The money raised by the share issue can be used either for the purpose of an existing qualifying trade or for the purpose of preparing to carry on such a trade. Where the shares are issued before 6 April 2011 the trade, or the preparation for it, must be carried on wholly or mainly in the UK. That requirement is removed for shares issued on or after 6 April 2011.
Alternatively it can be used to carry on research and development intended to lead to such a qualifying trade being carried on.
The money raised by the share issue must also be employed for the purposes of the trade or research and development within two years of the shares being issued (or within two years of the trade commencing, if that is later).
If these requirements are not met then the investors will not be eligible for relief on the cost of their shares, and any relief given will be withdrawn. It is therefore important that companies do not raise money under the EIS unless they are reasonably confident of meeting these requirements.
