Tokenised Shares and EIS: How Much of the Liquidity Story Can You Tell at Issue?

A tax adviser’s response to “SEIS, EIS and Tokenisation: What We Know, and What We Don’t”

By Aaron Scrupps, ACA, Operating Partner at gunnercooke llp.

This article appears in the TokenisingStartups Legal View series, which features contributions from gunnercooke. It is a tax insight from Aaron Scrupps, who is an Operating Partner at gunnercooke, offering a tax perspective on tokenised shares and EIS.

It is not legal advice. This article states the law and HMRC guidance as at 16 September 2026. The venture capital schemes and the PISCES framework are both developing. Positions may have changed since publication.

Why this matters

EIS relief is one of the most valuable things a UK startup can offer an early investor. Tokenisation and PISCES promise something investors have long wanted alongside it: a route to sell. The catch is that the two can pull against each other. The more certain you make the future exit at the moment the shares are issued, the more you put the relief at risk. This article is about holding both: keeping the relief, while leaving room for the liquidity.

The earlier TokenisingStartups article set the foundations, that relief attaches to the underlying share rather than the token, that the register of members is the legal record, and that the law already provides for identifying the beneficial owner of shares held through a nominee. This piece takes the next question: when should shares enter the token system, and what does each choice cost?

The short version, for founders

• Relief attaches to the share, not the token. Tokenisation is an administration and settlement layer, not a tax event.

• The golden rule for the risk to capital test: sell possibility, not certainty. The more concrete the exit you build in at issue, the greater the risk to relief.

• A nominee is fine. EIS law already looks through a genuine bare nominee to the investor (section 250). Appointing a nominee and tokenising are separate choices, and need not happen at the same time.

• The most overlooked trap is the independent investor rule (section 164A). An investor who holds shares bought on a secondary market cannot claim EIS on a new subscription in that company while they still hold them. There is no SEIS equivalent, so a secondary market poses less risk to SEIS than to EIS.

• On the current framework, PISCES should not, by itself, cost a company its unquoted status (section 184).

• If the structure is not built yet, keep tokenisation and future liquidity as later decisions, not contractual rights, and seek advance assurance before you issue, not after.

  
  

The rest of this article works through the law behind each of those points, and then sets out four practical structures and when to use each. Where it refers to EIS, substantially the same analysis applies to SEIS in the areas considered, although the statutory references differ and one important divergence (section 164A) is addressed below.

The assumptions we are working from

We assume the company qualifies for EIS in the ordinary way, and that the model is a simple one-share-to-one-token model. Where a nominee is used, we assume it is a bare nominee holding legal title, and that HMRC accepts the structure as a genuine nominee arrangement. We assume the register of members remains the legal source of truth, and that PISCES is the intended trading venue, with tokenisation used for the ownership and settlement layer.

Two ideas need to be kept apart from the start. A company can use a nominee without tokenising its shares, and a company can have token infrastructure in place without putting every class of share into it. That distinction matters when we come to sequencing.

Two periods are used in the detail below. Period B begins when the shares are issued and ends on the date defined by the legislation as the termination date: three years after issue, or three years after the company starts trading if that is later. It is referred to below as the three-year period. Period C is the same period with the twelve months before the share issue added in front, and it matters only for the rules on value received.

What does tokenisation actually improve?

It helps to be honest about what tokenisation does and does not add. PISCES already creates a route to a secondary market for private company shares without any tokenisation. Digital cap table and ownership infrastructure can also be provided without blockchain.

So the case for tokenisation is not simply access to a secondary market. It is the application of blockchain to the ownership and settlement layer of that market: a scalable, immutable transaction record; infrastructure that need not depend on a single registrar’s internal ledger; and, most relevantly for EIS, programmable compliance.

Tokenisation does not remove the need for a nominee where the legal structure depends on one. A single party still holds legal title and ordinarily remains responsible for customer due diligence and for giving legal effect to transfers. The primary benefit is better administration and settlement: faster secondary transfers, and integrated status monitoring and reporting.

This matters because the main EIS challenge here is not technical feasibility. It is how much future liquidity you can establish at the point EIS shares are issued.

The sequencing question: EIS first, or tokenisation first?

In practice there are two starting points. The first is a company that is already tokenised and later raises under EIS. The second is a company that raises under EIS before it tokenises its shares.

Both are assessed under the same statutory conditions. It is worth doing that analysis once, rather than treating tokenisation as a separate EIS regime. The relevant provisions do not all present the same difficulty. Some are straightforward. One can settle the question outright. Others turn heavily on the facts at the time the shares are issued.

Four main structuring options exist, each with different trade-offs.

Structure	What exists when the EIS shares are issued	Principal consideration
A. Tokenise at issue	Nominee, token infrastructure and trading mechanics are all operational	The full token and liquidity infrastructure is visible for section 157A purposes
B. Nominee at issue, token later	Bare nominee exists, but no token and no binding right to future tokenisation	Separates ordinary nominee treatment from the future liquidity proposition
C. Investor on the register, migrate later	No nominee and no token structure applies to the EIS shares at issue	Greatest separation at issue, but the highest later operational friction
D. Conversion right in the articles	Binding right to convert into a different, potentially tokenised class	Accommodated by section 177(2) for section 177(1)(a) purposes, but visible under section 157A; the share rights remain subject to section 173 throughout

The key comparison is not risk versus certainty. It is how much future liquidity is available at issue, and the operating cost of leaving it out. Each structure is considered in detail after the statutory analysis below.

Start with the nominee (section 250)

The starting point, and the reason a nominee does not defeat relief, is section 250 ITA 2007.

The general EIS rule is that an individual subscribes for shares on their own behalf. Section 250(1) then provides that shares subscribed for, issued to, held by or disposed of for an individual by a nominee are treated as subscribed for, issued to, held by or disposed of by that individual. HMRC takes the same approach at VCM16040 and VCM10520.

This is the statutory basis for the nominee model. The fact that the investor is not on the register as legal holder does not, by itself, prevent EIS relief. The law already accommodates a separation between legal title and the investor for whom the shares are held.

That is important for tokenisation, because the token does not need to perform any tax function. It can simply be the system through which the investor’s beneficial entitlement is recorded and transfer instructions administered, while the underlying share remains the EIS asset. So there is no need to treat nominee appointment and tokenisation as the same event. A nominee can hold the shares from issue without tokenising them at issue.

There is an implementation point. Section 250 sets the statutory treatment of a genuine nominee. It does not decide whether a particular set of custody, tokenholder and platform documents actually creates the arrangement the parties say it does. That is a matter for the documents, and should not be assumed from the label on the structure.

A practical operational point from VCM16040: the company should enter the actual subscriber’s name on form EIS3, even if the beneficial owner is not known in advance. Where a nominee acts for several investors, the platform must also keep enough beneficial-owner information to support the compliance statement and EIS3 process. A system based solely on wallet addresses will not be sufficient.

Note too that section 126 Companies Act 2006 prohibits noting any trust on the register of members in England, Wales and Northern Ireland. The register lists the nominee, while beneficial entitlement is recorded in the nominee documentation and, if tokenised, in the token layer. That is a familiar structure rather than a novel one, but it should be addressed expressly, because the whole model depends on the register remaining the legal source of truth while the economically relevant record sits elsewhere.

For SEIS, the equivalent treatment is at section 257HE, with HMRC guidance at VCM37040.

The rule most people miss: the independent investor test (section 164A)

This is the single most overlooked requirement in the market commentary, and it can settle the question on its own, without any judgement under the risk to capital test.

Section 164A ITA 2007, in force from 18 November 2015, provides that if, at the time the relevant shares are issued, the investor holds any other shares in the issuing company (or in a qualifying subsidiary), those other shares must be either a risk finance investment or qualifying subscriber shares. HMRC calls this the independent investor requirement at VCM8110.

Shares are a risk finance investment only if they were issued by the company to that investor and the company has provided a compliance statement under section 205, 257ED or 257PB. Those operative words matter. Shares acquired by transfer from an existing shareholder are not a risk finance investment. They were not issued to the investor, and they do not fall within the narrow subscriber share exception in section 164A(1)(b), which is confined to incorporation shares and shares acquired during the company’s shelf period.

The consequence for a tokenised company is significant. An investor who acquires shares on a secondary market, whether via a PISCES trading event, a token transfer or a conventional stock transfer form, is disqualified from EIS relief on any later subscription in that company for as long as they continue to hold those shares. This is not a risk to capital judgement, nor a question of presentation or documentation quality. It is a hard statutory bar operating at the date of issue.

So the secondary market carries a cost that is easy to miss: for a company planning multiple EIS rounds alongside active trading, a growing share of the base may be unable to take relief in future rounds while they hold their acquired shares. Two qualifications apply.

First, the test looks at shares held at the time of the new issue, so an investor who has disposed of the secondary holding before subscribing is not caught, though that is rarely attractive and a disposal of existing EIS shares within the three-year period carries its own consequences under section 209. Second, there is no SEIS equivalent. Part 5A contains no analogue to section 164A, so a secondary market purchaser is not disqualified from a later SEIS subscription. That asymmetry is one of the few structural differences between the two schemes, and it means a tokenised secondary market poses less risk to SEIS than to EIS.

Does PISCES make you “quoted”? (section 184)

The short answer, on the current framework, is no. Section 184 requires that, at the start of the three-year period, the company is unquoted and there are no arrangements for it to cease to be unquoted.

An unquoted company for this purpose is one none of whose securities are marketed to the general public, and section 184(3) defines that exhaustively: securities are marketed to the public if they are listed on a recognised stock exchange, listed on a designated exchange outside the UK, or dealt in outside the UK by designated means (HMRC guidance at VCM13090). PISCES engages none of those limbs. HMRC confirmed in Employment Related Securities Bulletin 59 (March 2025) that PISCES is not a recognised stock exchange for the purposes of section 1005 ITA 2007, and the PISCES technical note directs companies to answer “no” to the recognised stock exchange question on the ERS annual return. The other two limbs concern exchanges or dealing outside the UK, which a UK PISCES venue cannot engage.

So participation in PISCES should not, of itself, cause a company to cease to be unquoted for section 184 purposes, under either sequence. One qualification remains, narrower than it looks: HMRC has published no EIS-specific guidance applying section 184 to a PISCES company, and the PISCES technical note (updated 26 November 2025) addresses the tax-advantaged employee schemes only (SIP, SAYE, CSOP and EMI), not EIS. The analysis should therefore be disclosed rather than treated as settled, even though the statutory position is reasonably clear. The harder question is whether some wider set of pre-issue arrangements could amount to arrangements for the company to cease to meet the test. On a conventional token and PISCES model this should not follow merely from building infrastructure, because the aim is continued private status, not a listing. But the actual arrangements matter.

The shares themselves (section 173)

Section 173 governs the underlying EIS shares. Broadly, they must be ordinary shares carrying no prohibited preferential right to dividends, no preferential right to assets on a winding up, and no right to be redeemed (HMRC guidance at VCM12020).

Two features are often understated.

First, the test applies throughout the three-year period, not only at the date of issue. A rights change or class reorganisation during that period is a live section 173 event, not simply a section 177 or section 157A question.

Second, there is no de minimis. In Flix Innovations Ltd v HMRC [2016] UKUT 0301 (TCC), the Upper Tribunal upheld a refusal of relief where the ordinary shares carried a preferential right to assets on a winding up against a class of deferred shares, and rejected the idea that an insignificant preference could be ignored. A theoretically preferential right is still a preferential right.

Given that, a simple one-to-one token wrapper should be neutral: if the token does not alter share rights, tokenisation does not affect the section 173 analysis. The risk is where the structure goes further. If the company creates a separate restricted EIS class, a tradable class, conversion rights or other bespoke rights to accommodate tokenisation, each of those rights must be tested independently and, on Flix, strictly. Tokenisation alone should not affect section 173. Changes to share classes can. Precise drafting is essential.

Pre-arranged exits (section 177)

Section 177 deals with the arrangements under which the shares are issued. Section 177(1)(a) is concerned with arrangements with a view to the subsequent repurchase, exchange or other disposal of the shares. Section 177(1)(d) is separately concerned with arrangements whose main purpose, or one of whose main purposes, is to protect the investor against the risks of the investment. It is important not to conflate section 177 with section 173 or section 157A.

HMRC’s guidance at VCM12080 is helpful. It confirms that the rule does not stop directors from indicating in advance how they envisage shares might be disposed of at some later date. So there is a real distinction between describing the possibility of a future secondary market and putting arrangements in place with a view to a future disposal.

There is also an express carve-out for conversion. Section 177(2), as substituted in 2017, provides that the arrangements referred to in section 177(1)(a) do not include arrangements with a view to shares being exchanged for, or converted into, shares in the same company of a different class. A corresponding SEIS amendment was made to section 257CD(2). The change applies to shares issued on or after 5 December 2016. In other words, Parliament has specifically allowed a future conversion into another share class not to count as a prohibited pre-arranged exit. VCM12080 summarises the general rule but does not reference this carve-out, so the conversion analysis relies on the statutory language.

Two limits shape the structuring that follows. First, the carve-out applies to section 177(1)(a) only. It does not disapply section 177(1)(d). A conversion right that merely creates future liquidity is not itself protection against investment risk, but any accompanying mechanism that underpins value, guarantees a purchaser or price, or otherwise protects the investor against downside must still be tested separately under section 177(1)(d). Second, the carve-out says nothing about section 157A. A documented right to convert into a freely tradable tokenised class is still a circumstance existing when the EIS shares are issued. Permitting the conversion for section 177(1)(a) purposes does not remove it from the risk to capital analysis.

The big one: risk to capital (section 157A)

This is the gate to the wider availability of EIS in a tokenised model. Section 157A, the risk to capital condition, applies to investments made on or after 15 March 2018 (the SEIS equivalent is section 257AAA).

The condition asks whether, having regard to all the circumstances existing at the time of issue, it would be reasonable to conclude both that the company has objectives to grow and develop its trade in the long term, and that there is a significant risk of a loss of capital to the investor greater than the net investment return. HMRC describes it at VCM8530 as a principles-based gateway to the scheme, to be considered before any other requirement (its approach to the two limbs is at VCM8540 and VCM8542).

Three things stand out for this use case.

First, section 157A looks only at the circumstances at the issue date. It is not retested during the three-year period, so subsequent tokenisation does not reopen it. The one qualification (VCM8550) is that HMRC may make post-investment checks and withdraw relief if the information at the time of investment was misleading or incomplete. The test is fixed at the issue date but applied with hindsight: later tokenisation does not create a new issue-date circumstance, but may prompt HMRC to review the original ones. And the EIS analysis as a whole does not freeze at issue: other requirements run across the three-year period, and an actual disposal before the termination date can result in relief being withdrawn under section 209.

Second, the test is objective and considers all circumstances. Tokenising before fundraising increases what HMRC can see, because existing infrastructure is a relevant circumstance. Equally, if another class is already tokenised, excluding the new EIS shares from that infrastructure does not remove its relevance.

Third, the second limb concerns the risk of loss of capital, not liquidity as such. The existence of a venue on which an investor might sell does not itself preserve their capital. A PISCES trading event does not guarantee a sale, and a company-set floor price or other parameter is not necessarily downside protection if no buyer will pay it. HMRC looks at the overall context, including whether the structure is designed to preserve capital and how the opportunity is marketed. No single indicator is decisive, but marketing an investment as short-term and low risk is an obvious adverse factor.

This is why the language in investor communications matters so much, and it is the most controllable variable in the whole structure. Compare two lines. “Shareholders may in future be able to participate in PISCES trading events” describes a possible future facility. “Investors will be able to exit after the EIS period” is different: it presents liquidity as an expected feature and hints at an arrangement or capital preservation. The distinction is subtle, and it is the one most worth getting right.

Applying the tests to the two sequences

Tokenisation first, EIS second

Where the company is already tokenised, the nominee analysis can in principle be accommodated by section 250, section 173 should stay neutral if the underlying rights are unchanged, and PISCES participation should not cause section 184 to fail. Two questions dominate.

The first is section 164A. If the company has already run secondary trading, some of its base has acquired shares by transfer rather than by issue, and those shareholders cannot take EIS relief on the new round while they hold those shares. This needs to be identified from the cap table before the round is structured, not discovered when the EIS3 certificates are prepared, and it is a reason to be careful about encouraging existing tokenholders into a later EIS raise.

The second is section 157A. The infrastructure, the trading mechanics and any marketing history around liquidity all form part of the circumstances against which the new issue is judged. Temporarily keeping newly issued EIS shares outside the token system does not change the underlying facts. For an already tokenised company, the practical focus is therefore less on artificial separation and more on cap table diligence under section 164A, the terms of the investment, the absence of capital protection, the actual operation of the market, and how future liquidity is described.

EIS first, tokenisation second

A company that has not yet tokenised has a materially different choice. If there is no token infrastructure, no binding conversion right and no commitment to future liquidity at issue, less token-related material is relevant for section 157A, and tokenisation can be considered later.

That does not require the investor to be registered as the legal shareholder personally at issue. The shares can be subscribed for and held through a conventional nominee from the outset, relying on section 250, while no token is minted and no binding commitment to future tokenisation is made. Nominee ownership and tokenisation are separate choices. This produces an important middle ground, operationally very different from asking every investor to transfer legal title to a nominee several years later.

If instead the shares are registered directly in the investor’s name, a later move into a true bare nominee structure, with no change in beneficial ownership, should not in itself be a disposal for capital gains purposes. Section 60 TCGA 1992 looks through a bare trustee, and HMRC’s Capital Gains Manual recognises the distinction between a change in legal ownership and a change in beneficial ownership. On that analysis the move into the nominee need not wait until the termination date, though there may be a presentational benefit to waiting if neither a nominee nor tokenisation is needed initially, since there is then less evidence of an anticipated exit. The dividing line is beneficial ownership: a migration that merely changes the registered holder differs from an actual disposal of the investor’s beneficial interest, and an actual disposal during the three-year period triggers the ordinary withdrawal rules whether or not settlement runs through a token.

Four practical structures

Structure A: tokenise at issue

This is the natural structure where tokenisation is already part of the company’s infrastructure, or is a core part of the investment proposition. It is the simplest operationally: the investor enters the system once, legal title is held by the nominee from issue, the token represents the beneficial entitlement, and the platform records the EIS status of the holding from the outset.

It is defensible, but it requires analysis rather than assumption. The section 157A position stays live. The strongest version is one where the documents are clear that the investor’s capital remains genuinely at risk, there is no guaranteed purchaser or exit price, future PISCES participation is described accurately rather than promised, and the platform mechanics do not amount to an arrangement to preserve value. For an already tokenised company running a follow-on EIS round, this is often the most coherent approach, subject to section 164A screening. Excluding new shares from existing infrastructure creates friction without changing the relevant circumstances: a company cannot replicate the evidential position of an untokenised company simply by keeping a new class out.

Structure B: nominee at issue, tokenise later by agreement

For companies not yet tokenised, this is often the preferred default. The EIS shares are subscribed for and held through a conventional bare nominee from issue, relying on section 250. No token is minted, and the nominee arrangements give the investor no binding right to future tokenisation, future PISCES access or an exit after the termination date.

If the company later decides to tokenise, the beneficial entitlement is already held through the nominee, so, subject to the nominee documents, the investor can agree the additional platform and token terms and a token can be minted against the existing beneficial interest. This avoids later stock transfers from direct shareholders to a nominee, and keeps the EIS nominee structure separate from future liquidity.

The key is the documentation. If the nominee agreement entered into at issue itself provides that the shares will automatically be tokenised or made tradable after the termination date, the structure has recreated the very problem it was meant to avoid, because the future arrangement is then visible at issue. The nominee arrangement should stand alone. Tokenisation should be a later decision, not a contractual right, if the goal is to keep separation at the issue date.

Structure C: investor on the register, tokenise later

The most conservative presentational structure is for the investor to subscribe directly, appear on the register personally, and have no token or nominee arrangement at issue. Tokenisation then happens later by transferring legal title to a bare nominee, documenting the nominee and platform terms, updating the register and minting the token. Provided beneficial ownership genuinely stays unchanged, the change in registered holder should not itself be a disposal.

The cost is operational. Investors must later engage with the platform, complete the nominee’s customer due diligence, agree the terms and execute the documentation to move legal title. Each step is a point at which an investor may simply not proceed, so the company may end up with a permanently divided base of direct shareholders and tokenised beneficial interests. This structure is available for companies that want the cleanest issue-date presentation and will accept the friction. It is not required simply because nominees are thought incompatible with EIS: section 250 confirms otherwise.

Structure D: a conversion right in the articles

The conversion structure is available in principle but harder to justify commercially. A restricted EIS class could carry a binding right to convert, after the relevant period, into a freely tradable tokenised class, and section 177(2) expressly accommodates arrangements for conversion into another class. Three difficulties follow.

First, the conversion right is documented at issue. It buys investor certainty by putting the future liquidity structure on the record, which is precisely what section 157A requires HMRC to take into account. Second, the section 177(2) carve-out relieves only section 177(1)(a), so section 177(1)(d) still applies: any mechanism that underpins value, guarantees a purchaser or price, or otherwise protects the investor against downside must be tested separately. Third, the structure introduces a genuine share class reorganisation. Section 173 applies throughout the three-year period, and on Flix Innovations there is no de minimis tolerance for an inadvertent preference between the classes, so the rights on both classes need careful drafting and, if conversion can occur before the termination date, careful timing.

Unless a binding contractual right to future conversion is genuinely required, this structure adds complexity, section 173 risk and section 157A scrutiny for a certainty that may not be needed. It is unlikely to be the default.

Which structure is preferable?

It depends primarily on whether tokenisation already exists, and whether it is part of what the investor is being asked to buy.

A tokenised company running a follow-on EIS round cannot negate existing infrastructure by excluding new shares. Structure A is usually the most coherent option, with the focus on section 164A cap table screening and on ensuring the platform mechanics, offering documents and investor communications describe liquidity accurately without implying capital preservation.

A company that has not yet tokenised has a genuine choice. If tokenisation is not part of the investment proposition, Structure B typically offers the best balance: a bare nominee from issue, as recognised by EIS legislation, without committing to tokenisation or future liquidity, and with tokenisation added later if commercially appropriate. Structure C remains available where the company wants the greatest separation at issue and will accept the later migration. If tokenisation is a key feature of the raise, Structure A is more credible: it is better to disclose and analyse the actual structure than to create artificial distinctions that do not change HMRC’s assessment. The conversion structure is an option, but in most cases it addresses the wrong issue.

Across all four, sequencing is the recurring theme. Because of section 164A, opening a secondary market before later EIS rounds can reduce the number of shareholders eligible for relief in those rounds. Companies planning multiple EIS raises should align the timing of secondary liquidity with their fundraising strategy.

Programmable compliance: from status flag to tax lot

This is where tokenisation can do more than accommodate EIS: it can actively help with compliance.

Section 240 requires an investor to notify HMRC within 60 days of learning of an event that causes relief to be withdrawn or reduced, including a disposal within the three-year period. Section 241 imposes separate notification requirements on the company for specified company-side events. A token platform can make the underlying compliance much easier by holding the information needed to identify EIS-sensitive events.

A single status flag per holding is not enough, though. HMRC’s rules apply at the level of the individual acquisition: relief, termination dates and identification rules attach to specific shares acquired on specific dates. The record should therefore be granular, tracking each tax lot or beneficial holding per acquisition, and capable of recording the issue date, the applicable termination date under section 256, whether EIS or SEIS relief is attributable, the identity of the beneficial owner, and whether the holding remains within the relevant period. When a transfer is proposed, the system can check whether the holding is still within that period, alert the investor to the EIS consequences, and, if it proceeds, record the date, holding and beneficial owner automatically, creating an auditable record.

Section 246 must also be built into the design. Where an investor holds shares of the same class acquired on different dates, section 246 determines which are treated as disposed of: earlier acquisitions before later ones, and, for shares acquired on the same day, in a statutory order that takes non-relieved shares first, then SEIS shares, then deferral relief shares, then EIS shares, and finally shares carrying both EIS and deferral relief. Blockchain token identity does not override these rules. The system must track beneficial tax lots, not just token IDs. Assuming the token disposed of equals the share disposed of will lead to errors. The same record set should also carry the beneficial owner data needed to populate form EIS3 correctly.

The distinction to hold onto is that tokenisation does not prevent disposals affecting relief. What it enables is identification of EIS status before a transaction, and accurate recording of disposals at scale. Under Structure A this monitoring runs from issue; under Structures B and C it becomes relevant once the shares enter the token system.

A trap worth flagging: value received

There is a separate issue buried in the platform economics, and it is wider than it first looks.

Section 213 reduces or withdraws EIS relief where the investor receives value from the company at any time in period C in relation to the relevant shares. Section 221 extends this to value provided by a person connected with the company, and to value received by an associate of the investor (HMRC’s overview is at VCM15030). The most commonly missed point is the period: period C begins twelve months before the shares are issued and ends immediately before the termination date, so benefits conferred during investor onboarding, before a single share is issued, are already within the window.

The analysis is not open-ended. It has two stages. First, does the benefit fall within section 216, which sets out when value is received (the list includes the provision of a benefit or facility to the investor; guidance at VCM15060)? Second, is the receipt of insignificant value under sections 214 and 215 (guidance at VCM15050)? Value not exceeding £1,000 is treated as insignificant, and value above that may still be insignificant relative to the amount subscribed. Critically, section 215(3) removes the insignificant-value let-out entirely where repayment arrangements exist at any time from twelve months before issue to the end of the issue date, meaning arrangements for the investor to receive, or be entitled to receive, any value from the company in period C.

This matters because tokenisation platforms compete on features: free custody, waived transaction fees, preferential access to services or trading windows, governance features, reward tokens and so on. Those are not automatically value received. Whether they are depends on the benefit, who provides it, why, whether the provider is connected with or acting for the company, and whether an exclusion or the insignificant-value threshold applies. A benefit from an independent platform operator on arm’s length terms is different from one funded or provided by the company to its EIS investors. The point is to review platform economics and pre-issue onboarding incentives before the raise, rather than assume that operator involvement removes them from scope.

What remains open

Three questions are genuinely unsettled.

• The first is the EIS-specific application of section 184 to PISCES. The statutory position is reasonably clear and is supported by HMRC’s confirmation that PISCES is not a recognised stock exchange, but no published EIS guidance addresses PISCES directly. The second is section 157A: no published HMRC decision applies the risk to capital condition to a tokenised private share structure with prospective PISCES liquidity.

• The distinction between liquidity and capital protection is supportable in principle, but the outcome will turn on the actual arrangements and how the investment is presented.

• The third is whether HMRC will accept a particular token and nominee design as a genuine nominee arrangement. The general principle is settled by section 250 and VCM16040 (with SEIS at section 257HE and VCM37040), but whether a specific implementation falls within it depends on the documentation, the investor’s rights and the platform’s actual operation.

Section 164A, by contrast, is not open. It is a clear statutory rule with a clear outcome, and it should be treated as a design constraint, not a matter for argument.

The practical next step

No token-specific analysis has yet been tested in a published HMRC EIS decision. For a structure that has not been implemented, the credible route is an advance assurance application that discloses the proposed arrangements in full: the nominee documentation, the relationship between the token and the underlying share, the intended PISCES arrangements, the EIS status monitoring mechanics, the offering language and the sequencing. The application should ask HMRC’s Venture Capital Reliefs Team to take a position on the specific model, rather than leaving the market to reason by analogy to existing nominee and risk to capital guidance.

Timing is not a matter of preference. VCM60010 states that a company cannot apply for advance assurance once the relevant shares have been issued, and that an assurance is not valid if the company has failed to disclose the circumstances affecting its eligibility. VCM60150 applies the timing rule specifically to EIS: once the shares are issued, the company must proceed through the statutory compliance process without the benefit of advance assurance. VCM8550 adds that HMRC will not give assurance for investments that appear likely to fail the risk to capital condition. For a company that has not yet implemented the structure, implementing it before seeking assurance is the least advisable approach.

Sections 157A, 164A and 184 all focus on the position at the issue date, in different ways. Once the shares are issued, those issue-date circumstances cannot be rewritten. So the structural conclusion is straightforward. If tokenisation already exists, or is a core part of the proposition, tokenise at issue, screen the cap table under section 164A, and address section 157A directly. If tokenisation does not yet exist and is not part of what the EIS investor is being sold, use a conventional nominee where it is operationally useful, but leave tokenisation and future liquidity as later decisions rather than contractual rights. In either case, the timing of secondary trading should be weighed alongside expected future EIS fundraising, and for a company that has already permitted secondary transfers, the existing cap table should form part of the section 164A analysis before the next round is structured.

The goal is not to hide liquidity from EIS analysis. It is to avoid presenting certainty where only possibility exists.

Sources

ITA 2007 ss.157A, 159, 164A, 173, 177, 184, 205, 209, 213, 214, 215, 216, 221, 240, 241, 246, 250 and 256; SEIS equivalents at ss.257AAA, 257CA, 257CD, 257ED and 257HE. Finance (No. 2) Act 2015 Sch.5 para.4; Finance (No. 2) Act 2017 s.11; Finance Act 2018 s.14. TCGA 1992 s.60. Companies Act 2006 ss.113 and 126.

HMRC Venture Capital Schemes Manual: VCM8110, VCM8530, VCM8540, VCM8542, VCM8550, VCM10520, VCM10540, VCM12020, VCM12080, VCM13090, VCM15030, VCM15050, VCM15060, VCM16020, VCM16040, VCM37040, VCM60010 and VCM60150. HMRC Capital Gains Manual CG10720 and CG34320.

HMRC Employment Related Securities Bulletin 59 (March 2025). HMRC and HM Treasury technical note, Tax implications for companies and employees in relation to employees trading their shares on PISCES (updated 26 November 2025). Flix Innovations Ltd v HMRC [2016] UKUT 0301 (TCC).

Frequently asked questions

Does tokenising shares affect EIS relief?

Not by itself. EIS relief attaches to the underlying share, not the token, and tokenisation is an administration and settlement layer rather than a tax event. Changes to share classes or share rights made to accommodate tokenisation can affect relief and need to be tested separately.

Can EIS shares be held through a nominee?

Yes. Section 250 ITA 2007 treats shares held by a genuine bare nominee for an individual as held by that individual, and HMRC takes the same approach at VCM16040 and VCM10520. Appointing a nominee and tokenising are separate choices and need not happen at the same time.

What is the EIS independent investor rule and how does secondary trading affect it?

Under section 164A ITA 2007, an investor who holds shares in the company acquired by transfer, for example through a PISCES trading event or a token transfer, cannot claim EIS relief on a new subscription in that company while they still hold those shares. There is no SEIS equivalent of this rule.

How should founders describe future liquidity to EIS investors?

Describe possibility, not certainty. Saying that shareholders may in future be able to take part in PISCES trading events describes a possible facility, while promising that investors will be able to exit after the EIS period puts the risk to capital condition in section 157A at risk.

When should a company apply for EIS advance assurance on a tokenised structure?

Before the shares are issued. HMRC guidance at VCM60010 states that a company cannot apply for advance assurance once the relevant shares have been issued, and the application should disclose the proposed nominee, token and platform arrangements in full.

About the author

Aaron Scrupps is an Operating Partner at gunnercooke llp, specialising in fast-growth technology startups. He advises founders on the financial and tax considerations arising as businesses scale. Connect with him on LinkedIn: linkedin.com/in/aaron-scrupps

This article is written for general information only. It is not legal, tax or financial advice, and it does not take account of any particular circumstances. No client or advisory relationship is created by reading it, and no responsibility is accepted for any action taken or not taken in reliance on it. Anyone considering a tokenised share structure, or an EIS or SEIS raise alongside one, should take specific advice on their own facts.