Skip to main content

Bure Valley Group is an investment introducer platform which links successful investors with exciting, innovative UK startups seeking funding. This content is for information purposes only and should not be taken as financial or investment advice. 

The Enterprise Investment Scheme (EIS) is arguably one of the most powerful tax-efficient “vehicles” for early-stage investors in the UK. Yet, EIS can be confusing even for experienced investors. Below, we offer a summary of the top 10 most frequently asked questions we receive about EIS at Bure Valley Group – together with some answers.

We hope this information is helpful to you. To learn more about our EIS projects and other early-stage opportunities, visit our portfolio page. For enquiries regarding our latest projects and funding, you can reach us via:

+44 160 334 0827

[email protected]


#1 We can invest in EIS, exactly?

In theory, most UK tax residents can do so. Yet some key criteria must be met first. For instance, an investor cannot have any linked loans or “substantial interest” in an EIS-qualifying company (i.e. no more than a 30% stake). The investors cannot be an employee, either. 


#2 Can any of my startup investments apply for EIS?

Many early-stage companies in the UK could be eligible for EIS status, which would benefit founders and investors. To qualify, a business must not be listed on a public stock exchange (e.g., the LSE) but can be listed on AIM. There are other qualifying rules, too.


#3 Which criteria may exclude a startup from EIS?

A business cannot engage in any “excluded activities” under EIS, such as farming, forestry and legal services (although the rules may be relaxed a bit for “knowledge-intensive” companies engaged in R&D). Other rules include not having more than 250 full-time employees, owning fewer than £15m in gross assets (before investment) and trading no longer than 7 years.


#4 How much tax relief can I get?

An investor can access 30% up-front Income Tax relief on the value of their EIS investment. So, if you invest £1m into EIS companies in a financial year, you could claim £300,000 back using your Self Assessment tax return. In effect, this reduces your “at risk” capital significantly when investing in EIS.


#5 Does EIS offer tax-free capital gains?

Yes, provided certain conditions are met. Firstly, an investor must hold the EIS shares for at least three years before disposal. Secondly, Income Tax relief should have been given and not withdrawn. 


#6 What is “deferral” for capital gains tax?

Suppose you sell some shares in a general investment account and these would normally be subject to capital gains tax (CGT). If you invest the gains into EIS-qualifying shares, however, then the gain can be “deferred” as long as the money stays there (and the EIS rules continue to be followed). This could allow an investor to generate more tax-efficient capital gains over the longer term – for instance, by making disposals in a year when they are in a lower tax bracket. 


#7 Do I get all of my money back if an EIS investment fails?

No, an investor can lose money on an EIS company which underperforms or collapses. However, the “loss relief” mechanism in the scheme helps to mitigate any losses. This is equivalent to the taxpayer’s highest marginal rate of Income Tax. For instance, if an Additional Rate taxpayer commits £7,000 to an EIS company (£10,000 before the 30% tax relief), then he can receive 45% back using loss relief if the company fails – i.e. £3,150. 


#8 What are the risks and rewards of EIS?

The main risk of EIS investing is that your chosen business(es) fail. Early-stage companies typically have a higher chance of going bust as they establish profitability. However, with EIS, the aforementioned mechanisms of EIS (e.g. loss relief) mitigate some of these risks. The main reward of EIS is the high growth potential on offer. Many EIS companies offer innovative solutions in new “blue ocean” markets, allowing significant room for expansion.


#9 Can I invest in EIS using an ISA?

No, the ISA and EIS are separate “vehicles” for saving and investing. There are sometimes “indirect” ways around this. For instance, certain funds offered by an ISA provider (e.g. in a Stocks & Shares ISA) may invest in EIS-qualfiying companies. However, investors will not receive the same tax reliefs and benefits compared to holding EIS shares themselves, directly.


#10 How do I build a successful EIS portfolio?

Each EIS investor will have different criteria for “success” as well as their own investment priorities and needs. As such, it is difficult to offer a universal answer to this question. However, there are certain common features of EIS portfolios which act as indicators of success. 

Firstly, diversification. Savvy EIS investors know to spread out their risk across multiple markets, sectors and business lifecycles. Secondly, consistently. EIS shares are chosen, held and sold based on a predefined investment strategy or philosophy. A third indicator is quality. Each EIS investment should be thoroughly checked using a robust due diligence process before inclusion in a portfolio. 



Interested in finding out more about the exciting startup projects we have on offer to investors here at Bure Valley Group? 

Get in touch today to start a conversation with our team and discuss some of the great investment memorandums we have available here:

+44 160 334 0827

 [email protected]


Leave a Reply