Income Tax Act 2007 section 164A

The existing shareholdings requirement

Section 164A sets out the conditions that must be met where an EIS investor already holds shares in the issuing company or its qualifying subsidiaries at the time new EIS shares are issued.

• An investor claiming EIS relief must not hold other shares in the issuing company or its qualifying subsidiaries at the time of investment, unless those shares qualify as a risk finance investment or as subscriber shares
• Subscriber shares qualify only if they were issued to and continuously held by the investor since issuance, or were acquired when the company had issued nothing other than subscriber shares and had not begun (or prepared to begin) any trade or business
• A risk finance investment means shares issued to the investor where the company has provided a compliance statement to HMRC under the EIS, SEIS, or SITR rules
• The restriction applies not only to shares in the issuing company itself but also to shares in any company that is a qualifying subsidiary of the issuing company at the time the new shares are issued