The Enterprise Investment Scheme: a practical guide for early-stage companies and investors

In order to encourage investment in these early- and growth-stage companies, the government introduced the Seed Enterprise Investment Scheme and Enterprise Investment Scheme (EIS). Both schemes offer tax reliefs that are designed to encourage investment in early-stage companies.

Here we will be focussing on EIS. However, if you are interested in the Seed Enterprise Investment Scheme (which is relevant for very early-stage businesses raising their first capital), please contact us using the details in the final paragraph and we would be happy to discuss it.

Why is EIS good for early-stage companies?

EIS incentives are vital for encouraging investors to deploy capital in companies that are not yet big enough to have the profile or achieved numbers to attract major investors, and for which debt finance is unavailable or prohibitively expensive.

Most UK companies looking for investment will find that EIS is a key factor in attracting investment; indeed many professional investors run funds designed to obtain EIS treatment for their investors and take advantage of the generous tax relief available.

Recent changes to the EIS limits for companies have been implemented to encourage funding for companies that are in the ‘growth stage’ of the corporate lifecycle, giving greater capital access to those companies looking to mature and develop into established businesses. So,  if you thought your business had outgrown SEIS or EIS, this may not now be the case…

What are the advantages of EIS for investors?

EIS offers incredibly generous tax incentives to investors, which include:

• 30% income tax relief for the investor on investments up to £1 million per year in EIS shares, provided that the shares are held for at least three years, with an additional £1 million per year for knowledge-intensive companies;
• exemption from capital gains tax (CGT) on a disposal of the EIS shares provided they have been held for three years and income tax relief obtained on acquisition;
• unlimited deferral relief of CGT where gains are reinvested in newly issued EIS shares between one year before and three years after a gain is realised regardless of whether income tax relief was obtained or not; and
• relief for any allowable losses arising on the disposal of the EIS shares (less any income tax relief already claimed on those shares) against either taxable income or chargeable gains.

What does a company need to obtain EIS investment?

Due to the generosity of the incentives offered, there is a detailed set of requirements for a company to be eligible to take in EIS investment. The key ones are that the company:

• must not be listed on a recognised stock exchange;
• should not be under the control of another company;
• has gross assets that do not exceed £30 million before the EIS share issue or £35 million immediately after the share issue (these have both increased from £15 million and £16 million in 2026);
• has fewer than 250 full-time employees;
• must have a ‘permanent establishment’ in the UK;
• cannot raise more than £10 million in any 12-month period (increased from £5 million), or a total of £24 million (increased from £12 million) for knowledge-intensive companies; and
• should not have been trading for more than seven years prior to its first EIS round.

These rules are strictly enforced by HMRC and are highly prescriptive and procedural, so it is imperative that you take advice early as correcting errors once made is incredibly unlikely to be accepted by HMRC.

How can Greenwoods help me?

We extensive experience advising early-stage and scale-up companies as they take on EIS investment, as well as investors looking to take advantage of the relief that is offered. For further guidance or to discuss your specific situation, please contact our Corporate & Commercial team for advice.