TQOTW: Enterprise Investment Scheme
My client company is a successful trading company having raised share capital through the Enterprise Investment Scheme 10 years ago. The proprietors have spotted a gap in the market and wish to expand into that field. The company is looking to raise further share capital through another round of EIS investment. I understand that there may be restrictions given the age of the company. It is a stand-alone company. Can you explain, please?

A. The rules were updated by the provisions of Finance Act (No 2) 2015.

Subject to exceptions to the requirements, such investment is not permitted if the new shares are issued more than 7 years after the first commercial sale made by the company. (The limit is extended to 10 years for a knowledge-intensive company)

The exception here would be met if two conditions were met.

The first condition is that the amount raised by the new investment in a period of 30 consecutive days is at least 50% of the average turnover of the company taken over 5 years to the end of the last Companies Act filing period ending before the date of issue.

The second condition is that the money raised is employed in entering a new product or geographical market.

These terms are defined by EU regulation and it is recommended that specialist advice is taken (alternatively, see HMRC manuals at VCM5158). Suffice to say that a new product market is not the same as a new product, and relates more to the customer base. Also entering a new geographic area is not on its own the same as entering a new geographic market.

Such an investment may be possible although care must be taken to ensure that the EIS provisions are met.


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John has worked in taxation since 1977. Having worked for the Inland Revenue for 13 years, he moved into private practice working initially as a tax senior and then tax manager for small and medium sized firms across the Midlands. He has dealt with a wide range of clients including owner managed businesses and clients within the licensed trade. Latterly, John has been providing advisory and consultancy services to accountants. Whilst a generalist, John specialises in Stamp Duty and Stamp Duty Land Tax.

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