How the scheme works
EIS is designed so that your company can raise money to help grow your business. It does this by offering tax reliefs to individual investors who buy new shares in your company.
Under EIS, you can raise up to £5 million each year, and a maximum of £12 million in your company’s lifetime. This also includes amounts received from other venture capital schemes. Your company must receive investment under a venture capital scheme within 7 years of its first commercial sale.
You must follow the scheme rules so that your investors can claim and keep EIS tax reliefs relating to their shares. Tax reliefs will be withheld or withdrawn from your investors if you do not follow the rules for at least 3 years after the investment is made.
There are different rules for knowledge-intensive companies that carry out a significant amount of research, development or innovation, and either:
- want to raise more than £12 million in the company’s lifetime
- did not receive investment under a venture capital scheme within 7 years of their first commercial sale
Approved EIS funds
The rules for EIS approved funds will be changing on 6 April 2020 to take account of the:
- changes that will focus approved funds on knowledge-intensive investments
- increased flexibility available to fund managers in the timing of investments
Read the draft guidelines to find out more about the amendment to the requirements for an EIS approved fund.
What money raised can be used for
The money raised by the new share issue must be used for a qualifying business activity, which is either:
- a qualifying trade
- preparing to carry out a qualifying trade (which must start within 2 years of the investment)
- research and development that’s expected to lead to a qualifying trade
The money raised by the new share issue must:
- be spent within 2 years of the investment, or if later, the date you started trading
- not be used to buy all or part of another business
- pose a risk of loss to capital for the investor
- be used to grow or develop your business
Companies that can use the scheme
Your company can use the scheme if it:
- has a permanent establishment in the UK
- is not trading on a recognised stock exchange at the time of the share issue and does not plan to do so
- does not control another company other than qualifying subsidiaries
- is not controlled by another company, or does not have more than 50% of its shares owned by another company
- does not expect to close after completing a project or series of projects
Your company and any qualifying subsidiaries must:
- not have gross assets worth more than £15 million before any shares are issued, and not more than £16 million immediately afterwards
- have less than 250 full-time equivalent employees at the time the shares are issued
Your company must carry out a qualifying trade. If you’re part of a group, the majority of the group’s activities must be qualifying trades.