A tax subsidy to encourage investment in small risky companies. Where a company qualifies for the scheme, any investment in equity shares in the company qualifies for income tax relief at a rate of 20%, up to a maximum investment of #150,000 in the fiscal year in question. This means that if an investor invests #100,000 in EIS companies, he can claim an income tax rebate for the year of #20,000. In addition to this, if the investor holds the shares for five years, any capital gain which he makes on disposing of the shares is capital gains tax free. Any capital loss suffered on the shares is eligible as a deduction from other taxable capital gains. Although the tax reliefs are generous, there are a number of restrictions to prevent the scheme being used merely as a means of artificial tax avoidance.

A scheme that provides income and CGT relief for people prepared to risk investing in a single unquoted or AIM-listed trading company. Investors can become directors of the EIS companies in which they invest. Maximum investment is £150,000 a year.

This scheme was introduced to encourage individuals to invest in small higher risk trading companies. The scheme provides income tax relief to external investors in qualifying unquoted companies, and capital gains tax exemption on disposal of shares.