Enterprise Investment Scheme (EIS)
The Enterprise Investment Scheme supports investment in qualifying smaller companies through a range of tax reliefs subject to detailed conditions. Eligibility and suitability depend on individual circumstances and tax treatment depends on personal circumstances and may change.
EIS investing can give an experienced investor access to entrepreneurial businesses while supporting a wider capital allocation plan. It is higher risk than many established-market investments, with limited liquidity and outcomes that depend on each company’s progress.
This guide is part of our comprehensive specialist service. Return to our main High Net Worth Financial Planning overview to see how these elements coordinate.
As part of our HNW investment planning advice, we consider EIS only after establishing the role of liquid assets, core holdings and existing private-market exposure. Eligibility and suitability depend on individual circumstances, and tax treatment depends on personal circumstances and may change.
Definition
The Enterprise Investment Scheme is a UK government-backed framework that offers potential tax reliefs for qualifying investments in eligible smaller companies.
How does Enterprise Investment Scheme investing work?
An investor subscribes for shares in a qualifying company, either directly or through a managed service or fund. The company must meet conditions concerning its trade, size, use of funds and how long the capital is employed.
An advance assurance is not a guarantee that relief will ultimately be available. The company and investor must continue to meet the relevant requirements, and formal compliance documentation remains important.
What investment risks come with EIS relief?
Early-stage and growth companies can fail, require further funding or take longer than expected to reach an exit. Shares may be difficult to sell and valuations can be uncertain. Tax relief should never be used to justify an investment whose commercial case is weak.
Diversification across businesses, sectors and investment dates may reduce concentration, but it cannot remove the possibility of losing capital. We discuss loss capacity, liquidity and the investor’s experience before considering an allocation.
How should you assess an EIS proposal?
Due diligence should cover the business model, management team, competition, financing plan, valuation, governance and route to potential exit. For a portfolio service, the manager’s sourcing, selection, monitoring and reporting deserve the same scrutiny.
We also examine fees, conflicts, custody, share restrictions and what happens if qualifying status is lost. Independent legal and tax advice can be valuable where the investment intersects with a family company, trust or overseas position.
Where could EIS sit in your portfolio?
EIS is generally considered after a suitable cash reserve and diversified core portfolio are in place. The allocation should have a clear purpose, an agreed holding horizon and a plan for reviewing company updates without reacting to short-term noise.
We record assumptions and review the portfolio as a whole. That helps distinguish a deliberate private-market allocation from an accumulation of attractive-looking opportunities that may create hidden concentration.
Risks and Considerations
- Investment
- Early-stage
- Liquidity
- Concentration
- Capital is at risk. The value of investments and any income from them can fall as well as rise. You may not get back the full amount invested. Past performance is not a reliable indicator of future results.
Frequently Asked Questions
Does every EIS investment qualify for relief?
No. The company, shares, investor and ongoing holding conditions all matter. A claim should follow confirmation and appropriate professional advice.
Can EIS shares be sold easily?
Usually not. Smaller-company shares can be illiquid, and an exit may depend on a buyer, a company event or a manager’s process.
Is EIS low risk because of tax relief?
No. Relief may reduce some tax exposure but cannot remove commercial, liquidity or capital-loss risk.
Can I invest in EIS through a fund?
Some managers offer portfolios or funds, subject to their structure and terms. Diversification does not guarantee a positive outcome.
Official Sources and Guidance
Consider private investment in context
Talk to us about how an EIS allocation could be assessed alongside your core portfolio, liquidity and wider family objectives.
Investment & Pensions Risk: Capital is at risk. The value of pensions and investments and the income they produce can fall as well as rise. You may get back less than you invested. Past performance is not a reliable indicator of future results.