A knowledge intensive company is, broadly, a company which has a relatively high R&D or innovation spend and meets certain criteria in respect of innovation or number of highly skilled staff involved in innovation.
The government will legislate in the Finance Bill 2017-18 to encourage more investment in knowledge-intensive companies under the EIS and VCT scheme from 6 April 2018.
This will be achieved as follows:
- The limit for relief on qualifying investments is being increased to £2 million from the current limit of £1 million provided the additional £1 million is invested in one or more knowledge intensive companies.
- The shares will be eligible for relief in the knowledge intensive companies receiving investments where the annual investment limit for EIS and VCT’s does not exceed £10 million (current limit at £5 million). The lifetime limit will, however, remain at £20 million.
- The permitted maximum age rules will be amended to allow a knowledge-intensive company to use the date from which its annual turnover exceeded £200,000 instead of the date of its first commercial sale, when determining the date from which the end of the initial period is calculated.
This will affect companies and individuals using the EIS and VCT’s, fund managers and other promotors and advisers associated with EIS and VCT’s.