The complete guide to EIS compliance
Get a step-by-step guide to wrapping up EIS compliance and getting your investors the tax relief they expect.
Many people don’t know that you can offer SEIS & EIS to UK investors even if you are a French, German, US startup – or from anywhere really!
In order to qualify for SEIS & EIS, a company doesn’t need to be incorporated in the UK, but it does need to register as a UK permanent establishment, which means either:
The company must maintain their UK permanent establishment for the whole of the three year period from the date trading started or from the date the SEIS & EIS shares were issued.
A fixed place of business in the UK is defined as a place (any place of work, e.g. a branch, an office, a factory/workshop, or a project site) where an essential or substantial part of your business is carried out. This means the business activities that are carried out in the UK can’t be auxiliary or preparatory in nature, and HMRC give some examples of this as: storage or display of goods or merchandise belonging to the company; the maintenance of stock owned by the company for storage, display, or delivery; purchasing goods of merchandise or collecting information for the company; the maintenance of stock owned by the company for the purpose of processing by another person.
HMRC don’t on purpose give an exact definition of auxiliary or preparatory activities, they will review every application from non-UK company on a case by case basis. This means, when completing your SEIS & EIS Advance Assurance or SEIS & EIS Compliance application and on the application form or as part of a separate letter, give reasons to why you believe a substantial part of your business activity is carried out in the UK.
An overseas-registered parent company must itself have a permanent establishment in the UK for it to qualify for SEIS & EIS, it can’t just have a subsidiary resident in the UK. And it won’t work taking investment into the subsidiary, because SEIS & EIS investment must be taken into the TopCo.
If you are a UK holding company, the administrative and management functions of your company is enough to qualify as essential business carried out in the UK. The business of your trading subsidiaries doesn’t need to be carried out in the UK.
When taking investment as a holding and subsidiary company, investment must be taken into the TopCo. You can then use the funding to carry out a qualifying trade in a foreign subsidiary as long as the subsidiary is 90 % plus owned by the TopCo.
Another way of qualifying for SEIS & EIS as a foreign company is by having an agent working in the UK. A UK agent is defined as a person who can exercise his authority in the UK to enter into contracts on behalf of the company. This means the agent must plan to, or already has, repeatedly entered into binding contracts affecting the company that relate to the substantive business of the company and not relating to activities that are auxiliary or preparatory in nature. The definition of auxiliary and preparatory is the same as that given above, and once again, to qualify under the UK agents test you will need to provide reasoning and evidence to HMRC as part of your application.
It is important to note, to qualify for SEIS & EIS as a foreign company you will need to register as an overseas company in the UK and fill in an OS IN01 form. For more information follow this link:
If you plan to get SEIS & EIS Advance Assurance for a non-UK company, contact us before starting your application so we can advise on the additional information that you’ll need to provide as part of the application. Hit the chat feature in the bottom right corner to speak to the SeedLegals team!