I have a client who was made a director of a company in November 2009. He has not been paid for his services yet but what he was told he could do was to have shares in exchange for remuneration. As that has its own tax problems associated with it he is now planning to invoice the company for services, then pay the money back in a couple of days later to subscribe for shares. The company qualifies for EIS relief.
I am worried that he won't get the EIS relief because he is a director who is being paid for his services, although I am a bit confused about the "Business Angels" part of the legislation.
Although he has other directorships and receives remuneration from other sources, I am also worried about him invoicing for services.
Any help or advice would be very much appreciated
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Im afraid not
Unfortunatley your client is not able to get EIS relief under the business angels route.
As you will probably appreciate, EIS relief is generally not available to those who are connected with the comapny at the time of the subscription for shares in the company. Connection includes employment or directorship although unpaid directorships can be excluded. Unpaid does though mean no entitlement to payment, or benefits, as well as not actually receiving any payment. It sounds like your client is already connected by virtue of his entitlement to receive remuneration in shares.
Your client also fails on the Business Angels route where reasonable remuneration is permitted. This is because there must have been at least one subscription for shares at a time when your client was not connected with the company. if there is such a subscription then he would qualify for relief on subscriptions for shares made in the three years after the date of the last investment made before he became connected.