EIS Income Tax Relief

This guide explains how to claim Income Tax relief under the Enterprise Investment Scheme (EIS) once you have received an EIS3 compliance certificate.

How to claim the relief

There are two ways to claim EIS income tax relief:

Through your self-assessment tax return
Through the EIS3 compliance certificate claim form

Claiming through your tax return

On page Ai2 of the Additional Information pages, enter in box 2 in the ‘Other tax reliefs’ section the total amount of the subscriptions on which you’re now claiming relief.

Include any amount for which you received relief by way of an increase in your PAYE code or a reduction of a payment on account. But exclude any amount for which you’re claiming relief for the previous year and not the current year.

The maximum amount on which relief can be claimed is £2 million, but any amount over £1 million must be for shares issued by one or more knowledge-intensive companies (KIC).

Your EIS3 will identify if the company was a KIC at the time of your investment.

You must enter details of each investment in the ‘Any other information’ box, box 19 on page TR 7 of the tax return.

The details required for each investment are:

the Unique Investment Reference (UIR) as shown on the certificate
the name of the company invested in
the amount on which you’re claiming relief for this year
the date of issue of the shares
if you’ve subscribed more than £1 million for shares on which relief could be claimed, or more than £2 million where investments over £1 million are in KIC, how you want the relief attributed to them – read ‘How much relief you get for your subscriptions for shares’.

List all subscriptions on which relief is claimed, even if you had to restrict the amount you entered in box 2 in the ‘Other tax reliefs’ section on page Ai 2 of the Additional information pages because it would have exceeded the maximum. HMRC may ask to see the EIS3 to support your claim, so keep it safe.

If you made an investment in shares issued during the year for which you have not yet received a form EIS3, you cannot claim relief for that investment. You must wait until you have received a form. If you receive the form after you’ve sent your tax return, complete the claim form inside the EIS3 and send it to HMRC.

Claiming through the EIS3 compliance certificate claim form

The EIS3 is made up of four pages:

The certificate in relation to your investment
Notes for claiming income tax relief and capital gains deferral relief
EIS claim form - investment and claim details
EIS claim form - declaration

Use the details from page one to complete pages three and four. You can use the notes on page two to help you decide how much income tax relief and/or capital gains deferral relief to claim.

Ensure that the declaration has been fully completed with your name, address, signature and date. The form should then be posted to HMRC, PAYE & Self Assessment, BX9 1AS.

If you have not received a response from HMRC within 30 days we would suggest that you check the current estimated response time through their website tool here.

If the estimated response date has passed, methods by which you can contact HMRC are listed here.

Things to consider

Shares that were issued to you and someone else jointly

Where shares are issued to joint owners, they are treated as if each of them had subscribed the same amount for an identical number of shares. For example, if £2,000 is subscribed for 2,000 shares in the name of a married couple, each is regarded as having subscribed £1,000 for 2,000 shares. That is so even if one of them paid the whole amount. To claim relief, each joint owner should get form EIS3 from the company.

Tax relief for a different year – your choices

The general rule is that the relief is available for the tax year in which the shares are issued. But, if you choose, you can treat some or all of the shares as issued in the previous year and claim relief in that previous year, subject to the maximum limit for the year. You’ll find the date of issue of your shares recorded on form EIS3.

How much relief you get for your subscriptions for shares

You can get relief at the rate of 30% on the total of the amounts claimed for shares issued to you in the tax year (after taking account of any claims to treat shares as issued in the year prior to their actual issue).

However, you cannot get relief on more than £2 million, and any amount in excess of £1 million can only be for investments in KIC. If your tax liability is not high enough to absorb all the relief, you have to forgo the excess.