Successive governments have recognised that the spirit of entrepreneurialism, though deeply ingrained in the UK’s culture, is not really very well supported by the financial institutions. In an attempt to provide more ready access to investment capital for entrepreneurs, a variety of schemes have been created – such as the Loan Guarantee Scheme, which provides financial guarantees for loans made by lenders to smaller businesses.
- the shares cannot be quoted on a recognised stock exchange and arrangements for a flotation cannot be in progress. Note that a flotation on the Alternative Investment Market does not count for this purpose;
- there are limitations on the trades that are allowed for EIS relief. In particular, land-based businesses, professional services and financial activities are excluded;
- the company must have fewer than 50 full-time employees;
- the gross asset value in the company’s balance sheet must be less than £7m before the issue of the EIS shares (£8m afterwards); and
- there is also a limitation of £2m in any twelve-month period on the total amount which can be raised using the EIS or similar schemes, such as Venture Capital Trust investments.