In order to qualify for EIS, there are a number of conditions both the company and investor must meet:
The qualifying company
- The company must be an unquoted company and there must be no arrangements in existence for it to cease to be an unquoted company.
- The company must carry on a qualifying trade broadly speaking, most trades qualify unless it is an excluded trade (please refer to HMRC list of excluded trades)
- The company must have a permanent establishment in the UK;
- The company must not be under the control of another company and has not controlled another company that is not a 51% subsidiary;
- The assets of the company must not exceed £15million immediately before the shares are issued, and they must not exceed £16million immediately after the issue;
- There must be fewer than 250 full time employees in the company at the date the shares are issued;
The qualifying investor
- No connection with the issuing company at any time in the period from 2 years before to 3 years after the share issue. Connected parties include employees, shareholders or associates with more than, or an entitlement to acquire more than 30% of the ordinary share capital;
- No linked loan must be made to the investor or his associates from share issue for 3 years, otherwise relief will be clawed back;
- The investor must not be investing in the company purely to obtain a tax advantage;
- Must subscribe for shares that have been issued and at the time of issue the shares were fully paid for;
Still not sure if you qualify for EIS? Speak to us, it’s our job to know these things!