What is EIS (Enterprise Investment Scheme)?
The Enterprise Investment Scheme (EIS) is a UK government initiative designed to help higher-risk trading companies raise finance by offering generous tax relief to investors.
Along with its "little brother" SEIS, it is the fuel that powers the UK angel ecosystem. Without EIS, raising funds from UK high-net-worth individuals would be significantly harder.
The Investor Benefits If an angel invests £10,000 into your EIS-eligible startup, they get:
- Income Tax Relief: They can claim back 30% (£3,000) of their investment against their income tax bill.
- Capital Gains Tax Exemption: If they sell the shares after 3 years, they pay £0 tax on the profit.
- Loss Relief: If your company fails, they can offset the loss against their income tax, significantly reducing their downside risk.
EIS vs. SEIS
- SEIS (Seed EIS): For very early-stage startups (assets < £350k). Offers 50% tax relief. Cap of £250,000 total investment.
- EIS: For growth-stage companies (assets < £15m). Offers 30% tax relief. Cap of £12 million total lifetime investment.
Advance Assurance Before you pitch to investors, you should apply for Advance Assurance from HMRC. This is a letter confirming that your company should qualify for EIS. Most UK angels will not transfer funds until they see this letter, as they want to be certain they will get their tax break.
Key Takeaway: EIS de-risks the investment for angels. Effectively, the government is subsidizing 30% of their bet on your company.
