Use a venture capital scheme to raise money for your knowledge intensive company
Find out how to raise money for research, development or innovation using the Enterprise Investment Scheme or a Venture Capital Trust.
Knowledge intensive companies can get more funding through venture capital schemes than other types of companies.
You can raise money for your knowledge intensive company using the Enterprise Investment Scheme (EIS) or a Venture Capital Trust (VCT).
Check if you should apply as a knowledge intensive company
You only need to apply as a knowledge intensive company if:
- you need to raise more money than the usual scheme limits allow
- your company is older than the usual scheme limits allow
- your investor wants to make use of higher investor limits
If you do not, check which scheme is right for you.
You should apply as a knowledge intensive company if your company is carrying out research, development or innovation at the time you issue shares and:
- it’s been less than 10 years since either your:
- first commercial sale
- annual turnover going over £200,000
- your proposed investment is over the limits of the scheme you want to apply for, and within the limits of how much a knowledge intensive company can raise
- you meet the conditions of the Enterprise Investment Scheme
- you qualify as a knowledge intensive company
Check if you qualify as a knowledge intensive company
To qualify as a knowledge intensive company, you and any qualifying subsidiaries must have less than 500 full-time equivalent employees when the shares are issued and either:
- be carrying out work to create intellectual property and expect the majority of your business to come from this within 10 years
- have 20% of employees carrying out research for at least 3 years from the date of investment — these employees must be in a role that requires a relevant Masters or higher degree
Operating costs conditions
You must spend money from your overall operating costs on research, development or innovation. This should be either:
- 10% a year for 3 years
- 15% in one of 3 years
If your company is at least 3 years old, you must have done this in the 3 years before the investment.
If your company is less than 3 years old, you must do this in the 3 years following the investment. You’ll need to submit a schedule, supported by accounts to show that you have.
Limits on the age of the company
You can receive investment under the Enterprise Investment Scheme as long as it’s within 10 years of either your:
- annual turnover going over £200,000
- first commercial sale
If you have any subsidiaries, former subsidiaries or businesses you’ve acquired, use the earliest date of the group.
If you received investment in this period (under any venture capital scheme or state aid approved under the risk finance guidelines), you can raise money for the same activity as long as you showed intent in your original business plan.
How much you can raise
As a knowledge intensive company, you can raise up to:
- £10 million of investment per year
- £20 million of investment in the lifetime of your company and any subsidiaries
This includes amounts received from other venture capital schemes and state aid approved under the risk finance guidelines. Check with the person who gave you the aid for advice.
The limits on how much investors can invest under each scheme can be higher if they invest in knowledge intensive companies. For the Enterprise Investment Scheme, investors can invest up to £2 million, if at least £1 million of this is invested in knowledge intensive companies.
You must follow the scheme rules so that your investors can claim and keep tax reliefs relating to their shares.
Before you apply
You can ask HMRC if they agree your proposal is likely to qualify before you apply, but you must check the conditions of the scheme first.
HMRC will only give an opinion on whether you qualify as knowledge intensive company if you need to raise more money than the usual scheme limits allow.
How to apply
When you’ve issued your shares, you’ll need to complete a compliance statement and provide evidence.
Last updated 5 October 2018 + show all updates
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The annual investment and investor limits have been updated. Companies now need to meet extra conditions to use the scheme.
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First published.