EIS—conditions for relief: qualifying trades
EIS—conditions for relief: qualifying trades

The following Tax practice note provides comprehensive and up to date legal information covering:

  • EIS—conditions for relief: qualifying trades
  • Meaning of qualifying trade
  • Meaning of substantial
  • Meaning of excluded activities

IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marks the end of the Brexit transition/implementation period entered into following the UK’s withdrawal from the EU. At this point in time (referred to in UK law as ‘IP completion day’), key transitional arrangements come to an end and significant changes begin to take effect across the UK’s legal regime. This document contains guidance on subjects impacted by these changes. Before continuing your research, see Practice Note: What does IP completion day mean for Tax?

The EIS is designed to encourage investment in smaller, higher-risk trading companies by offering a range of tax reliefs to individual investors purchasing newly issued shares in those companies.

The EIS regime is prescriptive and sets out numerous requirements that must be met, including in relation to:

  1. the individual investors (see Practice Note: EIS—conditions for relief: individual investor conditions)

  2. the issuing company (see Practice Note: EIS—conditions for relief: issuing company), and

  3. the issued shares, the funds raised and the arrangements in general (see Practice Note: EIS—conditions for relief: issued shares, the funds raised and the arrangements in general)

A pervasive requirement is that the issuing company (or its group) must carry on a qualifying trade for the purposes of which the EIS funds are raised and ultimately spent. The trades that qualify are restricted so as to exclude those considered to be low

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