Before you go further
What can go wrong.
Don't invest unless you're prepared to lose all the money you invest. This is a high-risk investment and you are unlikely to be protected if something goes wrong.
You could lose everything
Most early-stage companies do not succeed. If a company you invest in fails, the shares become worthless and you lose the amount you invested, less any loss relief you can claim.
Loss relief reduces what a failure costs you. It does not return your capital. On a £50,000 EIS investment at the 45% rate, loss relief leaves a net loss of £19,250 rather than £50,000 — still a loss of nearly £20,000.
You cannot easily sell
Shares in unquoted companies are illiquid. There is no ready market for them and you should assume you cannot sell at all until a company-level exit occurs, which may be many years away or may never happen.
Some companies later join a matched bargain platform, where a willing buyer and seller can be matched. That is a possibility, not a guarantee, and prices on such platforms can be well below what you paid.
Your shareholding will be diluted
Growing companies raise money again. Each round issues new shares, and unless you invest again your percentage of the company falls. Later rounds can also carry preferential terms that rank ahead of yours on an exit.
Tax relief is not guaranteed
Relief depends on your own circumstances and on the company maintaining its qualifying status throughout the holding period. It can be withdrawn if you sell within three years, if you become connected with the company, or if the company ceases to qualify.
Advance Assurance from HMRC is not a guarantee. Tax rules can change.
There is no compensation scheme
If you invest as a high net worth or self-certified sophisticated investor, you can expect no protection from the Financial Conduct Authority, the Financial Ombudsman Service or the Financial Services Compensation Scheme in relation to this investment.
In summary
- Investing in early-stage and unquoted companies involves significant risks, including illiquidity, the absence of dividends, dilution and the loss of the full amount invested.
- These investments should form only part of a diversified portfolio and are intended only for investors who are able to bear the loss of their entire investment.
- Tax reliefs depend on individual circumstances and on the investee company maintaining its qualifying status, and may change in the future.
- Past performance is not a reliable indicator of future results.
The content of this promotion has not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000. Reliance on this promotion for the purpose of engaging in any investment activity may expose an individual to a significant risk of losing all of the property or other assets invested.