Do not invest unless you are prepared to lose all the money you invest. This is a high-risk investment and you are unlikely to be protected if something goes wrong. Take 2 mins to learn more.
Knowledge intensive companies are important because they fuel innovation, help develop new technologies and tend to lead to economic growth. Many of these companies have a unique approach to creating value, primarily through intellectual expertise, advanced skills, and cutting-edge research.
Defining Knowledge Intensive Companies
A knowledge intensive company is fundamentally different from traditional businesses. In essence, such a company generates significant value through intellectual capital, relying heavily on professional, scientific, or technical skills. These organisations prioritise continuous learning, invest substantially in research and development, and employ highly qualified personnel with advanced educational backgrounds.
The primary asset of a knowledge intensive company is its human capital. Unlike traditional businesses that might focus on physical assets or manufacturing, these organisations distinctly derive their competitive advantage from the intellectual capabilities of their workforce. Consequently, their teams are typically composed of professionals with advanced degrees, researchers, scientists, and highly skilled technical experts who specialize in complex problem-solving and innovation.
Sectors and Characteristics
Knowledge intensive companies span various sectors, with technology, life sciences, biotechnology, advanced research, and sophisticated manufacturing being particularly prominent. In the technology realm, this might include cutting-edge software companies developing AI and machine learning solutions. In life sciences, it could encompass pharmaceutical research firms or genetic engineering enterprises pushing the boundaries of medical innovation.
What truly defines these companies is not just their sector, but their approach to value creation. They invest heavily in research and development, often dedicating more than 10% of their operating costs to innovation. They generate intellectual property, file patents, and continuously seek to solve complex challenges through advanced technological and scientific approaches.
Significance in Investment and Economic Context
Within the Enterprise Investment Scheme (EIS), knowledge intensive companies hold particular significance. They represent high-potential investment opportunities that demonstrate remarkable innovation and growth potential. The EIS recognizes their unique value proposition by offering enhanced tax relief and more flexible funding requirements for these enterprises.
These companies play a critical role in economic development. They create high-value employment, advance technological capabilities, and maintain a country’s competitive international positioning. By focusing on intellectual innovation rather than traditional manufacturing, they represent the future of economic growth.
Knowledge Intensive HMRC-Approved EIS Funds (KI Funds)
For a company to qualify as a Knowledge Intensive Company for EIS purposes, HMRC require that they meet the following criteria:
- Carrying out work to create intellectual property
- 20% of employees carrying out research for at least 3 years from the date of investment (Master’s or higher degree)
- Overall operating costs spent on research, development or innovation:
- 10% a year for 3 years, or;
- 15% in one of 3 years
Companies which successfully qualify as Knowledge Intensive Companies are able to benefit from increased EIS funding limits of £10m per year vs £5m for regular EIS qualifying companies and £20m total lifetime funding vs. £12m for regular EIS qualifying companies.
Similarly, investors are able to benefit from an increased annual EIS limit of £2 million vs the usual £1 million limit provided that the second million is invested into Knowledge Intensive Companies.
KI Funds are a compelling option for investors looking to access these innovative, IP-rich businesses, and can offer additional benefits over standard EIS funds in certain circumstances, particularly for investors looking to carry back their relief to a prior tax year.
Provided that a KI Fund:
- Invests 50% of its capital within 12 months of the fund’s close date;
- Invests 90% of its capital within 24 months of the fund’s close date; and
- Invests 80% of its capital into Knowledge Intensive Companies,
investors can treat the investments in the fund as having taken place on the fund’s close date for income tax relief purposes. As KI Funds tend to close just prior to tax year end, this allows investors to effectively lock in their initial income tax relief at the very end of the tax year, despite the underlying investments themselves being made in the next tax year. This also allows carry-back to the prior tax year.
For example, a KI Fund closing at the end of the 2024/25 tax year and investing across the 2025/26 tax year would allow an investor to claim income tax relief against 2024/25 or carry back to 2023/24. A standard EIS subscription made at the same time would again be invested across the 2025/26 tax year, but as income tax relief would be linked to the dates of the underlying investments, the income tax relief could only be claimed against 2025/26 income or carried back to 2024/25.
Conclusion
Knowledge intensive companies represent more than just a business model—they are engines of innovation, progress, and economic transformation. By leveraging intellectual capital and maintaining a relentless focus on advanced skills and continuous learning, these organizations are shaping the future of global business and technology. Investing in these companies via a KI Fund can provide useful benefits to investors.
To find out more about Parkwalk’s Knowledge Intensive EIS Fund IV, please click here.
Parkwalk Advisors Limited (Parkwalk) is authorised and regulated by the Financial Conduct Authority: FRN 502237. Investments referred to in this news article are not suitable for all investors. Capital is at risk and investors may not get back the full amount invested. Any investment in a Parkwalk product must only be made on the basis of the terms of the full Information Memorandum. Tax treatment depends on the individual circumstances of each investor. Parkwalk is not able to provide advice as to the suitability of investing in any product. Past performance is not a reliable indicator of future results. This financial promotion was approved in February 2025.
