What is a knowledge intensive company?

📘 Overview

Knowledge Intensive Companies (KICs) can raise significantly more investment through venture capital schemes such as the Enterprise Investment Scheme (EIS). This guide explains when you should consider applying as a KIC, what the key differences are, and how to determine whether your company qualifies.

Overview: What This Article Covers

• What KIC status means and why it matters
• When to apply as a KIC
• How KIC EIS rules differ from standard EIS
• The qualification tests, including IP, R&D, and operating costs
• How to apply for KIC status with HMRC

Should You Apply as a KIC?

You should consider applying for KIC status if your business needs to raise investment at a scale that standard EIS rules do not allow, or if you fall outside the usual EIS company age limits.

You may benefit from KIC status if:

• You need to raise more than the standard EIS investment limits allow.
• Your company is older than the usual EIS age thresholds.
• Your investors specifically want to use the higher KIC investor limit.

To apply as a KIC, your company must:

• Be carrying out research, development, or innovation at the time you issue shares.
• Meet all standard EIS eligibility criteria.
• Satisfy the KIC-specific rules (explained below).
• Be within 10 years of your first commercial sale or exceeding £200,000 in turnover, unless you are a qualifying spin-out from a research organisation or university.
• Be raising investment above standard EIS limits but within KIC limits.

What’s Different for KICs?

The main benefits of KIC status include higher annual and lifetime investment limits and a longer permitted company age window.

📊 Comparison Table: Standard EIS vs KIC EIS

These enhanced thresholds can make a material difference for R&D-heavy companies with longer development cycles or higher funding requirements.

Do You Qualify as a KIC?

To qualify, your company and any qualifying subsidiaries must meet the employee requirement, plus one of the two main KIC tests (the IP test or the R&D personnel test).

Core employee requirement

Your group must have fewer than 500 full-time equivalent employees when the shares are issued.

Option 1: Intellectual Property (IP) Route

Your company must:

• Be creating, preparing to create, or have created intellectual property; and
• Expect that the majority of business income will come from this IP within 10 years; and
• If IP already exists, it must have been created within the last three years.

This route is often used by tech, software, pharmaceutical, and engineering companies whose business model depends on protected or protectable IP.

Option 2: R&D Personnel Route

Your company must have:

• At least 20% of full-time equivalent employees engaged in R&D, and
• These employees must have held a relevant Master’s degree or higher, and
• Their role must require that level of qualification.

This route is typically used by companies with highly specialised research teams.

Operating Costs Conditions

To qualify as a KIC, your company must also meet certain R&D or innovation spending thresholds.

You must satisfy either:

• At least 15% of operating costs spent on R&D or innovation in any one of the three years before the investment, or
• At least 10% of operating costs spent on R&D or innovation each year for three consecutive years.

If your company is 3 years old or more:

You must meet these conditions in the three years before the investment.

If your company is less than 3 years old:

You must plan to meet these conditions in the three years after the investment. HMRC will expect a detailed supporting schedule outlining how this will be achieved, with evidence.

How to Apply for KIC Status

There are two points at which you can apply:

1. Advance Assurance

You can request that HMRC confirm KIC status as part of an advance assurance application, but only if you are seeking investment above the standard EIS limits.

This can help reassure investors that the company qualifies for the enhanced KIC rules before they commit funds.

2. EIS1 Compliance Statement

You can also apply for KIC status when submitting your EIS1 after issuing the shares.

The form includes a specific section to confirm knowledge-intensive status and upload supporting documentation.

💡 Key Points to Remember

• KICs benefit from higher investment limits and a longer age window, which can be crucial for R&D-heavy businesses.
• To qualify, you must pass the IP test or R&D personnel test, meet operating cost thresholds, and comply with standard EIS rules.
• Younger companies (less than 3 years old) must submit forward-looking R&D expenditure evidence.
• You can apply for KIC status during advance assurance or through the EIS1 submission.

Need Help?

The eligibility rules for both EIS and KIC status can be detailed and highly dependent on the specifics of your business model. If you are planning an investment round, issuing shares, or preparing an application, we are here to help you assess your options and prepare the required documentation.