Conditions to be met by the EIS issuing company
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:
the kind 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.
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: ||Commentary||Legislative 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|