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How to start Growth EIS Investments successfully

How to start Growth EIS Investments successfully

By Mark Bower-Easton |

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.

Awards

  • BEST EIS
    FUND MANAGER
    2013,2012,2010 AND 2006

  • VENTURE CAPITAL
    HOUSE OF THE YEAR
    WINNER 2013 AND 2005

  • MOST IMPACTFUL
    INVESTMENT
    WINNER 2017

  • BEST ANGEL
    SYNDICATE
    WINNER 2018

  • BVCA Excellence in ESG
    GP CATEGORY
    COMMENDED 2020

  • VC INVESTOR OF THE YEAR
    GIANT HEALTH AWARDS
    WINNER 2020

  • EXIT OF THE YEAR
    ONE TO WATCH
    2020

  •            

    EXIT OF THE YEAR 2021 (FINALIST)UK BAA AWARDS