HMRC internal manual

Venture Capital Schemes Manual

VCM10520 - 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 for all of those shares. The amount subscribed by each owner however is taken to be the total amount of the joint subscription divided by the number of joint subscribers.

The company should provide each subscriber form EIS3 (in Pdf) showing the total number of shares subscribed for on Page 1 of the form EIS3 (in Pdf). Form EIS3 (in Pdf) Page 3 should show the amount on which each owner is entitled to claim the tax relief for the shares, that is the fractional amount of the total subscribed calculated, for example as follows:

The form EIS3 (in Pdf) from the company where the spouses or civil partners jointly subscribe £5000 for 5000 shares should on Page 1 of form EIS3 (in Pdf) show the 5000 shares subscribed for, but, the amount to be entered in the Investor details on Page 3 of the form EIS3 should show the name of each subscriber having subscribed £2500 for these 5000 shares.

Each of the owners must only claim half the total amount of subscription £2500 for shares. 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.