A company can raise money by issuing shares under EIS and SEIS so long as it is a trading company that carries on a qualifying activity. Certain activities are specifically excluded, often because they are asset-backed or because they benefit from other state aid subsidies.
The government announced at Report stage of Finance Act (No. 2) 2015 a number of changes to the excluded activities.
With effect from 30 November 2015, the provision of reserve energy generating capacity and the generation of renewable energy benefiting from other government support by community energy organisations will no longer be qualifying activities.
In addition, these activities will not be eligible for Social Investment Tax Relief (SITR) when SITR is extended.
The government will exclude all remaining energy generation activities from the schemes from 6 April 2016, as well as from the extended SITR.
The government will also introduce increased flexibility for replacement capital within EIS and VCT, subject to state aid approval. These changes will be included in Finance Bill 2016.
These changes to qualifying activities are required in order to satisfy EU state aid rules, and will prevent some companies from issuing shares under EIS or SEIS. Companies carrying out such activities will not be eligible for SITR.