Outlining the trades, activities and subsidiaries that qualify for SEIS and EIS.
One of the first questions you’ll be asked when applying for SEIS/EIS advance assurance is whether your company (and any of its subsidiaries) carries out a ‘qualifying trade.’
It sounds a lot scarier than it is, and quite frankly HMRC themselves do say “most trades will qualify, including any research and development which will lead to a qualifying trade.”
However, you’ll want to know if your company meets the qualifying trade criteria before you start the application.
Fortunately, the list of non-qualifying trades is relatively straightforward, and as long as more than 20% of your business doesn’t include the following, you should be okay:
- 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, such as electricity and heat
- Production of gas or other fuel
- Exporting electricity
- Banking, insurance, debt or financing services
For more information, and a full list of non-qualifying trades, read here.
What if my company is part of a group?
Things get a little trickier with groups, as each company needs to be a ‘qualifying subsidiary.’
- Your company must own more than 50% of the subsidiary’s shares
- No one other than your company or one of its other qualifying subsidiaries can control this subsidiary
- There cannot be any arrangements which would put someone else in control of this subsidiary
And of course, the subsidiaries must carry out a qualifying trade.
If the SEIS/EIS investment is going to be spent on one of your qualifying subsidiaries, the subsidiary must be at least 90% owned by the company. This is also the case if the subsidiary’s main business is property or land management.
You can also set up a subsidiary to complete a project or series of projects before closing, as long as it supports the growth and development of your company.
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