What Is the EIS and Why It Matters
The Enterprise Investment Scheme (EIS) is a UK government programme that incentivises investment in early-stage businesses. Through a range of tax reliefs, EIS encourages high-net-worth individuals and angel investors to back your startup. Here’s a quick breakdown:
- Income Tax Relief
Investors can claim up to 30% income tax relief on qualifying investments. - Capital Gains Deferral
Profits from the sale of EIS shares can qualify for capital gains tax deferral. - Loss Relief
If things don’t go to plan, investors can offset losses against income or gains. - Inheritance Tax Relief
After two years, EIS shares may escape inheritance tax.
That’s why a solid EIS compliance guide is more than paperwork—it’s a roadmap to unlocking millions in potential funding.
Step 1: Check Your Eligibility
Before you dive in, run these checks on your company:
- You have a permanent establishment in the UK.
- You’re not listed on any recognised stock exchange at share issue.
- Gross assets are under £15 million pre-issue and under £16 million post-issue.
- You employ fewer than 250 full-time-equivalent staff.
- You’re not controlled by another company (over 50% ownership).
- You carry out a qualifying trade (most trades count, but avoid property development, finance, and some others).
Pro tip: If you’re a knowledge-intensive company, you can raise higher amounts (£20 million lifetime instead of £12 million) and qualify beyond the seven-year limit from first commercial sale. Make a note—you’ll need more evidence for your EIS compliance guide checklist.
Step 2: Obtain Advance Assurance
What’s advance assurance? It’s HMRC’s nod that your share issue is likely to qualify for EIS tax reliefs. It’s not mandatory, but it’s a confidence booster for investors. To request advance assurance, you’ll need:
- Your business plan and financial forecasts.
- Copies of recent accounts.
- Memorandum and articles of association.
- Details on how you meet the risk to capital condition.
- A description of the trade and how funds will be spent.
The EIS compliance guide wouldn’t be complete without this assurance—it shows investors you’ve done your homework.
Step 3: Issue Qualifying Shares
You’ve got the green light. Now issue full-risk ordinary shares, paid up in cash:
- Must carry no special rights to assets.
- Can have limited preferential rights to dividends—but no accumulating rights.
- No arrangements that guarantee returns or protect investors from risk.
Shares must be issued for a genuine commercial reason—growth, R&D, entering new markets. Document everything. If HMRC spots risk-reducing arrangements, your EIS reliefs evaporate.
Step 4: Submit Your Compliance Statement (Form EIS1)
Within four months of carrying out qualifying activity—and certainly within two years of the share issue—you must submit Form EIS1. This is the heart of your EIS compliance guide:
- Attach any updated documents from advance assurance.
- Provide the final business plan and forecasts.
- Show evidence of the risk to capital condition:
- Demonstrate genuine risk.
- Highlight how you’ll use the capital to grow.
- List previous venture capital schemes and amounts received.
- Supply details of any qualifying subsidiaries.
Once HMRC processes EIS1, you’ll receive a unique reference number and EIS3 compliance certificates. Hand these to investors so they can claim relief.
Step 5: Maintain Compliance for Three Years
EIS reliefs are conditional. If your company fails to meet the scheme rules at any point within three years of share issuance, investors risk losing benefits. Keep records up to date:
- Notify HMRC within 60 days if conditions change.
- Avoid control shifts that breach rules.
- Ensure you spend funds on qualifying activities within two years.
This maintenance stage is often overlooked in an EIS compliance guide, but it’s critical to protect investor confidence.
How Oriel IPO Simplifies Your EIS Journey
Navigating compliance steps can be time-consuming. That’s where Oriel IPO comes in:
- Commission-Free Marketplace
No middleman fees. Connect directly with angel investors who understand EIS. - Curated, Tax-Efficient Opportunities
We vet startups for EIS eligibility, so investors find ready-to-go projects. - Educational Resources
From webinars to step-by-step articles, our platform delivers a built-in EIS compliance guide. - Subscription Tiers with Added Value
Choose the plan that suits you:
– Basic (Free Trial): Browse opportunities and access core EIS content.
– Standard: Gain personalised advice on advance assurance and compliance paperwork.
– Premium: Dedicated support, analytics tools, and investor matchmaking.
We’re not FCA-regulated, so we don’t give formal advice—but our community of accountants, lawyers, and successful founders share insights to help you check every compliance box.
Real-World Example: GreenTech Ltd.
Let’s bring this to life. GreenTech Ltd., a cleantech startup, used our EIS compliance guide:
- Step 1: Confirmed eligibility with our pre-screen tool.
- Step 2: Secured advance assurance in six weeks.
- Step 3: Issued £500,000 in ordinary shares.
- Step 4: Submitted EIS1, received compliance certificates in 10 days.
- Step 5: Reported quarterly activities via Oriel IPO’s dashboard.
Result? GreenTech closed its funding round 30% faster than peers. Investors claimed £150,000 in income tax relief while backing a climate solution.
Tips for a Smooth EIS Application
- Start early. Engage your lawyer and accountant before fundraising.
- Keep your business plan laser-focused on qualifying activities.
- Document every use of funds—transparency builds trust.
- Maintain clear lines of control; avoid complex share structures.
- Use Oriel IPO’s resources to stay on top of deadlines.
Conclusion
An effective EIS compliance guide isn’t just a checklist—it’s your pathway to unlocking growth capital. By following these steps and leveraging Oriel IPO‘s commission-free, educational platform, you’ll navigate EIS with confidence.
Ready to raise capital, issue shares and submit your compliance statements—all commission-free?
Start your journey with Oriel IPO today.
