Investments

Question 1

What makes a qualifying investment into an EIS? (7)

Answer 1

Company must be permanently uk based
Must carry out a qualifying trade
Gross assets of less than £15m
Have less than 250 employees
Running less than 7 years
Need to invest in new ordinary shares (no pref. rights)
Investment must be for purpose of business growth and development

Question 2

What are the rules around tax with investing into an EIS with proceeds of a gain?

Answer 2

Income tax relief of 50% (up to tax paid)
CGT deferred/reinvestment relief if investment within 3 years of gain
No max limit of CGT deferral
Deferred until eventual sale
No CGT on death

Question 3

What are the financial implications of a business purchasing their own premises?

Answer 3

Corporation tax relief on interest on loans/borrowing taken out to purchase property
No rent being paid out
Increased cash flow due to not paying rent
Company would use up cash to buy it
Company become geared and have long term debt
Increased economic risks (e.g. interest rate risk)