Resources List
UNDER EIS Tax Relief
EIS eligibility criteria
The Enterprise Investment Scheme (EIS) offers a vital funding pathway for smaller companies that may find it difficult to secure investment through traditional channels.
Companies eligible for EIS funding
EIS funding is targeted at businesses that require it most. To qualify, companies must be actively trading and unlisted on any major stock exchange, although those listed on the AIM market are still considered unquoted for the purposes of EIS.
Companies excluded from EIS funding
EIS is designed to direct funding to areas where it's most needed. Over time, the sectors eligible for EIS funding may change, but currently, businesses involved in the following activities do not qualify:
- Dealing in land, property development, or leasing
- Non-standard retail or wholesale distribution
- Financial services such as banking, insurance, or lending
- Dealing in financial instruments or receiving royalties
- Legal and accounting services
- Farming and market gardening
- Forestry operations
- Running hotels or residential care homes
- Coal, steel, or shipbuilding industries
- All energy generation activities.
Detailed EIS rules
Several rules govern how companies can use EIS funding:
- Funds must be used to purchase new shares, not existing ones.
- There must be a genuine risk to capital, meaning the investment cannot be designed as low-risk.
- The funds should drive business growth, such as expanding revenue, customers, or workforce, rather than sustaining the company’s regular expenses.
- Companies must have been trading for less than seven years, or up to ten years for knowledge-intensive companies (KICs), and cannot be controlled by another entity.
- The business must have a permanent establishment in the UK.
- The company must have fewer than 250 employees (500 for KICs).
- Gross assets must be under £15 million before investment and no more than £16 million post-investment.
- Funds raised must be deployed within 24 months.
- There are caps on the amount of investment a company can receive through EIS and similar schemes:
- Up to £5 million annually (£10 million for KICs).
- No more than £12 million across the company’s lifetime (£20 million for KICs).
Advance assurance from HMRC
Companies can apply for advance assurance from HMRC, which gives them an indication that a future investment will likely meet EIS qualification criteria. Although advance assurance isn’t mandatory, it provides a level of certainty to investors and businesses that the company should qualify under EIS guidelines.