Taxes Consolidation Act 1997 section 508L

Prevention of misuse

Section 508L provides that EIIS relief is only available where the investment is made for genuine commercial purposes and not primarily for tax avoidance.

• Relief is denied unless both the company's raising of risk finance and the individual's subscription for shares are for bona fide commercial purposes.
• The investment must not form part of a scheme or arrangement where a main purpose is the avoidance of tax.
• This is a general anti-avoidance provision applying across the EIIS regime.
• Both the company side (raising finance) and the investor side (subscribing for shares) must independently satisfy the commercial purpose test.