EIS relief if trade changes

EIS relief if trade changes

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If a company is started and qualifies for EIS relief is their any barrier to it changing its trade after the 3 year period?  I would think if that was the intention at the start then it would be caught but I'm not sure if it was decided in the future. Thanks

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By Steve Kesby
29th Aug 2013 12:47

Define "changing its trade"

What matters is the continuance of the "qualifying activity" for which the EIS money is raised and employed.

It's not at all outside the realms of possibility though that a company might start out with one trading activity, A, for which it raised and spent the EIS money, and later commence a second (related) trading activity, B, then later still it ceased trading activity A, all within the three year qualifying period.

BIM70535 says that A and B are mere components of the same trade that has been carried on throughout.

Only if you have very different activities would one qualifying activity cease and a new one commence to give problems.

What is more likely to present a problem is if an excluded activity becomes predominant.

That being said, such a change will only give an issue for EIS if it happens within the three year qualifying period.

Such a change outside the three year period will be relevant though if there are any VCT investors on board, for whom the shares will no longer be a qualifying holding.

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