What is a knowledge intensive company?
Knowledge Intensive Companies (KICs) can raise more investment through venture capital schemes like EIS compared to other companies. This guide outlines when and why you should apply as a KIC, what the differences are, and how to qualify.
Should We Apply as a KIC?
You should consider applying as a KIC if:
- You need to raise more than the standard EIS investment limits allow.
- Your company is older than the usual EIS age limits.
- Your investors want to use the higher investment threshold for KICs.
To apply as a KIC, your company must:
- Be conducting research, development, or innovation when you issue shares.
- Qualify under standard EIS rules.
- Meet KIC-specific criteria (see below).
- Be within 10 years of your first commercial sale or exceeding £200,000 in turnover, unless you're a spin-out from a research organisation or university.
- Be seeking investment above the standard EIS limits but within KIC limits.
What's Different for KICs?
| Feature | Standard EIS | KIC EIS |
|---|---|---|
| Company Age Limit | Within 7 years of first commercial sale or turnover >£200k | Within 10 years of first commercial sale or turnover >£200k |
| Annual Company Investment Limit | £5 million | £10 million |
| Lifetime Company Investment Limit | £12 million | £20 million |
| Investor Limit | £1 million per year | £2 million per year (if at least £1 million is in KICs) |
Do We Qualify as a KIC?
To qualify, your company and any qualifying subsidiaries must:
- Have fewer than 500 full-time equivalent employees at the time shares are issued.
And either:
- Be creating, preparing to create, or have created intellectual property (IP), with the expectation that most of your business income will come from this within 10 years. If IP has already been created, it must be within the last three years.
OR
- Have at least 20% of full-time equivalent employees engaged in R&D for at least 3 years from the date of the investment. These employees must hold a relevant Master's or higher qualification, and their role must require that level of education.
Operating Costs Conditions
Your company must spend a certain portion of its operating costs on research, development, or innovation (RDI):
- At least 15% of operating costs on RDI in any one of the three years preceding the investment, or
- At least 10% of operating costs on RDI each year for three consecutive years.
If your company is 3 years old or more, these conditions must be met in the 3 years before the investment.
If your company is less than 3 years old, you must plan to meet these conditions in the 3 years after the investment and provide a supporting schedule with evidence.
How to Apply for KIC Status
You can apply in two ways:
- Advance Assurance: HMRC may confirm KIC status during an advance assurance application—but only if you're seeking investment beyond the normal EIS limits.
- EIS1 Compliance Statement: You can apply for KIC status during your EIS1 submission after issuing shares. There’s a specific section to confirm knowledge-intensive status.
Need Help?
The eligibility criteria for both EIS and KICs can be complex and situation-specific. Don’t hesitate to contact us for advice before issuing shares or submitting applications.