EIS Qualifying Trades - A Summary

HMRC EIS QUALIFYING TRADES GUIDE OVERVIEW

The Enterprise Investment Scheme (EIS) is designed to help smaller higher-risk trading companies raise finance by offering a range of tax reliefs to investors who purchase new shares in those companies. To qualify for EIS, a company must carry on a "qualifying trade."

QUALIFYING TRADES CATEGORIES

1. MANUFACTURING

- Production of goods for sale

- Processing of materials

- Assembly operations

- Food and beverage production

2. CONSTRUCTION & PROPERTY DEVELOPMENT

- Building and civil engineering

- Property development (but not property investment/rental)

- Specialist construction services

3. RETAIL & WHOLESALE

- Sale of goods to consumers

- Wholesale distribution

- E-commerce operations

- Franchise retail operations

4. PROFESSIONAL SERVICES

- Consultancy services

- Legal and accounting services

- Engineering and technical services

- Management services

5. TECHNOLOGY & SOFTWARE

- Software development

- Technology consulting

- Digital services

- Research and development

6. HEALTHCARE & EDUCATION

- Private healthcare services

- Educational services (including special needs education)

- Training and development services

- Therapeutic services

7. HOSPITALITY & LEISURE

- Hotels and restaurants

- Entertainment services

- Tourism operations

- Sports and recreation facilities

8. TRANSPORT & LOGISTICS

- Freight and logistics

- Passenger transport

- Storage and warehousing

- Delivery services

9. AGRICULTURE & FORESTRY

- Farming operations

- Forestry management

- Agricultural services

- Food production

10. ENERGY & ENVIRONMENT

- Renewable energy projects

- Environmental services

- Waste management

- Energy efficiency services

EXCLUDED TRADES (NON-QUALIFYING)

The following are specifically excluded from EIS:

- Property investment and rental (passive income)

- Financial services and banking

- Legal services (in some circumstances)

- Accountancy services (in some circumstances)

- Dealing in land, commodities, or futures

- Dealing in goods otherwise than in the ordinary course of trade

- Banking, insurance, money-lending, debt-factoring, hire-purchase financing or other financial activities

- Leasing (including letting ships on charter)

- Receiving royalties or licence fees

- Providing legal or accountancy services

- Property development with a view to rental

- Operating or managing hotels or comparable establishments

- Operating or managing nursing homes or residential care homes

- Shipbuilding

- Coal and steel production

KEY REQUIREMENTS FOR QUALIFYING TRADE

1. GENUINE COMMERCIAL ACTIVITY

- Must be conducted on a commercial basis

- Aimed at making profits

- Not primarily for tax avoidance

2. ACTIVE TRADING

- Must involve active business operations

- Not passive investment activities

- Regular commercial transactions

3. UK-BASED OPERATIONS

- Substantial business activities in UK

- UK tax resident company

- Permanent establishment in UK

4. EMPLOYMENT CREATION

- Must employ people (directly or through contractors)

- Create economic value and activity

- Contribute to UK economy