The Enterprise Investment Scheme (EIS) is all about encouraging investment in small, high-risk UK companies by offering attractive tax reliefs to investors.
Before a company can qualify for EIS investment, it must meet several criteria set out by HMRC – one of which is having a Permanent Establishment in the UK.
Below, Cooper Parry’s Equity Rewards & Venture Capital Schemes team has broken down the key rules to keep on your radar.
PERMANENT ESTABLISHMENT FOR EIS: THE KEY RULES
For EIS purposes, a company is considered to have a Permanent Establishment in the UK if it meets at least one of the following conditions:
Fixed place of business
The Permanent Establishment condition is met if the company has a physical location in the UK through which its business is wholly or partially carried on.
The business carried on in the UK must involve substantive activities – not just preparatory or auxiliary functions (e.g., the storage or display of goods, marketing, collecting data).
Examples:
- A company with a UK office where employees work and decisions regarding the business are made would qualify.
- A company whose only UK presence is a warehouse used solely for storage purposes would not qualify.
Authorised agent
Alternatively, a company can meet the Permanent Establishment condition if it has an authorised agent in the UK who:
- Has the authority to enter contracts on behalf of the company, and
- Regularly exercises that authority.
However, it’s important to remember that independent agents are excluded, and tasks completed by a UK agent that are considered only preparatory or auxiliary to the trade do not count.
Simply having a UK employee isn’t enough – the agent must have and regularly use the authority to bind the company in substantive business activities.
Examples:
- A UK employee who regularly negotiates and signs contracts for the company would be considered an authorised agent, making the company eligible for EIS.
- A UK employee who only completes administrative tasks for the company would not qualify.
So, remember:
- Just being registered in the UK is not enough – the company’s UK presence must relate to substantive business activities.
- Overseas companies can still qualify for EIS – provided they have a genuine operational presence in the UK by meeting one of the conditions set out above.
- Activities that are only preparatory or auxiliary do not count.
NEED HELP WITH THE PERMANENT ESTABLISHMENT FOR EIS RULES?
Meeting the Permanent Establishment condition is essential for EIS eligibility – and it’s particularly important for overseas companies to consider. To ensure compliance with HMRC policy, we recommend keeping records, reviewing your UK operational presence and seeking professional advice to avoid costly mistakes.
Cooper Parry’s Equity Rewards & Venture Capital Schemes team is here to guide you through the entire process. If you’d like to find out how we can support you, don’t hesitate to get in touch.
