What is a Knowledge Intensive Company? The Criteria

What is a Knowledge Intensive Company?‍

Knowledge Intensive Companies (KICs) are companies that are carrying out research, development or innovation at the time that they are issuing shares. They have a special status under EIS, and can raise more EIS investment, more flexibly, than non-KIC companies.

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Knowledge Intensive Companies: EIS Benefits

1. As a KIC, you can raise up to:

• £10m in EIS investment per year (instead of £5m); and
• £20m in EIS investment in your company’s lifetime (instead of £12m).

This includes money received from other venture capital schemes and state aid approved under the risk finance guidelines (double-check with the person who provided the aid for advice).

In addition, investors can claim tax relief on up to £2m, if at least £1m of this is invested in KICs.

2. Another advantage is that the age limit for KICs is a lot higher.

Typically, to qualify for EIS, other companies must receive investment within 7 years of their first commercial sale. For a KIC, this period of time is extended to 10 years.

3. Lastly, the limit of employees for KICs is higher than other companies.

KICs can have a maximum of 500 full-time employees, whereas others must have no more than 250 full-time employees.

How to apply for EIS as Knowledge Intensive Company

It is important to note, that if you are not seeking one of the benefits there is no need to apply with KIC status. You can always apply for this later. Apply for Advance Assurance as normal.

When the shares are issued, both you and any qualifying subsidiaries must either:

• Be developing intellectual property that you expect will be the company’s main source of business within the next 10 years; or
• Have 20%+ of employees carrying out research for at least 3 years from the date of the investment, and these employees must be in a role that requires a relevant Master’s or higher degree.

In addition, your overall operating costs must include expenditure on research, development or innovation. This should be either:

• 10% a year for each of the past (or future) 3 years; or
• 15 % in one of the past (or future) 3 years

If your company is:

• At least 3 years old, you must have done this in the 3 years before the investment.

• Less than 3 years old, you must carry this out in the 3 years following the investment.

You will need to submit a schedule which is supported by accounts that prove that you have done this.

Finally, you can receive investment under EIS as long as it’s within 10 years of either your:

• Annual turnover going over £200,000; or
• First commercial sale

If you have any subsidiaries, former subsidiaries or businesses you have acquired, use the earliest date among those.

If you received investment in this period (under any venture capital scheme or state aid approved under the risk finance guidelines), you can raise money for the same activity as long as you showed intent in your original business plan.