The EII is a tax relief that can be used by trading companies to attract equity-based risk finance from individuals.
Qualifying companies that wish to raise finance under EII must issue ordinary shares to the investor in respect of the amount invested. The company must use the money raised to carry on a qualifying trade. Invested funds cannot be used for debt repayment.
The investor can claim Income Tax relief on amounts invested, provided they keep the shares for at least four years.