Learn the step-by-step process of applying for the Enterprise Investment Scheme (EIS), including issuing shares and submitting compliance statements to raise funds.
Introduction
Securing funding is a pivotal step for any UK-based startup aiming to scale and innovate. The Enterprise Investment Scheme (EIS) offers a compelling avenue for companies to attract investment by providing significant tax incentives to investors. This guide explores the EIS compliance submission process, detailing how to apply for EIS, issue shares, and submit the necessary compliance statements to successfully raise funds.
What is the Enterprise Investment Scheme (EIS)?
The EIS is one of the UK’s government-backed venture capital schemes designed to encourage investment in high-risk startups and early-stage companies. By offering tax reliefs to individual investors, the EIS makes investing in your company more attractive, thereby facilitating your ability to raise capital.
Key Benefits of EIS
- Tax Reliefs for Investors: Investors can claim up to 30% income tax relief on investments.
- Capital Gains Tax Exemption: Gains on EIS shares are exempt from Capital Gains Tax after a certain holding period.
- Loss Relief: Investors can offset losses against their income tax or capital gains tax.
Eligibility Criteria for Your Company
Before applying for EIS, ensure your company meets the following conditions:
- Permanent UK Establishment: Your company must have a permanent establishment in the UK.
- Gross Assets: Must not exceed £15 million before issuing shares and £16 million immediately after.
- Employee Count: Fewer than 250 full-time employees at the time of the share issue.
- Qualifying Trade: Engaged in a qualifying trade, with the majority of activities meeting specific criteria.
- Trading Age: Within 7 years of your first commercial sale.
Step-by-Step Guide to Applying for EIS
1. Confirm Eligibility
Ensure your company aligns with EIS requirements. Utilize resources like the UK Government SEIS/EIS Overview to verify eligibility.
2. Prepare Necessary Documentation
Gather essential documents, including:
- Business Plan and Financial Forecasts: Demonstrate your company’s growth potential.
- Latest Accounts: Provide financial transparency.
- Compliance Statement (EIS1): Detail how your company meets EIS conditions.
3. Issue Shares
Issuing shares is a critical step in the EIS process:
- Paid-Up Shares: Ensure shares are fully paid in cash at issuance.
- Ordinary Shares: Must be full risk ordinary shares without special rights.
- Dividend Rights: Can have limited preferential rights to dividends, but must not accumulate or vary.
4. Submit a Compliance Statement to HMRC
After issuing shares, submit the EIS1 compliance statement to HM Revenue & Customs (HMRC):
- Who Can Submit: Company directors, company secretaries, or authorized agents.
- Content Requirements: Include business plans, financials, and evidence of meeting EIS conditions.
- Deadline: Submit within 2 years of issuing shares or after 4 months of carrying out qualifying activities.
5. Receive Compliance Certification
Upon approval, HMRC will issue a compliance certificate (EIS3), which investors need to claim their tax reliefs.
Utilizing Oriel IPO for Your EIS Funding
Oriel IPO is an innovative online investment marketplace tailored to streamline the EIS funding process. By eliminating commission fees and offering curated, tax-efficient investment opportunities, Oriel IPO connects UK startups with angel investors effectively. Their platform also provides comprehensive educational resources, ensuring both startups and investors are well-informed about SEIS/EIS benefits and compliance requirements.
Benefits of Using Oriel IPO
- Commission-Free Funding: Maximizes the capital your company receives.
- Curated Investments: Ensures high-potential, tax-optimized opportunities.
- Educational Tools: Empowers you to navigate the EIS process confidently.
Maintaining EIS Compliance
To retain EIS eligibility and ensure investors can continue to claim tax reliefs, adhere to the following:
- Follow Scheme Rules: Comply with EIS conditions for at least 3 years post-investment.
- Use Funds Appropriately: Invest the raised capital in qualifying business activities.
- Report Changes: Notify HMRC within 60 days if aspects of your business no longer meet EIS criteria.
Conclusion
Applying for the Enterprise Investment Scheme can significantly enhance your ability to secure vital funding while offering attractive incentives to investors. By meticulously following the EIS compliance submission process and leveraging platforms like Oriel IPO, your company can effectively navigate the complexities of EIS, fostering growth and innovation in the UK’s vibrant startup ecosystem.
Ready to take the next step in funding your company through the EIS? Visit Oriel IPO today and connect with the right investors to fuel your business growth.
