The Enterprise Investment Scheme (EIS) offers varied tax reliefs and deferral opportunities, offsetting the potential risks of investments in newer, unlisted companies. Income tax relief, for example, provides annual relief of up to £600,000, which can be utilised to reduce your tax liabilities. But how do investors claim this EIS tax relief?
One of the common queries is around the practicalities of claiming those beneficial tax treatments and ensuring all entitlements are recorded correctly with HMRC to extract maximum value.
This guide explains the basics of what you need to know about claiming tax relief on EIS investments. However, should you require professional advice about your tax return submissions, we recommend consulting a suitably qualified accountant or tax adviser.
Documentation Required to Claim EIS Tax Relief
An EIS3 certificate is required to claim EIS tax relief. This document acts as verification of the date the investment was made and the value invested.
If you have invested in an EIS fund rather than directly in a company, you will receive a comparable document called an EIS5.
Most EIS-eligible companies issue EIS3 certificates a few months following the investment, depending on the actual share issue date. You will not be able to claim tax relief until your certificate arrives, and you must have a separate certificate for each independent investment.
These certificates show:
- The name of the company or fund.
- The subscribed amount invested, against which you can claim tax relief.
- The share issue date and HMRC office reference code
While you may wish to claim tax relief immediately after receiving your EIS3 or EIS5, speaking with your accountant is often advisable. Tax planning may dictate the way you claim tax relief and against your tax obligations in which period, where reliefs can be carried forward or back.
Claiming EIS Tax Relief Through Online Self-Assessment
Most investors submit their tax returns online and can use the standard self-assessment form to claim tax relief.
While you do not necessarily have to upload a copy of your EIS3 or EIS5, your accountant may wish to provide this as supporting information. You must have the relevant document(s) available if HMRC requests a copy.
Taxpayers with a rebate owing can provide the details of the bank account they would like their refund to be sent to – HMRC typically pays online but, in some circumstances, may issue a cheque via post.
Claiming EIS Tax Relief Through Hard Copy Tax Returns
HMRC encourages all tax transactions to be completed online but will accept paper submissions if there is a reason the individual cannot use the online system or cannot submit their returns digitally.
The process is similar to filing an online return, but you will need to fill in your EIS investment information on the additional information form labelled SA101. This document should be returned with your main tax return.
Claiming EIS Tax Relief Through a Claim Form
A claim application form is used for any tax claims that fall outside of the usual self-assessment process, including:
- Carrying back tax relief to the previous tax year – either because you wish to utilise all of the available relief and apportion it between tax periods or because you received your EIS certificate after the tax reporting deadline in the last tax period.
- Claiming EIS tax relief as an employed person who normally pays tax through the PAYE system. Your tax relief might potentially be treated as an adjustment to your tax code if your certificate arrives toward the beginning of the tax year.
- Submitting a claim for deferral relief or any other tax treatments alongside income tax relief. The certificate claim form has two sections, one for income tax relief and the second for EIS deferral relief – you can submit either section or both as necessary.
- Taxpayers who do not submit an annual self-assessment tax return for any other reason can also use the claim form included with their EIS certificate.
As discussed, we are not tax advisors but can advise on all EIS related matters.
In fact, you can read our guides below: