Conditions to be met by the EIS issuing company

Produced by Tolley
Conditions to be met by the EIS issuing company

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

  • Conditions to be met by the EIS issuing company
  • Types of company that can use the EIS to raise money
  • Risk-to-capital condition
  • Permitted maximum age requirement
  • The gross assets requirement
  • Number of employees
  • Financial health of the company
  • Territorial requirements
  • Disqualifying purpose test
  • The amount of money raised
  • More...

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 tax relief guidance note.

The rules which determine whether a company is qualifying for EIS broadly cover:

  1. the kind of company

  2. the amount of money it can raise

  3. how and when the money raised is used in the trade

  4. 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.

Types of company that can use the EIS to raise money

Certain conditions must be met by the issuing company if it is to be a qualifying company for the purposes of EIS. Detail on all the conditions can be found in Simon’s Taxes, but a summary of the key points is provided below.

The company must meet requirements in relation to: CommentaryLegislative reference and Simon’s Taxes reference
Risk-to-capital 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 applies to shares issued on or after 15 March 2018)ITA 2007, s 157A
Simon’s Taxes E3.102
Unquoted statusThe company must be unquoted at the time the shares were issued. 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.
AIM, PLUS Quoted and PLUS Traded are unquoted for this purpose. See Simon’s Taxes E3.131
ITA 2007, s 184
Simon’s Taxes E3.131
UK permanent establishment The company must have a permanent establishment in the UK (see below)ITA 2007,

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