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HMRC internal manual

Venture Capital Schemes Manual

HM Revenue & Customs
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EIS: income tax relief: general requirements: no tax avoidance requirement


Commerciality and tax avoidance

The shares must not be issued other than for bona fide commercial purposes, and must not be issued as part of a scheme or arrangement whose main purpose, or one of whose main purposes, is the avoidance of tax. The scope of the latter rule cannot be described precisely. However, the reduction of an investor’s tax liability which flows from the schemes in the circumstances intended by Parliament is obviously not a tax advantage at which this rule is aimed.

Before any case is challenged solely on these grounds a report should be made to CTIAA (CT Structure, Incentives & Reliefs team).

A report should also be made before any notice requiring information regarding any suspected scheme or arrangement is issued under ITA07/S243.