Business Services

In order to evidence recently created intellectual property the company should either:

• Produce patents or licences; or

• Have an independent expert, e.g., a university professor in a relevant field verify it is producing intellectual property.

There is no definition of growth and development. HMRC’s view is that the factors should be reviewed at the hive of the share issue. General indications of growth ambition would include plans for increasing revenues, customer base and employees.

For growth and development HMRC has produced a non-exhaustive list of the factors that may be considered relevant; these include whether or not the company has substantial assists; and what proportion of its trade is sub-contracted.

A qualifying trade for EIS purposes is not defined in the legislation, rather there is a list of non-qualifying trades:-

• Dealing in land, commodities or futures, or in shares, securities or other financial instruments:

• Dealing in goods otherwise than in the course of an ordinary trade of wholesale or retail distribution;

• Banking, insurance, money-lending, debt-factoring, hire-purchase financing or other financial activities;

• Leasing (including letting ships on charter or other assets on hire);

• Receiving royalties or licence fees, however, exceptions are made for intangible assets created by the issuing company or its subsidiaries;

• Providing legal or accountancy services;

• Farming and market gardening, woodlands and timber production;

• Property development;

• Operating and managing hotels and nursing homes;

• Coal production;

• Steel production;

• Shipbuilding;

• Providing services to a connected person conducting one of the above trades;

• The subsidised generation of electricity, heat, gas or fuel.

If another company holds more than 50% of the issuing company’s shares it is controlled by that holding company.

However, the definition of control also includes a company having the power to procure that the affairs of the issuing company are conducted in accordance with the holder’s wishes, e.g., by way of an investment agreement, shareholders’ agreement, financing agreement, etc.