ACCA Advanced Taxation (ATX) Practice Exam

What does EIS stand for in the context of tax relief?

1. Equity Investment Scheme

2. Enterprise Investment Scheme

3. Emergency Investment Strategy

4. Established Investment System

The correct answer is: Enterprise Investment Scheme

The correct answer is the Enterprise Investment Scheme. This scheme allows individual investors to receive significant tax relief when investing in certain small, higher-risk companies in the UK. The purpose of the Enterprise Investment Scheme is to encourage investment in early-stage companies that typically struggle to secure funding through traditional methods. Investors participating in the scheme can benefit from various tax incentives, including income tax relief, capital gains tax exemption on profits made from shares, and inheritance tax relief. These incentives not only make investing in such enterprises more attractive but also stimulate economic growth by supporting innovative businesses. The other options do not reflect the correct terminology or purpose associated with tax relief mechanisms in the UK. Equity Investment Scheme, while it may suggest a similar concept, does not represent an established tax relief scheme. Emergency Investment Strategy and Established Investment System sound like financial concepts but are not recognized terms in the realm of tax relief related to investments in the UK. Thus, the Enterprise Investment Scheme stands out as the correct and relevant choice.