Renewable energy is becoming increasingly popular with investors – not only do they get a return on their investment, but they are doing so in an environmentally responsible way.
The Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) allow investments to be made in certain unquoted companies in a tax efficient way. Both schemes encourage individuals to invest in smaller companies by offering income tax and capital gains tax reliefs so long as certain company and investor criteria are met. EIS and SEIS operate in a similar way but the criteria are different and SEIS is specifically designed for investments in start-up and early stage companies.
Why is EIS/SEIS attractive?
For qualifying EIS investments, a reduction in income tax liability equivalent to 30% of the funds invested is available. For SEIS investments, a reduction of 50% of the sums invested is available. A capital gains tax exemption is also available on the sale of EIS and SEIS qualifying shares and gains arising on the disposal of other assets can be deferred by reinvesting in eligible EIS or SEIS investments (within certain time limits). Tax reliefs are available to individuals holding qualifying company shares for a minimum of three years.
Which renewable technologies and tariffs qualify?
Many renewable energy projects come within the criteria for EIS and SEIS. However, electricity generation for which generation or export Feed-in Tariffs (FITs) are received are not eligible unless the energy is generated by anaerobic digestion or is hydro power, or the generation or export activity is carried on by community interest companies, co-operative societies, community benefit societies or Northern Ireland industrial and provident societies. ROC projects are eligible, subject to them meeting the other general EIS/SEIS criteria.