Enterprise Investment Schemes (EIS)
 
The taxman permits you to invest up to £150,000 a year
into a unquoted company and enjoy benefit tax advantages.
This is designed to encourage investors to put money
into smaller companies that constitute a higher risk investment.
 
The tax breaks are:
• Income tax relief available at a rate of 20%.
Therefore for every £1,000 invested the taxman gives you back £200.

• Capital gains tax exemption if held for three years.
Normally when you invest in shares, you receive a tax-free exemption.
In the financial year 2002/2003, it stands at £7,700.
But on bigger gains, you will be charged tax at your highest rate.

• Unlimited capital gains tax deferral - you can defer paying a CGT bill by reinvesting in an EIS.

• Relief against losses, which you may suffer on disposal.
If your investment goes wrong and falls in value one consolation is the losses
you've notched up can be set against any other profits you've made.
In practice, this is only of value to people with gains in excess of £7,700 a year.
To claim the above tax benefits you must invest for a minimum of three years and meet additional criteria.