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

The following Tax guidance 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

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 risk. This Practice Note explains what is meant by a qualifying trade. The concept of a qualifying trade is key to the definition of a qualifying business activity (another term used throughout the EIS legislation), for which see Practice Note: EIS—conditions for relief: issued shares, the funds raised and the arrangements in general — Meaning of qualifying business activity.

For an explanation of the various tax reliefs available to qualifying EIS investors, see Practice Note: EIS—introduction to regime and description of