EIS schemes offer tax relief on contributions at 30% and a tax deferral on gains. EIS investments are generally high risk and invest in a single company.

If the investment is into your own company, only CGT deferral relief is available.
Investing in an EIS

Example: John and EIS
John decides to set up a new trading business and subscribes for £50,000 of shares at par, and has gains realised elsewhere of £50,000 which he invests in the shares.

The company qualifies for EIS treatment and he applies for an EIS scheme number.  He elects to defer the gains into the new shares, and saves having to pay capital gains tax on his gains.

This gives him a tax deferral of £14,000 (28% of £50,000)!

Example: Alisha and EIS
Alisha invests £50,000 into a qualifying EIS company in 2012/13 with which she has no connection.

She has gains of £50,000 for the year which she invests in the EIS. She defers the tax payable on her gains of £14,000 and also receives a tax rebate of 30% of her contribution, i.e. £15,000.

This makes the total effective rate of relief on her investment a massive 58%.