Which tax relief is applicable on EIS provided it is held for three years?

The correct answer is that the tax relief applicable on the Enterprise Investment Scheme (EIS) is the exemption from both income tax and capital gains tax, provided the investment is held for at least three years.

Under the EIS, investors are incentivized to invest in small, high-risk companies. The scheme offers significant tax reliefs to encourage investment in these businesses. When investors hold their EIS shares for a minimum of three years, they benefit from a complete exemption from capital gains tax on any profits made from the sale of those shares. Additionally, if the investment has been held for at least three years, any gains can be reinvested into another EIS-eligible company without facing capital gains tax, which enhances the appeal of reinvesting.

Furthermore, EIS allows for income tax relief at the time of the investment, enabling investors to deduct a percentage of their investment from their income tax liability, which significantly reduces their taxable income. The dual relief from both income tax and capital gains tax, contingent on holding the investment long-term, is a fundamental feature of the EIS designed to promote investment in qualifying companies.

The other options would imply that either only one type of tax relief is applicable or that no relief is provided, which does not