Enterprise Incentive Schemes

A client that we recently helped with the start up of their business is very grateful to the Chancellor of the Exchequer for enhancing the tax relief that investors in his new business will receive.

He has adopted the Enterprise Incentive Scheme (EIS) to encourage individuals to make relatively modest investment in a business. The amount invested can be as little as £500. Provided that the investor and the company qualify for the required period then, from 1 April 2011 tax relief equal to 30% of the investment is awarded to the investor.

Our client has approached friends and business associates with a business plan with a view to raising £250,000 sufficient to finance the cost of acquiring the necessary plant and equipment to operate the business. It is expected that the business will be owned by between 10 and 20 people, each with a stake of between 5 and 10% of the share capital. We have introduced our client to an appropriate legal adviser and collectively devised a shareholders agreement that will safeguard the investors and enable the business to be managed in a transparent manner.

An EIS scheme is a simple concept but does have a number of conditions attached, that if breached will lead to the withdrawal of the tax relief. If you would like to explore how this scheme can be used to grow your business please do contact us.