The Stock Market Might Be Tumbling But Generous EIS Incentives Remain

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The UK’s leading share index – FTSE 100 – experienced its worst day since the 2008 financial crisis, after billions were wiped off the value of top shares earlier this week.

The spectacular fall follows a global trend as a dispute between Russia and Saudi Arabia caused oil prices to fall more than 20%.

Shares were already on a downward spiral from coronavirus fears as the number of cases worldwide continues to increase.

Investors are selling stocks at such a rate because they are unable to measure what Saudi Arabia and Russia may do next.

Unsurprisingly, oil firms are experiencing the biggest falls, with shares in Shell and BP both down by about 15%, while Premier Oil saw its shares more than halve in value.

The immense falls were also seen elsewhere in Europe, with stock markets in France and Germany also opening more than 7% lower. Norway – a major oil exporter – saw its main stock exchange fall 12% in early trade, before recovering by a couple of percent.

Justin Urquhart-Stewart, co-founder of Seven Investment Management told the BBC “It shows a level of nervousness in the market which I haven’t seen in a long time”.

So are unlisted securities as vulnerable as listed securities here in the UK?

Fortunately, there are two excellent UK government initiatives which encourage innovation by granting private investors significant tax breaks when investing in early stage, unlisted companies – the Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS).

And with the tax year just about to end, canny investors can take advantage of both generous schemes, to receive some very generous relief on their upcoming tax returns.

SEIS

Companies which have received Advanced Assurance from HMRC, can receive a maximum of £150,000 through SEIS investments.

SEIS enables individual investors to claim tax relief on up to £100,000 invested through the scheme per year. SEIS companies can be invested in directly or through an SEIS fund.

Tax reliefs to investors include:

  • Individual Income Tax relief of 50% of the amount invested
  • Exemption from Capital Gains on earnings from shares
  • Profits realised within three years are exempt from Capital Gains if reinvested in the SEIS
  • Loss relief if the company fails (even if this is within the three-year hold period)

EIS

If you’re considering investing more than £100,000 in an early-stage company, it may be better to look at EIS and EIS Funds, which also offers generous tax relief incentives to UK investors.

Tax reliefs include:

  • Individual Income Tax relief of 30% on up to £1m invested per tax year (or £2m per tax year as long as at least £1m of this is invested in knowledge-intensive businesses, for example, life science businesses).
  • No Capital Gains on the sale of shares held for at least three years.
  • Loss relief on your at-risk investment multiplied by your tax rate.
  • No Inheritance Tax paid on shares bought through EIS and held for two years.

These schemes can provide massive benefits to you as an investor in early stage-companies.

Moreover, this is a great time to invest in early stage companies because we are approaching the end of the tax year (April 5th) so make an SEIS or EIS claim before then and you will receive the tax relief very soon.

to see the opportunities currently available, please click here.

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