As one might expect, when the government is providing valuable tax relief, there are inevitability a number of strings attached.

 

I won’t run through the numerous conditions to be met by the company but the age, size and trading activities are the key areas where a company may fall short.

 

Age

 

If seven years have passed (ten for knowledge-intensive companies) since the first commercial sale, the company must have already issued shares which qualify under a number of regimes including S/EIS.

 

Size

 

The company’s gross assets must not exceed £15m before the share issue and £16m following the share issue. It must also not have more than 250 full-time equivalent staff or 500 if knowledge-intensive.

 

Trading activities

 

The following activities if undertaken to a substantial extent will result in the company not qualifying for EIS.

 

 

  • dealing in land, commodities, futures, shares, securities or other financial instruments;
  • dealing in goods otherwise than in the course of an ordinary trade of wholesale or retail distribution;
  • banking, insurance, money-lending, debt-factoring, hire-purchase financing or other financial activities;
  • leasing;
  • receiving royalties or licence fees;
  • providing legal or accountancy services;
  • property development;
  • farming or market gardening;
  • holding, managing or occupying woodlands, any other forestry activities or timber production;
  • shipbuilding;
  • producing coal or steel;
  • operating or managing hotels or comparable establishments;
  • operating or managing nursing homes or residential care;
  • generating or exporting electricity or making electricity generating capacity available;
  • generating heat, or any form of energy;
  • producing gas or fuel;
  • provision of services by one company to another which undertakes one of the above activities and which is controlled by the same person.

 

There are some exceptions to the above, as always the devil is in the detail. SEIS has its own set of conditions, however the trading activities condition are comparable.

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