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HMRC internal manual

Venture Capital Schemes Manual

HM Revenue & Customs
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EIS: income tax relief: the investor: connection: employees, directors and partners


As confirmed in Wild v Cannavan [1997] STC 966, in order to qualify for EIS relief the investor cannot be connected with the company at any time in period A (see VCM10540).

An individual is connected with a company if he or she, or any associate (see VCM11100), is:

  • an employee, or
  • a partner, or an employee of a partner, or
  • (subject to VCM11070)

    • a director, or
    • a director of a company which is a partner of the company, or of any company which is at any time in Period A, a subsidiary of that company.

For this purpose, ‘director’ has the wide meaning given in CTA10/S452 - see CTM60180 

(reproduced below:

“’Director’ includes any person occupying the position of director by whatever name called and any person in accordance with whose directions or instructions the directors are accustomed to act. It also includes any person who:

* is a manager of the company or otherwise concerned in the management of the company's trade or business, and 
* is either on their own or with one or more of their associates the beneficial owner of, or able, directly or through the medium of other companies, or by any other indirect means, to control not less than 20% of the ordinary share capital of the company. 

The expression ‘with one or more of his or her associates’ means that a person is treated as owning or, as the case may be, controlling, what any associate owns or controls, even if he or she does not own or control share capital of his or her own.

‘Ordinary share capital’ means all the issued share capital, by whatever name called, of the company other than share capital carrying a right to a dividend only at a fixed rate. ‘Associate of a person’ has a similar meaning to associate of a participator. See CTM60150 to CTM60170, substituting ‘person’ for ‘participator’.”