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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Stocks and shares: BES/EIS/VCT/EZ/Property Enterprise Trusts: purpose of the schemes


Business Start-Up Schemes and Business Expansion Schemes were introduced to enable an individual to claim Income Tax (IT) relief at their top rate (e.g. 40%, so that for every £10,000 invested in such a scheme, £4,000 will be recovered, however successful the investment might prove to be) if they invest in qualifying risky unlisted companies and latterly, those set up to provide private rented housing by taking advantage of the assured tenancy provisions. Provided the shares are held for 5 years, no Capital Gains Tax (CGT) is payable on any gains arising when they are sold. The relief came to an end on 31 December 1993.


Enterprise Investment Schemes have replaced the BES and give relief at the lower rate of IT in the year in which the investment is made on investments up to £100,000 in qualifying unlisted trading companies. Again, provided the shares are held for 5 years, no CGT is payable on any gains arising when they are sold.


Venture Capital Trusts are listed companies which are designed to enable individuals to take advantage of the EIS and invest in a spread of unlisted companies through the medium of a listed vehicle which should relieve them from the problems of selling unlisted shares. VCTs are exempt from Capital Gains Tax on chargeable gains and investors in them will not only be entitled to relief at the lower rate of IT on their investment, but will also be exempt from IT on dividends from them and from CGT on any gains arising on their disposal.

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Enterprise Zones

Enterprise Zones were established to regenerate depressed inner cities by encouraging investment. One attraction was the extension of the availability of Capital Allowances for industrial buildings to commercial buildings (including hotels) in enterprise zones. This enables the person who incurs the cost of a building to claim 100% initial allowances, effectively IT at their top rate on capital expenditure on such buildings. Property Enterprise Trusts have been set up to facilitate investment in and development of large sites by bringing together numerous individuals who hold the property as tenants in common. CGT is payable on any gains which arise on the ultimate disposal of the property.