VCM14010 - Venture Capital Schemes Manual: the Enterprise Investment Scheme: income tax relief: company and investor procedures: overview

The Enterprise Investment Scheme (EIS) is intended to encourage individuals to subscribe for shares in new, small, higher-risk trading companies that would otherwise struggle to raise finance to support their growth and development. Individuals whose investments meet the scheme conditions are eligible to a range of tax reliefs.

Investors should be aware that the company has to observe certain rules, not just at the time of the investment but for at least three years afterwards. If it fails to meet those rules tax relief will not be given, or, if it has already been given, will be withdrawn. Similarly companies should appreciate investors must meet certain conditions for tax relief to be due.

An investor cannot claim EIS tax reliefs until the company that issued the shares sends a compliance certificate, form EIS3, to the investor. Companies cannot issue EIS3s without first being authorisation to do so by HMRC. There are various procedures that the company and the investor must follow. VCM14020+ sets out what the company has to do and VCM14130+ sets out what the investor has to do.

HMRC’s Venture Capital Reliefs (VCR) Team decides if a company and a share issue qualify, and is responsible for monitoring companies to ensure that they continue to meet the requirements of the scheme for the duration of the qualifying period for any share issue.

The VCR Team will not enter into protracted correspondence if it considers that an investment would not be eligible or refuses to provide an opinion because is unable to reach a decision. The VCR Team will look at new information supplied but in general the VCR Team will enter into no more than two rounds of correspondence once it has made a decision.

In advance of inviting applications for shares, companies hoping to attract subscriptions under the EIS can seek advance assurance that they are likely to satisfy the conditions of the scheme insofar as the company requirements are concerned. There is no requirement for a company to seek advance assurance, and neither is there a requirement for them to register with HMRC in advance of an issue of shares. Guidance on advance assurances is at VCM60100+.

The rules of confidentiality apply. Requests will be dealt with only if they come from the company’s secretary or directors or from a person authorised by the company to negotiate with HMRC on their behalf, see VCM14030. The VCR Team must have a completed email disclaimer that authorises them to correspond by email see VCM2035

Potential investors making enquiries about a company must address those enquiries to the company itself and not the VCR Team.