These new allowances increased the EIS fund raising limit for such companies from £5m to £10m per tax year and the lifetime limit per company increased from £12m to £20m. Similarly, investors may now claim EIS income tax

An investee company is deemed a knowledge-intensive company if, at the time of the share issue, it meets an operating costs condition and either the innovation condition or the skilled employee condition.

The operating costs conditions are:

1. In at least one of the ‘relevant three preceding years’, at least 15% of operating costs consisted of research and development or innovation expenditure. Operating costs are, broadly, expenses recorded in the profit and loss account or income statement other than those incurred intra-group; or
2. In each of the three ‘relevant three preceding years’, at least 10% of operating costs consisted of R&D expenditure.

The innovation condition is:

At the time the shares are issued, the issuing EIS company has created or is creating (or is preparing to create) intellectual property and it is reasonable to assume that within ten years of the investment, the exploitation and/or use of that intellectual property will form the greater part of the issuing (EIS) company’s business. To be clear here, the majority of the intellectual property (in terms of value) must be created by the Company and the right to exploit it must vest in the Company (whether alone or jointly with others).

The skilled employee condition is:

At least 20% of the investee company’s full time equivalent workforce has a higher education qualification and is engaged directly in R&D carried on by the issuing EIS. This condition will be required to be met throughout the period commencing with the investment and ending on the third anniversary of that date.

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IMPORTANT: The views expressed in these webinars are the views of the individual and not necessarily of Deepbridge Capital LLP. Figures quoted by the presenter and/or guest may be approximations. The content of these videos should not be construed as financial advice. This video is a real-time financial promotion and, as a result, has not been approved as a financial promotion for the purposes of Section 21 of the Financial Services and Markets Act 2000.

RISK WARNING: Any decision to invest should be made only on the basis of the relevant documentation for the investment available in the accompanying company profile. Investments in unquoted companies carry high risks. Capital invested will be at risk and you could lose all of your investment. No established market exists for the trading of shares in private companies, making it difficult to sell shares.

Tax treatment depends on the individual circumstances of each investor and may be subject to change in future. The availability of tax reliefs depends on the Company invested in maintaining its qualifying status. Past performance is not a reliable indicator of future performance.

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