Seed Enterprise Investment Scheme (SEIS)

The Seed Enterprise Investment Scheme, like EIS, is one of the venture capital (VCT) schemes. Launched in 2012, SEIS offers an even bigger tax break than EIS. SEIS is designed for early-stage or start-up companies to help raise funds through investors. Shares in the company must have been issued on or after April 6th, 2012.

Individuals can invest up to £100,000 in a single tax year, spread out between qualifying companies and they must not hold more than a 30% stake in any of the companies they invest in.

The maximum your business can obtain through investments is £150,000 and you must not have previously raised money through other VCT schemes or under EIS.

SEIS RELIEF

Income Tax Relief

An investor in an SEIS eligible business can claim back up to 50% of the value of their investment in the form of income tax relief. Therefore, an investment of £10,000, for example, will save £5,000 in income tax.

Loss Relief

If the company fails, the investor may claim loss relief. The amount of loss relief you can claim is equivalent to the rate of income tax you pay. For example, if you pay a rate of 45% income tax, you will be able to claim up to 45% of your net loss in income tax relief.

Capital Gains Tax Relief

Investors get exemptions from Capital Gains Tax on earnings from shares. Profits realised within 3 years are also exempt from Capital Gains if reinvested in the SEIS.

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QUALIFYING CRITERIA

There are various conditions to be met for the company to qualify for the SEIS scheme. The company must:

Be a qualifying trade (a trade which is conducted commercially)
Be based in the UK with a permanent establishment
Be less than 2 years old
Have fewer than 25 employees
Have assets of less than £200,000
Have been trading for at least 4 months before they can be eligible for SEIS
Not be trading on a recognised stock exchange at the time of the share issue and do not plan to do so
Not control another company, other than its qualifying subsidiaries
Not be a 51% subsidiary or controlled by another company. Any property management subsidiaries must be 90%
Not be in financial difficulty

THE FOLLOWING TRADES WILL NOT QUALIFY

Property Development
Provision of Legal or Accounting Services
Banking, Insurance or any other Financial Activities
Coal and Steel Production
Leasing/Letting of Assets on Hire
Operating/Managing Hotels or Care Homes
Farming

All tax reliefs under the scheme will be withheld/withdrawn from investors if the company does not follow the rules for at least 3 years after the investment is made.

The above are general conditions relating to the Seed Enterprise Investment Scheme and each company should be reviewed on a case by case basis.

INTRODUCTORY MEETING

CONTACT US TO ARRANGE AN INTRODUCTORY MEETING, OR FOR A QUOTE.

PARMINDER CHATTHA

Partner - Corporate Tax

Parminder is a CTA qualified Corporate Tax Specialist with significant experience in EIS, SEIS and EMI.

JON ISAACS