EIS TAX BREAK
This is a Government Initiative to encourage investment of small unlisted companies where risk is deemed higher and the scheme allows you to receive tax relief of 30%.
An example being that if you invest £10,000 in ‘Give Them Wings’ you would be able to reduce your your income tax bill by £3,000 for the year that you invested. In addition, you pay no capital tax gains on any profits made from investing in ‘Give Them Wings’.
Should your investment in ‘Give Them Wings’ make a loss, you can offset that loss against income tax. Worst case if you lost all your investment £7,000 (£10,000 – £3,000) then you may reduce your taxable income for the year in which you dispose of the shares by £7,000, resulting in a saving of £2,800 (40% of £7,000) for a higher rate tax payer. Alternatively you can offset your loss against capital gains in the normal way.
- There is no inheritance tax to pay on shares bought through EIS.
- You must hold the shares for three years before selling them.
- Due to the purpose of investment ‘Give Them Wings’ will not be giving dividends on shares so taxable dividends aren’t applicable.
- You cannot be associated to the company ahead of purchasing shares.
- You cannot have a stake exceeding 30% of ‘Give Them Wings’.
- EIS stipulates that you cannot exceed £1m in a single year, however investment in ‘Give Them Wings’ is not required to those levels to get the film made.
‘Give Them Wings’ is looking for investment of £100,000 with a maximum personal investment of £33,000. The total investment may ultimately exceed £100,000 which would allow personal investment to be higher but remaining within the 30% limit.