Short answer
An EIS qualifying investment is a subscription for new, full-risk ordinary shares, paid in cash, in an unquoted company with a UK permanent establishment that carries on a qualifying trade, meets size, age and funding limits, and passes the risk-to-capital condition.
Share requirements
- New ordinary shares subscribed for directly from the company.
- Paid up in full, in cash, when issued.
- No preferential rights to assets on a winding up, and no arrangements to redeem them.
- Limited preferential dividend rights are allowed only if the dividends are not cumulative or adjustable.
- Issued to raise money for a qualifying business activity, and not as part of arrangements to avoid tax.
Company requirements
| Company test (shares issued on or after 6 April 2026) | Most companies | Knowledge-intensive companies |
|---|---|---|
| Gross assets | No more than £30m before and £35m after the share issue | Same |
| Employees (full-time equivalent) | Fewer than 250 | Fewer than 500 |
| Risk finance raised in any 12 months | £10m | £20m |
| Lifetime risk finance limit | £24m | £40m |
| Age (from first commercial sale) | Generally within 7 years | Generally within 10 years |
Limits increased from 6 April 2026 under Finance Act 2026. Earlier limits (£15m/£16m gross assets, £5m annual and £12m lifetime; £10m and £20m for knowledge-intensive companies) still apply to 'specified companies' as defined by HMRC and to earlier share issues.
- Unquoted when the shares are issued, with no arrangements to become quoted (AIM counts as unquoted).
- A permanent establishment in the UK.
- Not controlled by another company, and any subsidiaries must be qualifying subsidiaries.
- Not in financial difficulty when the shares are issued.
Qualifying trades and excluded activities
The trade must be conducted on a commercial basis with a view to profit. Excluded activities include:
- Dealing in land, commodities, futures, shares or securities.
- Banking, insurance, money-lending, debt-factoring and other financial activities.
- Leasing, and receiving royalties or licence fees (with exceptions for self-created intellectual property).
- Legal and accountancy services.
- Property development, farming, market gardening, forestry and woodlands.
- Operating or managing hotels, nursing homes or residential care homes.
- Shipbuilding, coal and steel production, and most energy generation.
The risk-to-capital condition
Since 15 March 2018, a company must have objectives to grow and develop its trade over the long term, and there must be a significant risk that the investor will lose more capital than they gain as a net return (including tax relief). This was designed to exclude low-risk, capital-preservation arrangements.
Knowledge-intensive companies
Knowledge-intensive companies spend a set share of their costs on research, development or innovation and either create intellectual property or employ a high proportion of skilled staff. They benefit from higher funding limits, a higher employee limit and a longer age window.
Advance assurance
Companies can ask HMRC for advance assurance that a proposed share issue is likely to qualify. It is not binding if facts change, and it does not confirm that investors will receive relief.
Frequently asked questions
Are AIM shares EIS qualifying?+
AIM is treated as unquoted for EIS, so new shares in a qualifying AIM company can qualify. Shares bought on the market do not.
Does advance assurance guarantee my relief?+
No. Relief depends on facts at the time of issue and throughout the qualifying period.
Sources
- GOV.UK — Venture capital schemes: apply for the Enterprise Investment Scheme
- HMRC VCM1010 — Latest updates to the venture capital schemes
- HMRC internal manual — Venture Capital Schemes Manual
Tax rules can change. The information on this website is general information only and is not personal financial, investment, tax or legal advice. It does not take account of your individual circumstances. See our editorial policy.
Interested in EIS investing?
If you are a high-net-worth, sophisticated or professional investor, you can request investor information from us.
Capital at risk. EIS investments are high risk and illiquid. Tax reliefs depend on individual circumstances and qualifying conditions.