By Louise Misiewicz
How can the Enterprise Investment Scheme benefit property investors?
I was talking to a property investor client yesterday, and the subject of the Enterprise Investment Scheme (EIS) was one of the topics. My team of property tax experts have been reviewing some of the top industry news this week, and our property investment blog is a great place to share our professional property accountancy advice.
EIS was introduced by John Major’s Conservative Government and has raised more than £15 billion funding for start-ups and SMEs, and has been pivotal according to many in developing UK business.
EIS is also a potential source of reducing liability on property tax for property investors, which is where it becomes a useful area as part of a property tax reduction strategy.
Having written recently here on the legacy that George Osborne left the buy-to-let sector, concerns were raised in the property investment market that EIS could be seen as an area for potential financial abuse.
Investing in EIS not property?
The Government has been consistently attempting to get the public in general to invest, let alone the onus being placed on property investors in providing affordable rented accommodation across the UK in recent years.
The same Government has been criticised for also penalising the higher-rate tax investors in the UK.
Indeed, it could be argued that without the Private Rented Sector there would be a critical situation regarding rented accommodation in this country, and the provision of housing for the population.
EIS has been seen in recent months as a viable option for property investors looking to maximise their returns whilst minimising their tax liabilities.
The idea behind EIS is a simple one: a series of tax reliefs launched in 1994, designed to encourage investment in small unquoted companies in the UK, with property investors utilising the tax breaks.
Is EIS delivering a better financial return than property?
To put it simply, payment of CGT can be deferred when the gain is invested in shares of an EIS qualifying company. The gain can be made from the disposal of any kind of asset, but the investment must be made one year before or three years after the gain arose – connection to the company doesn’t matter.
To boot there are some EIS investments that not only defers the possible 28% CGT liability but could give you a 30% incme tax reducer too. That is a tax relief of 58% on the investment. See our article for more details.
So, for property investors, the potential benefits are clear to see.
If you’d like to know more about how EIS can perform in comparison to property investment, please contact one of my team of property tax specialists here.
Interested in EIS in 2017?
The Government has detailed information regarding EIS – find out more about it here.
This detailed and interesting article on EIS is also well worth a read, which I passed it onto my client.
How to engage with us
If you want to discuss finance or property tax questions, then please book some time with me and my team using the below calendar. We can help you to understand how to use EIS within property investment in 2017.
Please use the redeem code “Article 33” to get 33% off your next consultation call.
If you are looking for a new property tax expert, then please book some time with us using the below calendar.
Please note that this booking is to describe our specialist property tax services, and will not be used to discuss your personal tax affairs.