Income Tax Act 2007 section 251

Approved knowledge-intensive fund as nominee

Section 251 sets out special rules for claiming EIS income tax relief where an individual invests through an approved knowledge-intensive fund, rather than subscribing for shares directly.

• Where shares are issued to the managers of an approved knowledge-intensive fund as nominee for an individual investor, the investor may claim EIS relief provided the fund has closed and certain deployment thresholds are met: at least 50% of the investment deployed within 12 months of closing, at least 90% within 24 months, and at least 80% in knowledge-intensive companies.
• For the purposes of calculating EIS relief and attributing it to shares, the relevant tax year and timing references are treated as the tax year in which the fund closes, rather than when individual share issues actually take place — including the option to carry back relief to the preceding tax year before the fund's closure.
• The normal EIS compliance certificate process is modified so that the investee company issues its certificate to the fund managers, who then issue their own consolidated certificate (commonly known as an EIS 5) to the individual investor, and no claim can be made without that managers' certificate.
• HMRC may require the fund managers to file returns of share holdings shown on the certificates they have issued, and the penalty provisions for fraudulent certificates under section 207 do not apply to certificates issued by the fund managers.