The Seed Enterprise Investment Scheme (SEIS) was introduced in April 2012 as an offshoot of Enterprise Investment Scheme (EIS) specifically targeted at boosting early stage investment in start-up companies.
To this end, SEIS offers the investor some especially generous tax reliefs:
- An immediate 50% Income Tax relief on investments under the scheme of up to £100,000 in a tax year;
- A Capital Gains Tax exemption for any gains on the SEIS shares;
- A Loss Relief should the venture fail.
There are some key points to bear in mind on the SEIS scheme:
- The shares must be held for a three-year period to qualify for the reliefs.
- The maximum amount a company can raise is £150,000.
- The investor can be a director of the company but not an employee.
- The maximum shareholding is 30%.
- The scheme is only open to incorporated companies that have been trading for less than two years.
- The company must have few than twenty-five employees and gross assets of less than £200,000.
In deciding whether to invest, it is important to ascertain whether the company has applied for and received ‘Advanced Assurance’ from HMRC. This is a certificate issued by HMRC confirming that the company qualifies for the SEIS scheme.
The investor is able to claim the Income Tax relief once either the business has been trading for four months or has spent 70% of the investment they received.
At that point, the company submits Form SEIS1 to the Small Companies Enterprise Centre (SCEC) for review. Assuming all the requirements are met, the SCEC will issue a Form SEIS3 to the company to distribute to the individual investors for inclusion in their tax return.
The SEIS relief can be claimed up to five years after the 31st January in the year that investment was made. Indeed, it can also be carried back into the previous tax year.
Lastly, as with all tax reliefs, the availability and benefit depends on your circumstances. For instance, if you are not paying Income Tax, the SEIS relief is of no value.
As a result, we recommend seeking independent tax advice before proceeding with any investment.
At CooperFaure, we work with a portfolio of companies and investors operating under the SEIS and EIS schemes. If you would like an initial call to discuss your circumstances, please email us at firstname.lastname@example.org to arrange a time. It is absolutely free and there is no obligation.
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