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Outt.com is delighted to have received Advance Approval from The Enterprise Investment Scheme (EIS) because it means offering a tax perk to every investor who decides to join our crowdfunding journey.

The reality is that deciding whether to purchase equity shares – and the potential tax implications – can feel like a complex decision. EIS Advance Assurance, in essence, means that anybody who invests gets up to 30% tax relief every year on any crowdfunding investments up to £1 million.

Let’s clarify that our round on Crowdcube means you can buy shares in Outt.com from just £10, so there’s no expectation of large investment. Here’s what that means and how investing in social care sector innovation could happily benefit your tax bill.

Why EIS Advance Assurance is a Big Deal for OUTT.com Investors

The EIS is a UK government scheme designed to give a helping hand to newer businesses and those with influential ideas but not limitless pockets. Seasoned investors tend to search for crowdfunding projects with the EIS approval we’ve secured – it means they can lower their tax bill by choosing to invest with firms who have done the legwork to offer this distinct advantage.

We’ll explain the benefits in more detail shortly, but the crux of it is that:

  • However large or small, any investments made qualify for up to 30% income tax relief for every tax year.
  • Returns you make are free from Capital Gains Tax, provided you’ve kept hold of them for three years or more.
  • If you sell your shares, or they drop in value, any loss on your investment is offset against your income tax – it’s a worst-case scenario, but still, there’s the assurance that you won’t lose out either way.
  • Should you make a profit and decide to reinvest that cash in another crowdfunding raise or EIS-qualifying company, you can defer your Capital Gains liability.

It’s essential to point out that tax relief is depend on your tax status – for example, the amount of income tax loss offset depends on your regular tax bracket, so it might look a little different between investors.

However, whilst eligibility for tax reliefs can vary, any qualifying individuals will benefit.

What is the EIS Scheme?

EIS is a government-backed initiative, so fully HMRC compliant and streamlined to apply for along with regular tax returns and other declarations – using your tax relief reward doesn’t require any substantial amount of additional paperwork.

The idea is that investors who buy shares in small businesses get a bonus for their efforts through relief against their income tax. It’s a win-win situation, so we can reach out to interested investors, raise funds to scale up our ambitious business plan, and offer something back in return – immediately!

EIS schemes are designed for individuals, sometimes investing for the first time, wanting to:

  • Get involved in backing a business from the early days.
  • Keep their vested interest in a high-growth company.
  • Invest in shares with the potential to grow significantly.

Therefore, for Outt.com, EIS Advance Assurance is a fantastic achievement and takes us one step closer to realising our aspirations.

If you’re wondering about the ‘advance’ terminology, it purely means that the crowdfunding raise hasn’t finished yet. HMRC awards Advance Approval at this stage because the tax office can’t actively apply the tax relief till the investments are finalised.

WE ARE CROWDFUNDING!

*capital at risk

EIS Investment Tax Relief Examples

We appreciate that some investors will be well-versed with EIS tax relief, and it might be a new concept to others, so let’s demonstrate precisely how it works with some examples.

Scenario One: Shares Remain Stable

In our first illustration, we’ll consider an investment in £100 of shares, which remain worth a consistent value. Stable share valuations do not mean that you don’t qualify for tax relief since it applies to the investment made, not solely against returns or profits.

HMRC applies tax relief of 30%, so £30 on our example value, and that amount is knocked off your income tax. The calculation doesn’t change no matter how much or how little you invest – provided you’re within the £1 million investment cap.

Therefore, if you bought £10,000 of shares, you’d get a £3,000 tax reduction or repayment.

Scenario Two: Shares Increase in Value

Let’s look at it from another perspective and consider what happens if your Outt.com shares are worth double their value in three years.

If you invested the same £100, you’d get an equal £30 income tax deduction, but your shares are now worth £200 – so a total gain of £130. Given that you’ve retained your shares for three years, there is no Capital Gains Tax to pay on your £100 profit.

The same goes for a £10,000 investment. You’d receive your £3,000 income tax relief, plus the personal gain of £10,000 as your share ownership has doubled in value.

Scenario Three: Shares Drop in Value

It’s only right that we look at every angle to ensure all prospective investors understand how EIS Advance Assurance impacts their share ownership if they don’t perform as we anticipate.

Shares worth the same £100 always maintain eligibility for tax relief up to 30%, regardless of how equity investments perform. However, you’d also earn loss relief on any drop in value.

The exact relief depends on your tax bracket, but you will get 20% back on the £100 lost if you’re a basic rate taxpayer, so there’s an in-built safeguard, even if shares lose value at some stage.

Benefits of EIS Scheme Eligibility

EIS Advance Assurance reinforces the opportunity to invest in innovation and benefit from a range of advantages as an added incentive with a blend of upfront and continual tax reliefs.

Tax relief values depend on the amount invested but offer a considerable benefit against other crowdfunding opportunities at any level. And, if we can make a difference to your taxes, think about what else we can achieve!