Enterprise Investment Scheme, aka EIS, is an investment module where experienced investors make investments in new companies or start-ups to receive a significant amount of tax relief. With the help of this scheme, small companies can seamlessly raise funds and expand their business alongside the operations. The investments could either be made to one company via funds overseen and managed by an experienced investment person.
Moreover, the companies which generally qualify for this specific type of investment are privately owned by mid as well as small investors. However, they can still be listed on the AIM. Procuring gross assets of less than $18 million during investment with fewer employees deems them to be able to gain access into the EIS. These companies do enjoy significant relaxation concerning taxes.
EIS Scheme launched for the first time in 1994, more than 33,000 companies have managed to reach an overall investment of more than $27 Billion. over two decades.
How Can Companies Qualify For EIS?
If you’re an investor, you can find several young companies spread across different verticals. The rules that these companies need to follow to qualify for EIS is reasonably straightforward. The idea behind opting for the EIS Shares is to make profits just like any other investment. Nevertheless, with EIS, there are specific sectors that are excluded, such as commodities, land etc. The government did also introduce a recent change to the entire scheme by excluding companies that invest their time on asset backing and possess contractual streams of revenue.
Even there are certain restrictions in a place like the size and age of the company, leading to not being qualified for EIS. Irrespective of the fact that the list of the companies being excluded is massive, it certainly does leave out an enormous scope for investors to make lump-sum money.
How Can You Get Into Socially Responsible Investing?
Social responsible investing includes understanding how unpredictable it is to pour down your money on EIS-qualifying companies. If you’re looking forward to investing in EIS, you must be aware of the risks you need to take to make more profits.
EIS companies are in the early stages. Hence, there is a highly likely chance that the value of the investment could fall to zero at time. In addition to this, there are chances that the acquisition won’t find an ideal return. Tax relief, on the other hand, depends entirely on the personal circumstances of investors. There isn’t a guarantee that the companies part of the EIS could maintain their qualifying status concerning the scheme.
EIS shares often are unquoted. The minimum holding period is three years from the time of investing. Hence, considering these factors will yield you benefits in the long run.
Final Words
Like any other investment scheme, EIS comes with its share of pros and cons. Taking both the benefits and drawbacks into consideration will either make you very rich or give you an ideal profit.
