What key feature is associated with the EIS shares pertaining to capital gains?

The Enterprise Investment Scheme (EIS) is designed to encourage investment in small, high-risk companies by offering significant tax reliefs. One of the key features related to EIS shares is the treatment of capital gains.

When it comes to capital gains associated with EIS shares, the correct response highlights that the gain is deferred until disposal. This means that if an investor disposes of the qualifying EIS shares at a profit, they can defer any capital gains tax on that gain. Essentially, the capital gains tax liability is postponed until the gain is realized, allowing investors the opportunity to reinvest that capital or manage their tax position until they actually sell their EIS shares.

This feature is particularly attractive, as it provides a form of tax relief that can be beneficial for those looking to invest in ventures that might be regarded as risky. The deferral of gains means that investors' cash flow is not adversely impacted by immediate tax obligations upon a gain, thus encouraging investment and fostering the growth of smaller businesses.

In essence, the deferral of capital gains tax serves as a strong incentive for investors to engage with EIS shares, thereby promoting investment in potentially transformative companies.