This brief explains how the Enterprise Investment Scheme (“EIS”) rules apply where a company is carrying on the relevant trade, preparatory work or research and development in partnership.

The EIS makes available various tax reliefs to investors who subscribe for shares in a company which meets certain qualifying conditions. During recent consideration of the EIS legislation, HMRC has revised its view on the application of the legislation in relation to partnerships.

In the brief HMRC considers that the relevant legislation has the effect of disqualifying a company where the relevant trade, preparation work or research and development, is carried on by the company in partnership or by a limited liability partnership of which the company is a member. This is because where any of these activities are carried on in partnership or by a limited liability partnership; there are persons other than the issuing company or a qualifying 90 per cent subsidiary of that company carrying on the activity.

The brief goes on to explain how HMRC intends to implement this interpretation and notes the treatment that will apply to shares issued before 9 December 2009 and shares issued after that date.

The brief is available at http://www.hmrc.gov.uk/briefs/income-tax/brief7709.htm