How Can I Make My Company Eligible For EIS?

I’ve been doing quite a lot of work recently for clients who want to get some investment into their companies, and the question of EIS (the Enterprise Investment Scheme) has come up with a couple of people, so I thought I’d share some practical advice with you. This article is quite a specific how to do things one, so if you’re not interested in getting funding for your business, you’d probably be better off reading something more interesting such as How to spot a gap in the market or Key Success Factors. If you are thinking about bringing in angel investment, this will be fascinating. Promise.

EIS – what is it, and why is it important?

EIS is a government scheme that is actually useful for small businesses. Now, that it in itself is unusual enough to make it interesting, but enough of the politics. Imagine you’ve got yourself an angel investor who’s going to give you a nice cheque for 100k so you can employ staff, develop your product, and generally do all the cool marketing things which are going to bring in lots of customers. EIS means that as soon as the angel investor writes you a cheque, they get a cheque back from the government for 30% of that amount. So you get 100k, and they get 30k immediately. And when you sell the company for a million pounds, the investor doesn’t have to pay any capital gains tax. Brilliant!

Is there a catch?

Of course, there are a few more details to it than this, so the investor has to have actually paid the 30k in income tax that year, as HMRC don’t like to give away money with one hand unless they’ve taken it with the other beforehand. Here’s all the boring bits from HMRC.

Would my business be eligible?

You can get the Revenue to tell you beforehand if you are, by filling out a form, but most of the small businesses I help to raise investment could make themselves much more attractive to angel investors by saying that they are eligible for EIS. So that probably means that you could too.

More articles on fundraising and investment

If you’re interested in getting angel investment or other juicy chunks of cash into your company, I’d recommend three things: First, have a look at some of the other articles I’ve written on this area:

• Getting someone to invest in your company
• Why you need a woman on board

Second, sign up to my email newsletter, because I have lots of exciting things to say about how to grow and develop your business, including investment advice. And third, if you buy me a coffee, I’ll give you some advice on whether this is a good route for your company, and tell you if I can help. Julia Chanteray

Photo credit – Mexican paper money by Kevin Dooley from Flickr on a creative commons licence