Part 4: Income tax, corporation tax and capital gains tax Section 25 and Schedule 5: Enterprise investment scheme Background note
The EIS encourages investment in small, higher risk, trading companies by offering tax incentives to individual investors in qualifying companies.
	This Schedule includes a number of amendments to the EIS rules aimed at ensuring compliance with Articles 107 and 108 of the Treaty on the Functioning of the European Union (EU).
	Risk finance investments are intended to support smaller companies which, because of a market failure, would struggle to access the finance they need to grow and develop. The reasons for this lack of funding may be because the company lacks a track record or the costs of carrying out due diligence are disproportionately high.
	The new provisions ensure that tax-advantaged investments are directed to companies likely to experience this market failure. They introduce limits on the total amount of State aid a company may benefit from, and the age before which a company may first receive a risk finance investment. The limits are higher for "knowledge-intensive companies" in recognition of the greater market failure that applies to innovative companies that tend to need more State aid, and for a longer period, before they are able to attract traditional forms of finance.
	The Schedule legislates rules to ensure that the money is used for the internal ('organic') growth of a company, not external growth by acquiring an existing business.
	The Schedule also contains provisions to smooth certain interactions between the SEIS and EIS.