EIS Qualifying Companies normally are treated as "relevant business property" for the purposes of Inheritance Tax Relief (‘IHT’) where the investment in an EIS Qualifying Company has been held for two years. In this case an IHT exemption for 100% of the value of the investment would be obtained in the event of the death of an Investor.
Even if an investor dies within the two year period and his or her spouse inherits the investment in the EIS Qualifying Company, the holding period of both the investor and the spouse are combined in order to determine whether the two year holding period condition has been satisfied on the death of the spouse.
Example
£
Initial investment
50,000
EIS Relief (at 20%)
(10,000)
Capital Gains Deferral (at 40%)
(20,000)
IHT Relief (at 40%)
(20,000)
Net cost of investment
Nil
A subsequent Full listing on the London Stock Exchange, though not an AIM listing, would lead to a loss of business property relief for IHT purposes.
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