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pCharles de Lastic, Managing Director of Bluebond Financial Planning, explains why small business owners might want to make their business an EIS company./p
pThe Enterprise Investment Scheme (EIS) is traditionally thought to be a high risk, entrepreneurial investment.nbsp; As a small business owner you would benefit from 20% tax relief and tax free capital gains.nbsp; These two benefits alone can make the scheme seem an attractive option.nbsp;/p
pstrongAre EIS companies too high risk?/strong/p
pItrsquo;s not widely known that EIS can be used by small business owners to enable their lsquo;normalrsquo; companies to benefit from:/p
ul
liInvestments into the company becoming more appealing through available tax reliefs/li
liInvestors can holdover capital gains created in the past three years, or one year into the future/li
/ul
pInvestors could refer to an existing shareholder or a member of their family, as well as any venture capitalists or entrepreneurs that may be out there. nbsp;When already connected to the company by holding office, having shares or being related to someone that does, the immediate 20% tax relief is usually lost, together with the Capital Gains Tax (CGT) exemption on the shares.nbsp; The CGT lsquo;holdoverrsquo; relief remains.nbsp; However, many EIS investments fail to deliver a return and can be difficult to sell on./p
pItrsquo;s hard telling people who have sold shares, private assets or even their own company shares if they are a small business owner, that there isnrsquo;t much you can do to get rid of the capital gain other than by investing in an EIS company and claim EIS reinvestment relief.nbsp; Subscribing for shares in such lsquo;riskyrsquo; businesses usually puts taxpayers off ndash; the EIS shares may hold off paying CGT, but you may find later that yoursquo;ve lost all your capital!/p
pstrongWhy become an EIS company?/strong/p
pSo, if you are a small business owner and were going to invest money into an EIS company to holdover CGT, why not invest in your own company?nbsp; Banks are still not very keen to lend money at present and it may be the case that you are a small company and need to inject some much needed cash.nbsp; However, the only way you might be able to do this is to sell the shares that you hold in an energy company, for example, which would create an unwanted tax charge.nbsp; If your company qualifies as an EIS company, then you could holdover the gain./p
pItrsquo;s easy to apply to become an EIS company.nbsp; Complete the form EIS1 and return this to the tax office.nbsp; If they agree that you can become an EIS company, they will issue you with an EIS2 certificate.nbsp; Once you have this, you can then issue form EIS3 to new subscribing shareholders./p
pThere are certain types of business that are excluded from becoming EIS companies and there are some rather complex tax rules.nbsp; Speak to an independent financial adviser who has tax advice experience to see how and if you can benefit as a small business owner.nbsp; You could also go to: a href=http://www.hmrc.gov.uk/eiswww.hmrc.gov.uk/eis/a/p
pstrongFurther questions on EIS companies?/strong/p
pIf you have any questions, or would like some help from us, you can visit the Bluebond Financial Planning website to contact us.nbsp; Wersquo;d be happy to help small business owners with their financial planning./p
pBluebond Financial Planning are a href=http://www.bluebond.co.uk target=_blankIndependent Financial Advisers In St Albans/a/p