ACCA Advanced Taxation (ATX) Practice Exam

What is the maximum investment amount per tax year for EIS to receive income tax relief?

1. £100,000

2. £200,000

3. £1,000,000

4. £300,000

The correct answer is: £1,000,000

The maximum investment amount per tax year for the Enterprise Investment Scheme (EIS) to qualify for income tax relief is set at £1,000,000. EIS is designed to encourage individuals to invest in small and high-risk companies by offering significant tax reliefs, including income tax relief. When a taxpayer invests in an EIS-qualifying company, they can claim up to 30% income tax relief on their investment. For a maximum investment of £1,000,000, this can potentially provide a tax relief of up to £300,000. This makes EIS an attractive option for investors looking to support small businesses while gaining some tax benefits. Understanding the limits of EIS investments is essential for taxpayers considering their investment strategy and tax planning, as investing beyond this threshold in EIS does not provide additional income tax relief, which can significantly affect an investor's financial planning and returns.