VCM12031 - EIS: income tax relief: general requirements: maximum amount raised annually through risk finance investments: overview
ITA07/S173A, 173AA and 173AB
There are limits on the amount of relevant investment a company may receive,
both in any 12-month rolling period and throughout the company’s lifetime.
Finance Act 2026 raised the annual and lifetime
limits on relevant investments for most companies. The existing limits will
continue to apply to the specified companies (see definition below).
ITA07/S173A applies a limit on the amount of relevant investments a company may
receive within a 12-month rolling period (the annual investment limit).
See VCM12032 for
more details on the annual limit.
ITA07/S173AA applies a limit on the maximum amount of
relevant investment a company may receive; known as the lifetime limit.
ITA07/S173AB are anti-abuse provisions to prevent companies from sidestepping
the limits by employing money raised through EIS or VCT in companies or
businesses that are imported after the investment has been received. See VCM12033
for more details on the lifetime limit.
The relevant investments that count towards the annual and lifetime investment limits were extended by F(2)A 2015 to include relevant investments received by, or employed in, subsidiaries of the company or businesses transferred to the investee company (see VCM12032 and VCM12033).
A company’s annual and lifetime investment limits will depend on that company’s circumstances; including whether they are a knowledge-intensive company (see VCM8161) and specified company (defined below). The annual and lifetime investment limits are set out on following pages.
Relevant Investments
‘Relevant investments’ include:
- an investment of any kind made by a VCT,
- an issue of shares in respect of which the company provides an EIS Compliance statement EIS1 (to access the form seeVCM14020)
- an issue of shares in respect of which the company provides an SEIS compliance statement SEIS1 (to access SEIS1 form see GOV.UK, HMRC’s website Guidance: Use the Seed Enterprise Investment Scheme (SEIS) to raise money for your company)
- an investment made in a social enterprise (shares or loan) in respect of which the social enterprise provides an SITR compliance statement
- any other investment which is a State aid approved by the European Commission in accordance with the Community Guidelines on Risk Finance Investments in Small and Medium-sized Enterprises (as replaced or amended). Companies will need to check with the issued or investment authority as to whether an investment is a notified State aid.
Any EU de minimis State aid is received, excepting an SEIS or SITR investment is not a relevant investment. De minimis aid is not notified and therefore cannot be approved under the Guidelines on State aid to promote risk finance investment.
Companies that have received another form of EU State aid, whether de minimis or other aid, should check with the issuer or investment authority to ensure that the receipt of investment under the SEIS, EIS, SITR or VCT schemes does not have cumulation consequences in respect of the other aid received. Aid may be withdrawn where the cumulation thresholds are exceeded.
Specified company
ITA07/S256B
A specified company has its registered office in Northern Ireland, and carrying on a trade in either:
- goods - this will usually involve the manufacture of goods and will not be part of the service sector; or
- the wholesale electricity market, including generation, transmission, and distribution of electricity.
(Note, exclusions on energy generation and fuel creation (VCM3160) still apply to specified companies.)
Implications for completing form EIS1 compliance statement
To the extent that a share issue includes shares on which relief is to be claimed under EIS, it is only those shares that are included on EIS compliance statements (form EIS1) that contribute towards the limit.
So while all shares included on forms EIS1 count as relevant investments, not all shares within an issue (or subscription) should necessarily be included on those forms - only those shares in respect of which the investor has requested that the company issue a compliance certificate (form EIS3).
In order not to unnecessarily restrict their ability to raise funds, companies should ensure that only those investors who have indicated that they want an EIS3 so that they can claim relief are entered on the compliance statement. There is no statutory provision to amend an EIS1once submitted.
Example 1
| Date | Action |
|---|---|
| 1 September2024 | Company (not a knowledge-intensive company)
issues shares for £2 million |
| 1 October 2024 | Company issues another £3.5 million of
shares |
| 1 February 2025 | Company submits an EIS1 covering all the shares issued on 1 February. The VCR Team issues forms EIS3 in respect of those shares, allowing investors to claim relief. |
| 1 March 2025 | Company submits an EIS1 covering all the
shares issued for £2 million on 1 September 2024. |
Because the EIS1 relating to the second share issue covers shares that breach the £5 million limit that was in place on 1 February 2025, the VCR Team will not issue forms EIS3 and the investors in that issue will be unable to claim tax relief. Note that no relief is available in respect of any of the shares in that issue, even though the £5 million limit was only breached to the extent of £500,000.
It is also important to note that it is the amounts entered on the compliance statement that count, irrespective of whether relief is actually claimed on all those amounts. It may be that, for various reasons, investors find they were unable to claim relief on more than £1 million of the £2 million invested in the first issue on 1 September 2024. That makes no difference; it is still the figure of £2 million that counts towards the £5 million limit.
This limit operates by reference to the dates on which relevant investments in the company have been made, not by reference to the dates on which compliance statements are submitted. If compliance statements are not made in the same sequence as the share issues to which they relate the submission of compliance statement for an earlier issue may impact on the availability of relief on shares which have already been included on a compliance statement which relates to a later issue. The following example illustrates this.
Example 2
The facts are the same as in Example 1 above, except that, for some reason, the company does not submit the compliance statements in the order in which the shares were issued.
| Date | Action |
|---|---|
| 1
September 2024 | Company
(not a knowledge-intensive company) issues shares for £2
million |
| 1
February 2025 | Company
issues another £3.5 million of shares |
| 1
March 2025 | Company submits an
EIS1 covering all the shares issued on 1 February. The VCR Team
issues forms EIS3 in respect of those shares, allowing investors to
claim relief. |
| 1
October 2025 | Company submits an
EIS1 covering all the shares issued for £2 million on 1 September 2024. |
The latter compliance statement relates to the share issue that pre-dates (by 5 months) the issue reported on the statement received in March. The £2 million of shares covered by this later statement must now be taken into account in determining whether relief was due on the £3.5 million of shares issued on 1 February 2025. Doing so means that no relief is due to any investors in the second issue, and any relief that has been given on those shares will be withdrawn. Relief may however be due on the £2 million of shares since at the time those shares were issued the £5 million annual limit was not breached.
Example 3
Where the 12-month period straddles 6 April 2026 the £20 million limit applies to a knowledge-intensive company that is not a specified company, notwithstanding that the company may have reached the £10 million limit before 6 April 2026.
| Date | Action |
|---|---|
| 1
August 2025 | Company
issues shares for £500,000 |
| 1
November 2025 | Company
receives VCT investment of £9.5 million |
| 1
December 2025 | Company
submits EIS1 for the share issue on 1 August. VCR Team accepts it and provides
forms EIS3. |
| 1
June 2026 | Company
issues shares for £3 million |
The £20 million annual limit applies to the share issue on 1 June 2026, so relief will be available for the whole of the share issue in June, once the company submits its EIS1.
The limit in a 12-month period is calculated taking into account any investment in respect of which an EIS1, SEIS1 or SITR1 has been provided, whether or not relief has been allowed in respect of that share (or loan) issue. So, if the company in Example 1 above wanted to issue further shares in January 2026 it would be limited to raising £1.5 million if the investors were to be eligible for relief, notwithstanding that no relief had been granted on the £3.5 million shares issued in February 2025.