EIS qualifying companies: which businesses are eligible

Investors carry the risk of the company failing the EIS conditions, because relief is withdrawn if it does. Knowing what the company had to satisfy at the point of the share issue, and has to keep satisfying for three years, is part of doing the diligence properly.

This guide is one part of a set covering the whole scheme. The EIS hub lists every guide, from eligibility to claiming.

The company tests

• Unquoted: not listed on a recognised stock exchange when the shares are issued, and with no arrangements to become listed. AIM and the Aquis Growth Market do not count as recognised exchanges for this purpose.
• Independent: not controlled by another company, and not a subsidiary of one.
• Permanent establishment: a fixed place of business or a dependent agent in the UK.
• Trading: carrying on, or preparing to carry on, a qualifying trade on a commercial basis with a view to profit.
• Not in difficulty: the company must not be a business in difficulty under the subsidy control rules.

Size and age

The gross asset and investment figures are the levels applying from 6 April 2026; the earlier figures and the Northern Ireland exceptions are in EIS limits and rules. A company beyond the age limit can still qualify in limited circumstances, mainly where the new money funds entry into a new product or geographic market and is at least half of the company's average annual turnover over the previous five years.

Knowledge-intensive companies

A knowledge-intensive company is one that spends a defined proportion of its operating costs on research, development or innovation, and either is creating intellectual property or employs a sufficient number of skilled staff with masters-level or higher qualifications. The status raises the employee cap, the age limit, the company's investment limits and the investor's annual limit to £2 million.

Excluded activities

A trade does not qualify if excluded activities make up a substantial part of it, which HMRC generally reads as more than 20%. The main exclusions are:

• Dealing in land, commodities, futures, shares, securities or other financial instruments.
• Banking, insurance, money-lending, debt factoring, hire purchase finance and other financial activities.
• Leasing, including chartering ships, and receiving royalties or licence fees, unless the intellectual property was created by the company itself.
• Property development and operating or managing hotels, guest houses, nursing homes and residential care homes.
• Legal and accountancy services.
• Farming, market gardening, forestry and timber production.
• Coal and steel production, shipbuilding, and generating or exporting electricity, gas or fuel where subsidies are received.

The money raised must also be used for a qualifying business activity - growing or developing the trade - normally within two years, and cannot be used to buy another business or to repay existing shareholders. HMRC sets out the company-side rules in its guidance on using a venture capital scheme to raise money.