Income Tax Act 2007 section 165

The no tax avoidance requirement

Section 165 requires that an investor's subscription for shares under the Enterprise Investment Scheme must be driven by genuine commercial reasons and not by tax avoidance motives.

• Shares must be subscribed for by the investor for genuine commercial reasons
• The subscription must not form part of a scheme or arrangement aimed mainly at avoiding tax
• If this requirement is not met, the investor cannot be a qualifying investor and loses eligibility for EIS relief
• A complementary requirement also applies to the company's issue of the shares under separate provisions