Changes to timing of Enterprise Investment Scheme (EIS) tax relief

EIS is a fantastic vehicle for reducing tax exposure as it provides 30% Income Tax relief, can be used to defer capital gains, and after 2 years an investment into EIS qualifies for 100% Business Property Relief, which removes it from the charge to Inheritance Tax.  

However you may not be aware that HMRC have recently been tightening up on the claiming of EIS reliefs.  Historically, although the tax reliefs cannot technically be claimed on EIS investments until the EIS3 certificates have been issued, HMRC have allowed you to claim EIS Relief on Returns as soon as the investment has been made and before EIS3’s have been issued, and in the vast majority of cases, HMRC allowed this (even in cases where there was an investigation), almost by concession.  Their stance has now changed however, and on 8th August their Agent Update Issue No. 61 confirmed that agents should not be claiming EIS Reliefs until EIS3 certificates are received.  

It is important to emphasise that the very generous tax reliefs themselves are unchanged, however this change in HMRC’s approach does unfortunately mean that EIS investors may have to wait longer now than they have in the past to claim the relief and receive the tax repayment. 

If you have any queries regarding how the new regulations will affect you, please contact your usual Scrutton Bland adviser or Sally Ledger on 01473 267000.