Income Tax Act 2007 section 169

Directors qualifying for relief despite connection

Section 169 provides an exception to the general rule that an investor connected with the issuing company cannot be a qualifying investor under the Enterprise Investment Scheme, allowing certain directors — typically business angel investors — to qualify for EIS relief despite their connection with the company.

• A director (or an investor whose associate is a director) who is connected with the issuing company solely because of that directorship and associated remuneration may still qualify as an EIS investor, provided three conditions are satisfied
• Condition A requires that any remuneration the director receives or is entitled to receive consists only of reasonable payment for services actually rendered in their capacity as director, and the term "remuneration" includes any benefit or facility
• Condition B requires that the investor was issued the relevant shares (or an earlier qualifying issue) at a time when they had never been connected with the company and had never been involved in carrying on any part of the trade, business or profession of the company or its subsidiaries
• Condition C applies only where the relevant shares do not themselves meet Condition B, and requires that those shares were issued before the termination date of the latest share issue that did meet Condition B, or before the date specified under section 257AC(4) if that earlier issue qualified for SEIS relief