Enterprise Investment Schemes

I have inherited £175,000 from my uncle.  It was something of a nice surprise as I didn’t know he was planning to leave me anything.  I regularly use my ISA allowance using excess income but I think I’d like to do something a bit different with this money.  I’ve read that Enterprise Investment Schemes can give quite a good return.  Would you recommend this route?

Carl responds

Enterprise Investment Schemes (EIS) are one of a group of investment schemes that also includes Venture Capital Trusts (VCT) and Seed Enterprise Investment Schemes (SEIS).  With these schemes, you are investing in companies that are looking to find capital in order to grow their business.  Some will be start-ups and others will be looking for significant expansion.

The important thing to know about these schemes is that they involve a much higher level of investment risk than many other investments.  This is not surprising:  the companies in which you are investing are often at an uncertain stage in their development and so may have a greater likelihood of failure.  It may also be harder to sell their shares if they don’t do as well as hoped.

Of course, if the growth is successful, you may see increases in the value of your holding.

One of the reasons that EIS can be attractive is the fact that you may be eligible for certain tax reliefs if you invest in them – including potential reliefs for Income Tax, Capital Gains Tax and Inheritance Tax.

EIS investments are a specialist route and are only suitable for a small number of investors and usually only right for those with a sophisticated understanding of investment risk.

I suggest you meet with an Independent Financial Adviser to look at all the different investment options that might be suitable for you.  I’m sure we can find something that is sufficiently different in which you can invest your windfall.

Any opinions expressed do not constitute advice.  The value of your investment can go down as well as up and you may get back less than the amount invested.  The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.