EIS – Personal training gym startup

The client was a personal trainer who wanted to raise money to set up a gym in Central London by issuing shares qualifying for relief under the Enterprise Investment Scheme (EIS).  The shares were to be issued by New Co. which would own and run the gym.  The business model was slightly unusual in that the members of the new gym were to be personal trainers, who would pay a monthly fee to New Co. in order to use the gym facilities with their clients who did not become members.

Advance Assurance that the shares when issued would qualify for EIS relief was sought from HMRC and was initially refused on the grounds that the personal trainers were paying a licence fee for the use of land so that New Co. did not have a ‘qualifying trade’ for the purposes of the EIS.

HMRC were eventually persuaded that as New Co. was to provide all equipment, changing facilities, reception facilities, towels, laundry services, refreshments, bottled water etc. the services being provided to the trainers outweighed the simple provision of space.  The charge was therefore not a licence fee for the use of the space but a charge for use of gym facilities.  New Co. therefore had a qualifying trade.

EIS relief was forthcoming once the share capital had been issued and all the necessary forms had been submitted.

At the time of publication this case study was technically accurate however, as tax law and practice change rapidly, you should take specific advice before taking any action.