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HMRC internal manual

Venture Capital Schemes Manual

Introduction to EIS income tax relief: eligibility for EIS relief

ITA07/S157; ITA07/S250

To be eligible for Income Tax relief the investor must be an individual. The individual must make the subscription on his or her own behalf. Thus relief cannot be claimed by an individual subscribing in the capacity of a nominee or a trustee.

There are, however, two exceptions:

  1. Individuals who use another person as a nominee to subscribe for the shares, or be registered as the holder of them, on their behalf, are treated as themselves being the subscriber - ITA07/S250(1). See VCM16040.
  2. Where a joint subscription is made, with the result that the subscribers are in law acting as bare trustees (whether for themselves or for others), the beneficiaries are treated as being the subscribers.

Joint subscriptions - ITA07/S250(2)

Where shares are subscribed for jointly,each of the owners is to be treated as having subscribed an equal amount in respect of those shares. So if spouses or civil partners each subscribe £5000 for 5000 shares and the shares are registered in their joint names they are each treated as having subscribed £2500 for 5000 shares and each is entitled to relief on £2500. This is the case even if all of the funds were provided by one of them.

Other conditions

Where an individual subscribes for an issue of shares in a company, the individual is eligible for EIS income tax relief only if certain conditions are met by the investor (see VCM11000+) and by the company issuing the shares (see VCM13000+). In addition, there are other general requirements (see VCM12000+).

Minimum subscription - for shares issued before 6 April 2012

For shares issued before 6 April 2012 there was a minimum subscription amount of £500 unless the investment was made via an approved investment fund (ITA07/S157(2), see VCM16050). This requirement was removed in Finance Act 2012 for investments made on or after 6 April 2012.