Conditions to be met by the EIS issuing company

By Tolley
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The following Personal Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Conditions to be met by the EIS issuing company
  • Type of company which can use the EIS to raise money
  • The amount of money raised
  • How and when the money raised is used in the trade
  • Type of activities carried on by the company
  • Knowledge-intensive companies

For the investor to qualify for any of the available enterprise investment scheme (EIS) tax reliefs, the investment must be in an EIS qualifying company. For more detail on the tax reliefs, see the Enterprise investment scheme income tax relief guidance note.

The rules which determine whether a company is qualifying for the purposes of EIS can be broken down into four main categories:

  • the type of company
  • the amount of money it can raise
  • how and when the money raised is used in the trade
  • the type of activities carried on by the company

ITA 2007, ss 172, 180

Note that a sunset clause for EIS income tax relief has been introduced. This ensures that income tax relief will no longer be given to subscriptions made on or after 6 April 2025, unless the legislation is renewed by Treasury Order.

ITA 2007, s 157(1)(aa), (1A)
Type of company which can use the EIS to raise money

The company must:

  • have objectives to grow and develop its trade in the long-term and there must be a significant risk that the investor could lose money on the shares (this is known as the risk-to-capital condition and it applies to shares issued on or after 15 March 2018, see below)
  • be unquoted at the time the shares were issued (AIM, PLUS Quoted and PLUS Traded are unquoted for this purpose). It can subsequently become quoted without loss of relief as long as there were no arrangements for it to become quoted at the time of the share issue (ITA 2007, s 184)
  • have a permanent establishment in the

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