EIS1 is an employment form and support allowance;

Its UK government aims to promote investment in early-stage and high-growth companies by offering tax incentives to investors. 

Eligibility for the EIS Scheme

The company demands an EIS1 form from the employee to check the employee’s eligibility for employment and for allowance due to sickness.

Company Requirements:

The company set the criteria for employees;

  • Employee’s Responsibility: The employee can get the EIS1 form from the healthcare department. This form checks their ability to do work and also checks their medical and physical condition.
  • Completing the Form: The healthcare department fills the EIS1 with detailed information consisting of the employee’s medical condition, including any treatments.
  • Submitting the Form: Once the form is filled, the employee submits the form to the company’s HR department or the designated contact for further processing.
  • Review and Decision: The company review the form filled out by employees to decide whether they meet the criteria or not. Department of Work and Pension (DWP) should take these kinds of decisions.
  • Further Documentation: Depending upon the assessment, additional documentation may be required to support the ESA claim.

It’s the responsibility of both the employee and the company to protect sensitive medical information with care and in compliance with relevant data protection laws.

If there are specified rules set by the company, the HR department guides the way of form submission.

Information Required in EIS1 Form:

Personal and Company Details:

This form requires the employee’s personal information such as name, address, contact number, and company name.

Investment Information:

In the case of a partnership, it requires sharing allocation information and other investment details.

Confirmation of Compliance:

HMRC sets the rules and regulations that must be followed.

Submission Process:

Where to obtain the form?

The EIS form can be downloaded from the official website of HRMC and also obtained by contacting the HMRC helpline.

Submitting the form:

After completing the form along with the required information, post it to the address of HMRC.

Limitations and Conditions:

Investment in Qualifying Companies:

Investment made in companies which can qualify in the United Kingdom.

Minimum Holding Period:

Investors must hold their investments for a specified minimum period.

Adherence to HMRC Rules:

Follow all rules set by HMRC.

EIS1 Form

Filling out EIS1 Form:

The following information is required in the EIS form;

Investor Details:

It requires the personal information of investors such as their names, address, national insurance number and the tax year in which they made investments.

Investment Details:

Investors provide information about the date of investment, the amount invested and the shares purchased.

Declaration and Signature:

The final process is a declaration which is done after the signature of the investor on the EIS1 application form.

Benefits of EIS1 Form:

The benefits of the EIS1 FORM are listed below:

Income Tax Relief:

Investors can reduce income tax and claim 30% of the investment.

Capital Gains Tax (CGT) Exemption:

Profit on EIS investments held at least three years are exempt from CGT. The investors can fully enjoy the profit by selling their EIS shares.

EIS Loss Relief in Business:

If an EIS investment value decreases, investors can claim loss relief against either their income tax or CGT bill.

CGT Deferral:

Investors can defer CGT on profit from other assets by reinvesting those profits in EIS-qualifying companies.

Carry-back Rule:

Investors can apply the tax relief from EIS investments to the tax year before they invest, offering flexibility and tax planning strategies.

Inheritance Tax Relief: 

After getting EIS shares for two years, investors can claim tax relief on these shares.

Risk in EIS Investments:

It also holds some risks which are given below;

High Risk of Capital Loss:

EIS companies are basically early-stage businesses, and investments in them are at high risk.

Market Volatility:

Smaller companies hold more volatile shares than large and established companies.

Uncertain Tax Relief:

Availability of tax relief can be forced by changes in legislation or HMRC’s interpretation.

Personal Circumstances:

Tax reliefs depend upon individual investors’ circumstances and are not guaranteed.

Limited Exit Opportunities:

EIS shares are often unquoted, making them harder to sell and not sell for a long period.

Business Seeking EIS Investment:

Details are given below;

Guidance on Eligibility and Compliance:

A tax accountant can help include guidance on the types of trades that qualify and the criteria for investor ability.

Assisting with Documentation: 

EIS1 Form compliance statement submitted to HMRC. It is a critical step for businesses after share issuance. Tax accountants can help the investors in preparing and submitting this document accurately to ensure that investors can benefit from EIS tax breaks.

Advice on Fundraising Limits: 

They can provide advice on fundraising ensuring businesses understand the maximum amount they can raise annually and across the company’s lifetime.

Structuring Investments:

 Tax accountants maximize the profit by structuring the investments and planning the tax relief strategies.

For Investors in EIS Form:

Maximizing Tax Benefits:

Tax accountants can help investors maximise benefits by understanding the tax relief under EIS.

Calculating Tax Relief:

Tax accountants assist investors in calculating loss relief.

Navigating CGT Deferral Relief:

Investors are guided by an accountant on how they deferred their gains.

Investment Timeframe Guidance:

They hold a share for at least three years for tax relief.

Assessment of Risks:

Investors can assess the risk in the early stages of business with the help of accountants.

Conclusions:

Investors ensure that they completely fill out the form accurately and efficiently to claim tax relief on the investments they made in EIS companies.

Investors received the eis1 form Information Memorandum before completing the form and they submit the form along with their tax return in the relevant tax year.

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Published On: July 19th, 2024 / Views: 351 /

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