Knowledge-intensive company status: the tests and the higher EIS limits

By Buzz Accounting · 2 October 2026

A knowledge-intensive company can raise more under the Enterprise Investment Scheme, and can keep raising it for longer, than a standard EIS company. Qualifying depends on two tests: an operating costs test, and either a skilled employee test or an innovation test. Meeting them changes the annual limit, the lifetime limit, the employee limit and the age limit that apply to your company.

What a knowledge-intensive company is

A company is knowledge-intensive for a particular EIS share issue if it meets an operating costs condition, and either the innovation condition or the skilled employee condition, in the period that condition is tested against. The test is applied separately to each share issue, using the three years around that particular investment date, so a company can be knowledge-intensive for one round and not for another if its spending or staffing has moved.

The company does not apply for a general knowledge-intensive label in advance. It works out whether it meets the tests for the specific round it is raising, and includes that position in its application for advance assurance, HMRC's view before you raise that the company and the planned share issue are likely to qualify.

The operating costs condition

A company meets this condition if either of the following is true for the three relevant years:

It spent at least 15% of its relevant operating costs on research, development or innovation in one of the three relevant years, or
It spent at least 10% of its relevant operating costs on research, development or innovation in each of the three relevant years.

Relevant operating costs means day-to-day running costs, not capital spending, and HMRC's guidance on research, development and innovation spending for this test follows the same definition used for R&D tax relief claims. Which three years count depends on how long the company has been trading. A company trading for three years or more at the date of the investment looks at the three years before that date, using its own accounts. A company trading for less than three years looks at the three years after the investment, which means forecasting the spending rather than reporting it.

The skilled employee condition

At least 20% of the company's full-time equivalent employees, a way of counting part-time and contract staff as a fraction of a full role, must be directly engaged in the company's research, development or innovation work, and must hold a relevant qualification at master's degree level or above, or be in a role that genuinely requires one. The 20% threshold is deliberately low. HMRC's own guidance notes that qualifying companies typically clear it by a wide margin, often with most of the technical team counted in, because it is built to allow for experienced researchers without a formal qualification and for vacancies the company has not yet filled.

The innovation condition

Instead of the skilled employee condition, a company can meet the innovation condition. It must be carrying out work to create intellectual property, and it must be reasonable to assume that within 10 years the greater part of the company's business will come from exploiting that intellectual property, or from a business that uses it. Most of the intellectual property's value has to be created by the company itself, which keeps the right to exploit it, alone or with partners.

Evidencing the innovation condition is harder than evidencing the skilled employee condition. Where the intellectual property already exists, a business case, grant application or patent filing from within the last three years is enough. An early-stage company with nothing on paper yet needs a written evaluation from an independent expert who holds a master's degree or above and has relevant experience in research, development or innovation, which is an extra cost and a delay most applications do not need, because the skilled employee condition usually covers a technical team with no separate evidence to commission.

What knowledge-intensive status is worth

From 6 April 2026, a knowledge-intensive company can raise up to £20 million under EIS in any 12 months, against £10 million for a standard EIS company, and up to £40 million over its life, against £24 million standard. It can have up to 499 full-time equivalent employees at the date the shares are issued, against fewer than 250 standard, and it can keep raising under EIS for 10 years from its first commercial sale, against 7 years standard. SEIS has no knowledge-intensive category. The SEIS limits of £250,000 raised, a trade no more than 3 years old and fewer than 25 employees are the same for every company.

Worked example: a robotics company past the standard age limit

The figures below are illustrative. Helion Robotics Ltd made its first commercial sale in October 2019. By October 2026, seven years have passed, so it is past the standard EIS age limit and can only raise under EIS as a knowledge-intensive company. It is also planning to raise £15 million in this round, above the £10 million standard annual limit, so the raise itself needs knowledge-intensive status as much as the age does.

In its last full year, Helion's operating costs were £2,400,000, of which £950,000 was spent on engineering and product research. £950,000 ÷ £2,400,000 works out at 39.6% of operating costs, comfortably over the 15% needed in one of the three preceding years, so Helion meets the operating costs condition on that year alone.

Helion has 34 full-time equivalent employees. Nine of them are engineers working directly on the company's research and development, each holding an engineering master's degree or a PhD. 9 ÷ 34 works out at 26.5% of the workforce, over the 20% the skilled employee condition needs. Helion meets both conditions: the operating costs condition on the research spending above, and the skilled employee condition on its qualified engineers, without needing the innovation condition's independent expert evidence. Both sets of figures, and the list of qualifying employees and their qualifications, go into the advance assurance application before the round opens. Helion's 34 employees are well under the 499 knowledge-intensive limit, so the employee count is not what the round turns on.

Applying for advance assurance as a knowledge-intensive company

The application is the same SEIS and EIS advance assurance process used for any round, with the knowledge-intensive position added as a separate section. HMRC asks for the figures behind whichever condition is being relied on: the operating costs split for the relevant years, or the employee list with qualifications and roles, or the independent expert's report if the innovation condition is used instead. Advance assurance is £499 + VAT, and the SEIS1 or EIS1 compliance statement and investor certificates that follow a completed round are £599 + VAT. Most angel investors and funds will not commit until advance assurance is in hand, so working out the knowledge-intensive position before you start pitching keeps the round on schedule.

What to do this week

Pull the last three years of management accounts and split operating costs into research, development and innovation spending against everything else, to check both operating costs tests.
List the employees working directly on research, development or innovation, and check how many hold, or are in a role that requires, a master's degree or above.
If neither operating costs year clears 15%, and the three years together do not each clear 10%, work out whether the innovation condition fits instead, and what evidence of the intellectual property you already have.
Check the date of your company's first commercial sale against both the 7-year standard limit and the 10-year knowledge-intensive limit, and against how much you plan to raise against the £10 million and £20 million annual limits.
Put the knowledge-intensive position, with its evidence, into the advance assurance application before you start pitching to investors.

Our post on SEIS and EIS for founders covers how both schemes work and the order to use them in, and SEIS vs EIS sets the limits side by side. Our SEIS and EIS guide covers the compliance statement and investor certificates that follow a round.

Where we help

We check the operating costs and employee figures against the knowledge-intensive conditions, prepare the advance assurance application and answer HMRC's questions on it. After the round, we prepare the compliance statement and each investor's certificate. Advance assurance is £499 + VAT, and the compliance statement and certificates are £599 + VAT. Your monthly accounting fee comes from the instant quote. Get started.

Common questions

What is a knowledge-intensive company for EIS purposes?

A knowledge-intensive company is a company that meets an operating costs condition, and either a skilled employee condition or an innovation condition, for a particular EIS share issue. Meeting both tests raises the annual and lifetime amounts the company can raise, the number of employees it can have, and the number of years since its first commercial sale it can still raise under EIS. The status is not a general label applied to the company once and kept. It is worked out separately for each round, using the three years around that round's investment date, so a company can qualify for one round and not for another if its research spending or staffing has changed.

How do I know if my company meets the operating costs condition?

Add up the company's day-to-day running costs for each of the three years around the investment date, and work out what share of that went on research, development or innovation. The condition is met if that share was at least 15% in one of the three years, or at least 10% in each of the three years. A company trading for three years or more at the investment date uses the three years before it, from its own accounts. A company trading for under three years uses the three years after the investment, which means forecasting the spending rather than reporting figures that already exist.

What is the skilled employee condition?

At least 20% of the company's full-time equivalent employees must be directly engaged in its research, development or innovation work, and must hold a master's degree or above, or be in a role that genuinely requires one. Full-time equivalent counts part-time and contract staff as a fraction of a role rather than as a whole person. The 20% threshold is set low enough that most technical teams clear it easily, since it allows for experienced researchers without a formal qualification and for roles the company has not yet filled. It is usually the simpler of the two routes to evidence, because it relies on employment records rather than an outside assessment.

What is the innovation condition, and how is it evidenced?

The innovation condition is met if the company is creating intellectual property, and it is reasonable to assume that within 10 years most of its business will come from exploiting that intellectual property or from a business that uses it. Where the intellectual property already exists, a business case, grant application or patent filing from the last three years is usually enough evidence. A company with nothing on paper yet needs a written evaluation from an independent expert who holds a master's degree or above and has relevant research or innovation experience, which adds cost and time that the skilled employee condition usually avoids.

How much more can a knowledge-intensive company raise under EIS?

From 6 April 2026, a knowledge-intensive company can raise up to £20 million under EIS in any 12 months and £40 million over its life, against £10 million and £24 million for a standard EIS company. It can also have up to 499 full-time equivalent employees at the date the shares are issued, against fewer than 250 standard, and can keep raising under EIS for 10 years from its first commercial sale, against 7 years standard. A company can qualify on any one of these higher limits. The reason does not have to be research spending.

Does knowledge-intensive status apply to SEIS as well as EIS?

No. SEIS has no knowledge-intensive category, and the same limits apply to every SEIS company regardless of how much it spends on research or how many staff hold higher degrees. A company can raise up to £250,000 in total under SEIS, must have a trade no more than 3 years old, and must have fewer than 25 full-time equivalent employees. The knowledge-intensive conditions and the higher limits they bring only apply once a company has moved on to raising under EIS, typically after it has used up its SEIS allowance.

Do we need advance assurance to confirm our knowledge-intensive status?

Advance assurance is not compulsory, but most angel investors and funds will not commit to a round without it, and HMRC's advance assurance process is the normal way a company confirms its position before it starts pitching. The application includes the knowledge-intensive position as a separate section alongside the usual SEIS or EIS conditions, supported by the operating costs figures, the employee list and qualifications, or the independent expert's report, depending on which conditions the company is relying on. Working this out before the round opens avoids the position being challenged partway through due diligence.