Income Tax Act 2007 section 178

The no tax avoidance requirement

Section 178 requires that shares qualifying for Enterprise Investment Scheme (EIS) relief must be issued for genuine commercial reasons and not primarily to avoid tax.

• Shares must be issued for genuine commercial reasons to meet the EIS qualifying conditions
• The share issue must not form part of any scheme or arrangement where a main purpose is tax avoidance
• Even if only one of several main purposes is tax avoidance, the requirement will not be met
• A separate but complementary requirement applies to the investor's subscription for the shares