EIS Certificates have gone digital!
Good news Founders! You can now fill and send your EIS Certificates in PDF, without printing them or signing hard copies.
As you probably know, EIS (along with its little brother SEIS) is a Government Scheme designed to help start-ups raise funds by giving investors a tax relief that essentially decreases the risk involved in investing in an early stage startup.
If you are familiar with the EIS approval process, you will know that after getting Advance Approval from HMRC, when you have issued the shares, you need to submit the EIS1 Compliance Statement to HMRC, to provide the details regarding the SEIS/EIS share issue.
Three or four weeks later, HMRC will send by email the EIS2 and an empty copy of the Compliance Certificate, or EIS3. This is the Certificate you will have to fill and send to your investors as proof of compliance with the Scheme. Your investors can use EIS certificates to complete their personal tax return and claim the income tax relief they are due
EIS3 used to require an actual signature on a paper copy, but as of now it is only sent digitally.
Most of the information you need to complete an EIS3 form can be found either in the EIS2 or in the Investment Agreement. Below you can see in detail what goes in each field.
- Source: Investment Agreement (sometimes called Shareholder Agreement).
- Source: Investment Agreement.
- Source: EIS1 or EIS2 (unique to each subscription date).
- Source: EIS2.
- Has this investor received any “value” from the company in the 12 months prior to the subscription date or will they in the 36 months afterwards? Generally the answer is “nil” as most investors give money and get shares in return. But you need to be careful where the investor (or any company or individual connected to them) has or will receive payments, transfers or anything else of value (e.g. assets, services, products) from the company as it may reduce the investor’s relief. You can see some examples here. It is a complicated area so seek advice from a Chartered Accountant with EIS experience or get in touch with one of our EIS qualified advisors here.
- Source: EIS2 (unique to each subscription date).
- Most companies will not need to apply as a knowledge intensive company. You only need to apply as a knowledge intensive company if:
- Your company needs to raise more than £5 million of investment per year or £12m of investment in the lifetime of your company and any subsidiaries,
- your company is older than the 7 year trading rule for EIS.
- your investor wants to make use of higher investor limits annual limits (for EIS £1m per investor).
- You can find more detail about knowledge intensive company rules and qualification criteria here.
- Typically a director of the company.
- N.B. Not always the trading address… Check the Companies House Website!
- Date of signing.