Simple guide to EIS

What is EIS?

• It’s a range of tax reliefs the Government provides when you invest into small early stage companies.
• Tax reliefs are designed to incentivise certain behaviours – ISAs encourage regular saving habits, pension tax relief encourages people to save for their retirement. EIS reliefs encourage investment into companies where the investment risks are higher – the reliefs are designed to compensate for some of these incremental risks.
• The EIS was introduced in 1994 and has been a huge success story for the UK. It has played a key role in creating one of the best places to start a business in the world. Consistently supported by all political parties, it has recently been extended until 2035.
• Small early stage companies can be exciting investments. The companies may be building new technology, growing new sectors, or changing how things are done. They have the potential to grow significantly in value if successful. But they are also much more likely to fail than more established businesses. And you are unlikely to be able to choose when you sell your investment.

How does it work

• Investments have to be made into the shares of qualifying companies. Specialist managers can select these for you, or you may find one yourself. When investing via a manager, they will be responsible for ensuring the companies in your portfolio should qualify for EIS. However, if you want to understand more about how investments qualify for EIS relief, click here.
• Money invested in an EIS qualifying company attracts the following headline benefits:
  • 30% upfront relief: 30% of the amount invested can be claimed back against income tax

• • No capital gains tax paid on growth: companies have the potential to grow significantly in value, sometimes to multiples of the initial amount invested. This growth is returned tax free, which can represent a material benefit.

• • Relief on losses: when a company fails, the loss can be used to reduce income tax otherwise payable. This is a really important part of how the risk of investing is mitigated, and for additional rate tax payers can be worth an extra 31.5% of relief in addition to the 30% upfront relief claimed.
• Investments qualify for other tax benefits as well, including being able to be left free from IHT if an investor dies while holding them.
• This is a simplified summary of EIS tax reliefs – click here for our detailed guide to EIS tax reliefs and how to claim them.

Adding EIS to your portfolio

• If you are considering investing in EIS with Parkwalk, you can find out more about who we are and our current investments by clicking here.
• Investing with us is simple. We have funds open to new investors throughout the year. Once closed, we start to invest into new EIS qualifying companies on behalf of all investors in the fund.
• There are two types of EIS funds, an “EIS Fund” and a “Knowledge Intensive EIS Fund” – the underlying investments each makes are very similar, but there are some administrative differences. Click here to see the differences between these investment options.
• Click here if you want to find out more about how to invest with us, and our investment timeline.
• Consider taking professional advice. This can be really helpful to ensure you understand the investment and how it fits within your wider portfolio. An adviser can also make sure you are maximising the benefit of the various tax reliefs available to you.

EIS Tax Reliefs Explained

Investments that qualify for EIS relief benefit from tax reliefs. These are reliefs that the Government has put in place to mitigate some of the risks of investing into small, early stage companies, and to incentivise investment into the types of companies that have the potential to become important, sector defining businesses of the future.

Summary of five tax reliefs:

The following 3 reliefs are relevant to all EIS investors:

• 30% upfront relief: 30% of the amount invested can be claimed back against income tax
• No capital gains tax paid on growth: companies have the potential to grow significantly in value, sometimes to multiples of the initial amount invested. This growth is returned tax free, which can represent a material saving.
• Relief on losses: when a company fails, the loss can be used to reduce income tax otherwise payable. This is a really important part of how the risk of investing is mitigated, and for additional rate tax payers can be worth an extra [xx%].

There are 2 additional benefits that can be relevant to some investors, depending on personal circumstances:

• Inheritance tax relief: Shares can be left free from inheritance tax provided they have been held for at least two years at time of death.
• Capital gains deferral: capital gains realised on other assets during the three years prior to investment or one year following investment can be deferred.

Detailed information about each relief:

1) Income Tax Relief

Investing in EIS qualifying shares entitles the investor to a 30% reduction against their income tax bill. So a £100,000 investment entitles you to a £30,000 saving on your income tax bill.

• The income tax saved must relate to the year your capital is invested in shares, or you can elect to claim the relief against tax paid for the prior tax year;
• The value of relief is 30% of the amount investment no matter the effective rate of tax you pay. But you do need to have a sufficient income tax liability to cover the relief – it cannot create a repayment;
• The maximum amount on which income tax relief can be claimed is £1m of investment each tax year. If you invest into “Knowledge Intensive Companies”, up to £2m can be invested annually. Click here to learn about KICS.
• Shares must be held for a minimum of three years, if sold or given away sooner, some or all of the income tax claimed must be repaid. The same applies if a company ceases to qualify within three years. If a company fails within three years, income tax claimed should not normally need to be repaid.

Click here to understand how to claim income tax relief.

If you would like to read HMRC’s guide to claiming income tax relief for EIS qualifying investments, please click here: HS341 Enterprise Investment Scheme — Income Tax relief (2024) – GOV.UK

2) Capital Gains Tax (CGT) free growth

When you sell shares at a profit, capital gains tax is usually payable at your marginal rate. Depending on your personal circumstances this can be either 18% or 24%. Shares that qualify for EIS relief do not attract CGT, therefore on a profitable exit, no CGT needs to be paid from the proceeds you receive. This is sometimes referred to as Disposal Relief. For very successful companies that grow to be worth many multiples of the amount invested, this can be a significant benefit.

To qualify for this relief, shares have to have been held for a minimum of 3 years prior to sale, and must have met the qualifying conditions during this time. Income tax relief must also have been claimed in respect of the investment.

If you would like to read HMRC’s guide to CGT free growth (called disposal relief here) for EIS qualifying investments, please click here: HS297 Capital Gains Tax and Enterprise Investment Scheme (2024) – GOV.UK

3) Relief for losses

If a company fails or is exited at a loss, you can offset the loss against your tax bill. For there to be a loss, the company must have been sold for less than the “effective cost”. This is the amount you invested in that company less the income tax you claimed in respect of it. For example, if you invested £10,000 in a company and claimed income tax relief of £3,000, a loss will arise if proceeds from the sale of the company are less than £7,000 (your effective cost).

The amount of loss you can claim will be the difference between your effective cost, and the proceeds you receive.

Alternatively, a company may fall to £nil value, which can entitle a claim to be made.

You can choose whether to claim the effective loss against capital gains, or income tax. It is often beneficial to claim against income tax, and you can do so in respect of the year the loss has arisen, or the previous year.

An additional-rate taxpayer that offsets the loss on a company that falls in value to £0 could benefit from an extra [xx%] tax relief. In total, the initial 30% income tax relief plus the additional loss relief could effectively reduce a net loss per £1 invested to 38.5p.

Alternatively you can claim the loss against any capital gains tax bill for the current year, or future years on a roll forwards basis.

To understand when loss relief can be claimed, and how to make a claim, please click here.

HS286 Negligible value claims and Income Tax losses on disposals of shares you have subscribed for in qualifying trading companies (2025) – GOV.UK

4) Inheritance Tax Relief

Shares in EIS qualifying companies also qualify for Business Property Relief, sometimes called Business Relief. From April 2026, everyone will have a £1 million Business Relief allowance, enabling them to leave qualifying assets (including EIS shares) worth up to £1m completely free from IHT when they die. To qualify for this relief, shares must have been held for at least 2 years when the investor passes away.

If shares (or other qualifying assets) worth more than £1 million are held at death, the excess value benefits from 50% relief from inheritance tax. As inheritance tax is typically charged at 40% of the value of the estate in excess of the nil rate bands, this can save the estate 40% (20% for assets above £1 million).

Business Relief for Inheritance Tax: Overview – GOV.UK

5) Capital Gains Tax (CGT) deferral relief

If an investor realises a capital gain on the disposal of other assets they own, CGT will typically be payable during the following tax year. However, if capital equivalent to the gain is invested into EIS shares, that gain can be deferred over the life of the EIS investment.

To qualify for deferral relief, it is the value of the gain that needs to be reinvested. This will be a lower amount than the proceeds received on the disposal. For example, if another asset was sold for £100,000 and cost £60,000, the value of the gain is £40,000 – investing £40,000 into EIS qualifying shares could defer the CGT payable on this gain.

To defer the tax due on a disposal, investment into EIS-qualifying shares needs to be within three years.

Alternatively, an EIS investment can be made up to 12 months prior to the gain being realised.

The gain will be deferred until the earliest of the following:

• the EIS shares are sold
• the company stops being EIS-qualifying within three years of investment
• the investor stops being a UK resident within three years of investment

When the deferred gain comes back into charge, capital gains tax will be payable on it at the relevant rate at that time. A gain can be deferred again if it’s reinvested into a new EIS-qualifying investment.

If the investor dies before the gain returns to charge, it will be eliminated.

There’s no maximum value limiting the amount of gains that can be deferred.

To understand how to claim CGT Deferral Relief please click here.

If you would like to read HMRC’s guide to deferring gains released elsewhere through investment in EIS qualifying shares, please click here (you’ll need to scroll down as the first half covers EIS disposal relief): HS297 Capital Gains Tax and Enterprise Investment Scheme (2024) – GOV.UK

How to Invest With Parkwalk

We recommend that investors seek professional advice if you are not experienced at making your own investments. Financial and/or tax advice can be valuable to ensure you understand the investment and how it fits within your overall portfolio, and to ensure you benefit fully from the tax reliefs available.

When you decide to invest with us, the process is straightforward:

1: Submit an application for our EIS Fund

Complete your application form and send to investor.relations@parkwalkadvisors.com, and transfer funds to the relevant bank account – details can be found on page 2 of the application form. Scanned or docusigned application forms are fine.

2: Making Your Investment

1. When you invest in our Opportunities EIS Fund, we will target full deployment within 12-18 months of the date your application is accepted. It can be two or three months until the first investment is made.
2. When you invest in our Knowledge Intensive Funds or our University Funds, we will start to invest your money once the fund closes. You should expect this to take 12-18 months within our Knowledge Intensive Funds and 12-24 months within our University Funds as we seek the right opportunities for your portfolio.
3. We will invest in shares expected to qualify for EIS relief based on the qualifying conditions.
4. On acceptance of your application, you and your designated adviser will receive a log-in to our portal, where you will be able to find details of your underlying investments, valuations, and correspondence relating to your investment including EIS certificates, contract notes, exit letters and biannual statements.

3: Certificates to claim relief

5. You will need an EIS certificate before you can claim any tax relief. This will be issued to you by Parkwalk as soon as it is available.
6. The type of certificate you need depends on the type of fund you invest in:
   • EIS 3 certificates will be issued for each company in our Opportunities EIS Fund and our University Funds. These will be issued throughout the investment process, as soon as they are available. Typically this is 6-12 weeks after each investment is made.
   • Our Knowledge Intensive Approved Funds will issue investors with an EIS 5 certificate for the Fund overall. This will be issued once the Fund is completely invested.
   • The certificates are issued by HMRC to Parkwalk, so timings can vary. You should expect to receive a certificate around 2 months after the final investment is made. Typically this is 12-18 months after the Fund closes.
7. We will upload each certificate to our portal for you as soon as it is available and notify you.

It is useful to remember that the relevant date for all EIS tax reliefs is not the date you subscribe to the Fund:

• for an EIS Fund, all tax reliefs are based on the date each underlying investment is made,
• for a Knowledge Intensive Approved Fund, income tax relief is based on the date the Fund closes; all other reliefs are based on the date each underlying investment is made.

How to Claim EIS Tax Reliefs

When you invest in EIS, you can claim up to 30% income tax relief. You can apply to claim the relief against your income tax bill of the year the investment was made, or the previous year.

You need to have received a tax certificate in respect of your investment in order to make a claim. For single company investments or EIS portfolios, you will receive an EIS 3 certificate in respect of each company you invest in. For a Knowledge Intensive Fund, you will receive an EIS 5 certificate in respect of your overall investment in the Fund. You should expect to wait some time after investment before receiving these certificates, as the manager will need to make the underlying investments on your behalf, and wait for HMRC to issue the relevant certificates.

We summarise how to claim EIS relief below:

Self Assessment Tax Return

Most investors claim relief as part of their annual self-assessment tax return. It is simple to include details of your EIS investment in the relevant section(s)

• In the “Tailor your return” section, there is a question asking about other tax reliefs – you should answer “yes” which will create the page you need to include details of your EIS investments
• In this “other tax relief and deductions” section, you can enter the total amount of all your EIS subscriptions for which you want to claim relief in that tax year. The details you need can be found on your EIS certificate(s).
• You won’t need to provide your certificates, but these are available on the portal if needed.

Submit a claim using your certificate

Another way to claim relief is to complete the claim form that is part of the EIS 3 or EIS5 certificates and send it to your HMRC tax office. This route can be useful if:

• You usually pay all of your tax via PAYE. This can reduce your monthly tax deductions for the year via a change to your tax code.
• if you want to claim Capital Gain Tax deferral relief as well as income tax relief (click here to read about CGT deferral relief – click through to [SECTION B])
• if you want to claim the tax relief against a previous year