chargeable gain**. This allows investors to defer a capital gain by subscribing for EIS shares.

### 4. Loss Relief Against Income
**Chapter 6 of Part 4 of ITA 2007** (losses on disposal of shares) provides for **relief against the income** of an individual who incurs an allowable loss for CGT purposes on a disposal of shares to which EIS relief is attributable.

### 5. Loss Adjustment on Disposal
Where EIS relief is attributable to shares and there would otherwise be a **loss** on disposal, the consideration given for the shares is treated as **reduced by the amount of the EIS relief** (preventing double relief).

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## HMRC Guidance / Practice

- The EIS is one of the **venture capital schemes** that "provide various tax reliefs to individuals who invest directly or indirectly in qualifying small, higher risk companies or social enterprises, to help them grow and develop." The EIS specifically **encourages direct investment by individuals**.

- HMRC administers the schemes through a specialist **Venture Capital Reliefs (VCR) Team**, which handles enquiries from companies about EIS conditions and requests for informal advance clearance. However, **claims by investors** to income tax/CGT reliefs are dealt with by the tax office handling the claimant.

- **Share Loss Relief** is also available in connection with EIS shares — it has been available in respect of certain shares issued on or after 1 January 1994.

- Where cryptoassets are involved, there are **no specific legislative provisions** referring to cryptoassets within the EIS rules; HMRC reviews such cases in the same way as any other cases, and clearance can be sought via the Non-Statutory Clearance Notice if genuine uncertainty remains.

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### Summary Table

| Relief | Nature | Key Provision |
|---|---|---|
| Income Tax Relief | 30% tax reduction on subscription | s.158 ITA 2007 |
| CGT Exemption on Disposal | No chargeable gain on qualifying disposal | s.150A TCGA 1992 |
| CGT Deferral Relief | Defer gain on reinvestment into EIS shares | Sch. 5B TCGA 1992 |
| Loss Relief Against Income | Allowable loss set against income | Ch. 6, Pt. 4 ITA 2007 |

Relief	Nature	Key Provision
Income Tax Relief	30% tax reduction on subscription	s.158 ITA 2007
CGT Exemption on Disposal	No chargeable gain on qualifying disposal	s.150A TCGA 1992
CGT Deferral Relief	Defer gain on reinvestment into EIS shares	Sch. 5B TCGA 1992
Loss Relief Against Income	Allowable loss set against income	Ch. 6, Pt. 4 ITA 2007