For UK tax payers there are some very generous tax breaks to encourage investment in early stage companies such as Triodos Bank. The scheme is referred to as the Enterprise Investment Scheme (EIS) and the benefits are listed below.
There is no guarantee that this tax relief will apply to an investment in Triodos Bank as conditions apply and you are recommended to take your own tax advice.
1. Income Tax Benefit From EIS Tax Relief
Tax relief of 30% can be claimed on investments (up to £1m in one tax year) giving a maximum tax reduction in any one year of £300,000, provided you have sufficient Income Tax liability to cover it.
The shares must be held for at least three years from the date of issue or the tax relief will be withdrawn. EIS allowances are allocated individually; therefore a married couple could invest up to £2 million each tax year.
2. Capital Gains Tax Exemption (CGT)
Gains are exempt from CGT if the shares are held for at least three years and the income tax relief was claimed on them.
3. Loss Relief
If shares are disposed of at a loss, the investor can elect that the amount of the loss, less Income Tax relief given, can be set against income of the year in which they were disposed or, on income of the previous year instead of being set of against any capital gains.
4. Capital Gains Tax Deferral Relief
Payment of CGT can be deferred when the gain is invested in shares of an EIS qualifying company. The gain can be made from the disposal of any kind of asset but the Investment must be made one year before or three years after the gain arose – connection to company does not matter. Unconnected investors are eligible for relief from both Income tax and CGT referral relief.
For more information, please see the HMRC website.