Oxford capital eis fund
Investor Portal

Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment. Take 2 mins to learn more.

How to start Growth EIS Investments successfully

If you are considering making an EIS investment, it is important that you decide from an informed position. Below are some of the key considerations to take into account to kick start your EIS investing journey:

How Does The EIS Work For Investors?

In order to benefit from an EIS investment, an investor must be a UK taxpayer, and must be comfortable investing in high-risk, UK-based, early-stage, unquoted companies. An individual can invest up to £1m per tax year (£2m if Knowledge Intensive). Investors can also invest based on the previous tax year, which effectively doubles those annual limits.

EIS is very popular with investors who have already fully utilised their annual ISA allowances, and/or have utilised their annual pension contribution limit or hit their pension lifetime allowance.

EIS investors benefit from numerous tax reliefs as a result of investing in EIS qualifying shares, including:

  • A 30% income tax break against the amount invested, which can be offset against either the current or previous tax year’s income tax liability
  • No capital gains tax is to be paid on any profit arising from the sale of the shares, as long as they are held for at least 3 years from the date quoted on the EIS3 Shares
  • Payment of CGT from the sale of another asset can be deferred if the money gained is invested through EIS. The investment must be made 1 year before or 3 years after the gain occurred
  • No inheritance tax is payable provided shares are held for at least 2 years, and still held at death, thanks to the shares qualifying for Business Property Relief
  • If the shares are sold at a loss, the loss can be offset against either income tax or Capital Gains Tax, thanks to Loss Relief
  • UK resident, non-domiciled investors can use funds held offshore, without having to pay the remittance tax charge, by utilising Business Investment Relief

How Much Can I Invest In An EIS?

Every EIS has a minimum investment amount, regardless of whether it is an individual company deal or a portfolio of companies. However, the question shouldn’t be how much can you invest, but rather, how much should you invest. Various factors need to be taken into account when determining how much to invest. The three main ones are:

  • Attitude to risk. Does investing in early-stage, high-risk companies match your overall risk profile?
  • Capacity for loss. If the EIS shares fall in value, will the loss in value of your holding have a material affect on your standard of living?
  • Liquidity. Unquoted shares cannot be bought and sold like traditional share classes, and you will only regain access to your invested capital as and when the shares are sold, usually via trade sale or IPO. An investor needs to be comfortable and confident that they will not need access to the invested capital for at least 5-7 years.

EIS Minimum Investment

The minimum investment amount varies from provider to provider, but typically, for an EIS fund/portfolio/, it is between £15,000 and £30,000. At Oxford Capital, our minimum investment is £25,000.

There are other ways to invest in EIS qualifying shares, such as crowdfunding platforms, and these can offer much lower minimums, but by doing so, you will be investing in only one company as opposed to a pre-vetted selection of 8-12 companies, and you will also not be benefitting from an EIS provider’s experience and expertise when it comes to picking the companies offering the best opportunity for a successful investment outcome.

Where Can I Find EIS Opportunities?

If you use a search engine to find EIS providers, a potential EIS investor will be able to find a lot of information. Most EIS providers will have a website, where you can download a lot of information on the company, their investment strategy, their current investment portfolio, and their performance. This will give investors a good idea of which companies to invest in and sectors and stages that interest them, to give them the best fit for their investment requirements. Alternatively, for individual company deals, there are several platforms that provide such offerings.

Learn More About The Oxford Capital Growth EIS

Oxford Capital is one of the longest-standing EIS providers in the market. We invest in early-stage companies in sectors where the UK is recognised as a global leader, such as fintech, digital health, e-commerce, AI & machine learning, and B2B SaaS.

There are two ways to invest with Oxford Capital:

  • Oxford Capital Growth EIS. A discretionary investment service, investing in 8-12 companies, across a diverse spread of sectors and stages, with a lifecycle of 5-7 years.
  • Co-Investor Circle. A deal-by-deal approach, where investors can choose which businesses to invest in, with the added benefit of leveraging our institutional due diligence and selection process; ongoing operational and strategic involvement; and institutional investment terms.

 

Estimated reading time: 2 min

 

Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.

What are the key risks?

  1. You could lose all the money you invest
    1. If the business you invest in fails, you are likely to lose 100% of the money you invested. Most start-up businesses fail.
  2. You are unlikely to be protected if something goes wrong
    1. Protection from the Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover poor investment performance. Try the FSCS investment protection checker here.
    2. Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated firm, FOS may be able to consider it. Learn more about FOS protection here.
  3. You won’t get your money back quickly
    1. Even if the business you invest in is successful, it may take several years to get your money back. You are unlikely to be able to sell your investment early.
    2. The most likely way to get your money back is if the business is bought by another business or lists its shares on an exchange such as the London Stock Exchange. These events are not common.
    3. If you are investing in a start-up business, you should not expect to get your money back through dividends. Start-up businesses rarely pay these.
  4. Don’t put all your eggs in one basket
    1. Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well.
    2. A good rule of thumb is not to invest more than 10% of your money in high-risk investments. https://www.fca.org.uk/investsmart/5-questions-ask-you-invest
  5. The value of your investment can be reduced
    1. The percentage of the business that you own will decrease if the business issues more shares. This could mean that the value of your investment reduces, depending on how much the business grows. Most start-up businesses issue multiple rounds of shares.
    2. These new shares could have additional rights that your shares don’t have, such as the right to receive a fixed dividend, which could further reduce your chances of getting a return on your investment.

 

If you are interested in learning more about how to protect yourself, visit the FCA’s website here.