Relief rules on Angel Finance
DG writes: I am the founder of a new technology firm and we have been negotiating with business angels about an investment in the company. They are keen to obtain EIS (Enterprise Investment Scheme) relief. What do I have to do to make sure we qualify? Second, one of the angels has indicated that he would like to make the investment through his limited liability partnership. Is this possible?
There is a straightforward process whereby a company can submit the details of its business, along with the envisaged share transaction, to the specialist Small Company Enterprise Centre (SCEC) of HM Revenue & Customs, writes Chris Lane, a partner at Kingston Smith LLP. The SCEC will then confirm whether the proposed share issue is likely to qualify. There is a standard form HMRC recommends you use, EIS (AA), but this is not compulsory.
Once the share transaction has taken place and the shares have been issued to the investor, the company should complete a Form EIS1 and send this to the SCEC for approval. If the company and its shares meet all requirements, the SCEC will issue one copy of Form EIS2, which indicates the company qualifies for relief, and will supply copies of Form EIS3, which can be sent to the investors to complete.
On the subject of investment vehicles, it is not possible for investors to obtain EIS relief if their investment is made through a traditional partnership or a limited liability partnership.