Which statement about the status required for EIS or SEIS qualification is correct?

For the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) qualification, it is essential to understand the status and roles that investors can have within the company to benefit from these schemes. The correct statement reflects that individuals cannot hold a position as an employee or director in the company for which they are claiming EIS or SEIS relief. This restriction is designed to ensure that the investment is made by external parties looking to support the company rather than by insiders, which helps to create a genuine investment risk that is a fundamental concept of these schemes.

The rationale behind this rule is rooted in the intention of these schemes to attract outside investment and foster growth in smaller companies by providing tax reliefs. By preventing employees or directors from claiming reliefs on their investments, it minimizes the potential for abuse of the tax advantages, ensuring that they are genuinely supporting the company rather than just creating a method for tax relief on their own investments.

The other options do not accurately reflect the requirements for EIS and SEIS qualification. Permanent employee status, majority shareholding, or being classified strictly as an external investor does not align with the established regulations that govern these schemes. Understanding these nuances is critical for ensuring compliance with the eligible investment criteria and for strategizing