Chris Nash
The Enterprise Investment Scheme (EIS) is a powerful fundraising tool for scaling startups, offering generous tax reliefs to investors who fund eligible businesses.
This enables startups to grow (with increased limits to SEIS) by reducing downside risk for investors to encourage investment into UK-based businesses.
If you’re considering raising through EIS, understanding the eligibility requirements is essential. While EIS is broader than SEIS, there are still strict criteria for both companies and investors.
EIS qualifying criteria
To qualify for EIS, companies must meet a range of requirements set by HMRC.
Age of the company
Your company must generally have made its first commercial sale within the last 7 years.
For knowledge-intensive companies (KICs), this limit can extend to 10 years.
Gross assets
Your company must have:
- No more than £30 million in gross assets before investment
- No more than £35 million immediately after investment
Number of employees
Fewer than 250 full-time employees (500 for KICs).
Funds raised
EIS allows significantly larger raises than SEIS. Companies can raise up to £10 million per year, with a £20 million lifetime cap. For KICs, these numbers are doubled (£20m and £40m respectively).
Permanent establishment
The company must have a permanent establishment in the UK. This is because the scheme is designed to fuel industry growth within the UK.
Company independence
It cannot be under the control of another company, and any subsidiaries must also meet the criteria to qualify under this scheme.
New shares only
The shares you issue through EIS must be new, ordinary shares. They cannot be transferred from existing shares.
Use of funds
Funds raised through EIS must be used for a qualifying business activity, supporting the growth and development of the company.
Our SEIS/EIS eligibility quiz is a great place to start, but for more guidance, explore our help guide or book a call to determine if you could qualify.
Excluded trades
Some industries are not eligible for EIS, so understanding how your business in relation to excluded trades is important in understanding the qualification criteria.
Common excluded activities include:
- Coal or steel production
- Farming or market gardening
- Leasing activities
- Legal or financial services
- Property development
- Running a hotel
- Running a nursing home
- Generation of energy
- Production of gas or other fuel
- Exporting electricity
- Banking, insurance, debt or financing services
- Dealing in land or commodities
If a significant portion of your business (typically 20% or more) falls into excluded activities, you may not qualify.
If your company operates across multiple areas, your main trade must be eligible.
For more information on excluded industries, please see our help guide.
Restrictions for investors
To benefit from EIS tax relief, investors must also meet certain criteria.
Not connected to the company
Investors:
- Can't own more than 30% of the company
- Can't generally be employees
- May be directors in certain cases*
- Can't be a spouse, civil partnership, parent, grandparent, child or grandchild.
Investment cap
- Up to £1 million per tax year under EIS
- Up to £2 million if at least £1 million is invested in knowledge-intensive companies
Risk to capital
The investment must involve genuine commercial risk in order to qualify. For more details on risk to capital, check out our blog.
No options on shares
The investment must not include any put or call options within the first three years.
In simple terms, investors can’t have the right to sell their shares at a guaranteed price (put option) or buy additional shares at a pre-agreed price (call option) during this period, as this would reduce the level of investment risk required for EIS.
No value received
The investor must not receive any value from the company (e.g. dividends) within the first three years.
Hold period
Shares must be held for at least three years post-investment to retain tax relief.
UK taxpayer
The investor must be liable for UK Income Tax.
*Directors are eligible for SEIS/EIS tax relief in certain situations. Learn more.
Check your eligibility with InVestd Raise
EIS eligibility can get complex, especially as your business grows.
With InVestd Raise, we guide you through the process, ensuring you meet all the criteria to give your business the best shot at success.
From checking your eligibility to submitting applications and managing all HMRC correspondence, we handle it all.
Whether you’re raising your first growth round or scaling further, we make the process faster and simpler.
Book a call today to see how we can make your fundraising journey as seamless as possible.