Why Invest SEIS & EIS

 30% TAX RELIEF –   For more information, please visit: hmrc.gov.uk/eis/index.htm

  • EIS - You get income tax relief of 30 per cent. So if you invest £10,000 in a company that is eligible for EIS, you can knock £3,000 off your income tax bill in the year that you invest.
  • You’ll pay no capital gains tax on any profits you make from an EIS investment. So if you invest £10,000 and five years later sell your shares for £20,000, you’ll get the full benefit of the £10,000 profit, saving you at least £1,800.
  • There’s no inheritance tax to pay on shares bought through EIS.
  • As with EIS, there’s no capital gains tax to pay on profits, no inheritance tax, and you can claim loss relief in the same way.
  • There is an extra relief called capital gains reinvestment relief. This is useful to you if you have recently paid capital gains tax on other investments. You can reclaim up to 50 per cent of the tax paid if you reinvest that money into SEIS. (This was originally introduced as a temporary measure, but in the 2014 Budget, Chancellor George Osborne made it permanent).

EIS Tax Incentives

First introduced in 1994, the Enterprise Investment Scheme or EIS was designed by the UK Government to encourage equity investment in unlisted (private) companies. The idea behind the scheme is to stimulate entrepreneurial activity in the UK. An EIS encourages investors to invest in qualifying companies through a series of very generous tax reliefs.

More about how the using SEIS/EIS can help you!

1What you need to know
Over 7 Billion pounds has been invested through Enterprise Investment Schemes. Films are classified by the UK Government as an EIS qualifying activity. Movie investments can be a particularly good fit with EIS Film investments have unlimited upside potential and investors pay NO Capital Gains Taxes on profits earned from a successful EIS film company. Depending on your income bracket, up to 75% of an EIS investment can be protected, even before the film is released. As long as you have a UK tax liability you will be eligible for these tax benefits.
2What you need to look out for
To receive the full benefits of an EIS scheme your investment must be held within the qualifying company for a minimum three year period. Enterprise Investment Schemes have a complex series of tax laws. LDM Film Studios work with specialist film accountants to ensure you gain the maximum benefit from these schemes.
3How do I claim these tax benefits?
Fill out your tax return as normal, stating your investment in the EIS company. When filing the completed return, include a copy of your share certificate and the EIS3 certificate, provided for you by the company secretary. It is that simple.
4What are my downside protection options?
EIS loss relief effectively limits your downside to 56% (as a 20% tax payer), 42% (as a 40% tax payer) or 38.5% (as a 45% tax payer) of your original investment at current rates. Capital Gains Tax Deferral Relief for EIS Subscriptions If within the past three years you have made capital gains in other areas, you can defer the tax due by reinvesting into an EIS qualifying company. There are no restrictions on the amount of capital gains that can be deferred with the only limitation being no single person can own more than 30% of the total amount of shares in issue. You may also defer any capital gains made, within one year of investing in the EIS company. Capital gains can be deferred, until you sell your shares, at which point they become chargeable once again.

Example (cash effect at the outset)

 Initial Investment    

£20,000

Income Tax Relief at 30%

(£6,000)

Capital Gains Deferral

(£5,600)

Net Cost of Investment

£8,400

SEIS & EIS Summary

Film investments through well-structured EIS companies provide significant downside risk protection. When coupled with zero Capital Gains Tax on profits, an EIS film investment can become an essential part of a diversified investment portfolio.