Introduction to this document

Election for alternative maximum age basis

Companies looking to raise finance via an enterprise investment scheme have to receive their first tranche of funding within seven years of their first commercial sale. However, if the company qualifies as a “knowledge intensive company”, this is extended to ten years. In addition, it is possible to elect to measure the ten years from a different starting point.

EIS restriction

For investments made on or after 18 November 2015, a new restriction was introduced so that now your company’s first tranche of EIS funding must occur within seven years of your first commercial sale, or within ten years if you qualify as a knowledge intensive company (KIC).

Knowledge intensive company

A KIC is one whose costs of research and development or innovation are at least 15% of its operating costs in at least one of the previous three years, or at least 10% of the company’s operating costs in each of the previous three years. Plus, either the company has created, is creating or is intending to create, intellectual property, or the company’s employees with a relevant masters or higher degree who are engaged in research and development or innovation comprise at least 20% of the company’s total workforce.

Ten years

Finance Act 2018 introduced further flexibility for KICs in relation to the maximum age restriction. If you are a KIC you can elect to measure your ten-year initial investing period from the date your turnover is treated as exceeding £200,000. This would be useful where you made some commercial sales, but then had to refine your product before bringing it back to market, for example. The date is treated as being the last day of the first accounting period where the turnover exceeds £200,000. You can use our Election for Alternative Maximum Age Basis to make this election.