VCM12033 - EIS: income tax relief: general requirements: maximum amount raised annually through risk finance investments: maximum amount raised in the company’s lifetime

ITA07/S173AA and 173AB

Finance Act 2026 raised the lifetime limits on relevant investments for most companies. The existing limits will continue to apply to the specified companies (see VCM12031).

The maximum amount of relevant investment a company and its subsidiaries may receive in its lifetime will depend on its circumstances.  

Shares issued on or after 6 April 2026

Companies that are knowledge-intensive can raise up to: 

  • £20 million of relevant investments in its lifetime for specified companies
  • £40 million of relevant investments in its lifetime for all other companies. 

Companies that are not knowledge-intensive can raise up to:   

  • £12 million of relevant investments in its lifetime for specified companies. 
  • £24 million of relevant investments in its lifetime for all other companies.

Shares issued before 6 April 2026

Companies that are knowledge-intensive companies can raise up to: 

  • £20 million of relevant investments in its lifetime

Companies that are not knowledge-intensive can raise up to:   

  • £12 million of relevant investments in its lifetime  

The rules for the lifetime limit operate in a similar way to the annual limit in determining the relevant investments that are taken into account for the purposes of this condition.

The relevant investments an issuing or relevant company has received include relevant investments that have been employed for the trade of a subsidiary of the issuing company (whether or not the investments were raised by the issuing company) and in any other company which used the money for a trade that was subsequently transferred to the issuing company.

The relevant investments received by a subsidiary which subsequently leaves the group still count toward a company’s funding limit except for relevant investments made after the subsidiary left the group.

Example 3 

Company C is the holding company of just one subsidiary, Company E, which started trading on 1 July 2024. Company C sold its other subsidiary, company D, on 30 November 2024. All the companies are less than 7 years old, and their business activities were started from scratch after they were incorporated. 

Company C wishes to raise money from EIS investors on 10 April 2026 to employ in company E’s qualifying activities. Company C is neither a knowledge-intensive company nor is it a specified company and so the lifetime limit is £24 million. 

Company C has raised risk finance investments as follows: 

1 July 2020 £2 million – for company C’s activities 

1 December 2021 £2 million – for company C’s activities 

1 January 2023 £2 million – for company D’s activities 

1 April 2024 £2 million – for company D’s activities 

1 June 2025 £2 million – for company E’s activities 

The maximum amount of risk finance investments company C can raise in future is £14 million. 

The relevant investments of subsidiaries and trades acquired by the issuing or relevant company or a subsidiary of the company after the investment is received also count towards the lifetime limit if: 

  • the acquisition is made within 3 years of the EIS investment ITA07/S173AB and 
  • the money raised by the investment is used wholly or in part for the business of the subsidiary or trade acquired after the investment was received. 

The purpose of this rule is to stop companies exceeding the lifetime limit by using the money on a subsidiary company or trade that it acquires after raising the investment where, if it had acquired the subsidiary company or trade before raising the investment, the lifetime limit would have been breached. This would happen where the new company or trade has benefited from earlier relevant investments that, together with the relevant company’s relevant investments at the investment date, would breach the relevant company’s investment limit. 

Example 4 

Company F, which is neither a knowledge-intensive company nor is it a specified company, plans to receive an EIS investment of £8 million on 31 January 2027, bringing its total relevant investments to £20 million. It intends to use the money to grow and develop company G, which it will acquire on 1 March 2027 using other, non-tax-advantaged funds. Company G is not a knowledge-intensive company and received relevant investments of £5 million in 2022. The effect of company F using the money for its new subsidiary, company G, would be that company F would breach its lifetime limit of £24 million and the £8 million EIS investment would not be eligible for relief. There would be no impact on the £5 million raised earlier by company G because the termination date of the shares would have passed by the time company G was acquired by company F. 

If the EIS money is used for one of the companies or trades acquired after the relevant investment was made then all of the relevant investments received by the subsidiaries acquired since the relevant investment was made are taken into account in determining if the issuing company’s limit is breached. 

Example 5 

The facts are the same as for example 4 except that after company F raised the £8 million, and before acquiring company G, company F used other funds to acquire a business from another company and the business is being carried out by one of company F’s other subsidiaries. The previous owner of the business had employed £5 million in the business, having raised the money from VCT investors. 

The lifetime limit of company F is not breached when it acquires the business even though the relevant investments of the group are £25 million because company F does not intend to use the £8 million in the newly acquired business. 

The breach of the lifetime limit occurs only when company F employs the £8 million in company G, by which time the total relevant investments of the group are £30 million.