Income Tax Act 2007 section 163

The no connection with the issuing company requirement

Section 163 sets out the requirement that an investor claiming Enterprise Investment Scheme relief must not be connected with the company issuing the shares during a specified period.

• The investor must not be connected with the issuing company at any time from two years before the shares are issued until immediately before the termination date relating to those shares.
• The rule applies to connections that exist before the issuing company is even incorporated, as well as those arising afterwards.
• A pre-incorporation connection could arise, for example, where the investor was a former employee of a company that later becomes a subsidiary or partner of the issuing company within the relevant period.
• An exception exists under section 169(1), which allows certain directors to qualify for relief despite being connected with the issuing company.