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Seed Enterprise Investment Scheme (SEIS) 2020-02-12T16:09:45+00:00

Seed Enterprise Investment Scheme (SEIS)

SEIS

What is SEIS?

SEIS offers lucrative tax reliefs to investors in early stage start up businesses.  The relief available is limited and there are a number requirements that must be met by the company and investor throughout the period of investment.

Principle benefits of SEIS

  • Firstly, the scheme offers a 50% up-front income tax relief, for investments of up to £100,000.
  • There is no capital gains tax payable on the disposal of SEIS shares which are held for more than three years.
  • Loss relief is available on the disposal of SEIS shares if the company fails.
  • Capital gains tax due on the disposal of other  assets can be deferred by reinvesting the relevant gain into a qualifying company.
  • Finally, inheritance tax relief is available if the SEIS shares are held for at least two years.

50% upfront income tax relief

50% of the value of your investment is deducted from your current years tax liability or can be carried back to the previous year.

No gain on the disposal of SEIS shares

The SEIS shares are exempt from CGT if held for at least 3 years

£0
Maximum amount that investor can obtain relief
0%
Maximum % ownership for each investor
£0
Total amount a company can raise under SEIS

Deferral of tax liabilities on assets previous sold

Gains on other assets can be deferred and “rolled over” into the SEIS qualifying shares.

Additional loss relief is available if the company fails

If the company fails a further relief is available which can be set against income in the year of the loss.

No IHT relief if held for at least 2 years

The shares will qualify for full business property relief if held for at least 2 years.

Requirements and limits to qualify for SEIS

  • In order to qualify for SEIS, the company must be undertaking, or planning to undertake, a new business.
  • It must have fewer than 25 full-time employees and gross assets of less than £200,000 at the time of the investment.
  • Qualifying companies can raise a total of up to £150,000 under the scheme.
  • Once 70% of funds have been utilised, the company can raise funds under the EIS or from VCTs
  • Funds raised must be used within three years within the qualifying trade.
  • An individual investor can claim relief for investments of up to £100,000 each tax year.
  • There are lots of conditions that need to be satisfied by the investor and company, the main ones being;
    • Firstly, the investor must subscribe cash for newly issued ordinary shares with no preferential rights.
    • The shares must be fully paid up on subscription
    • The business must not be more than 2 years old.
    • The investor must not own more than 30% of the equity or voting power in the relevant company.
    • The company issuing the SEIS shares must be unquoted and must be UK tax resident or have a fixed place of business in the UK.
    • Finally, the company must not be under the control of another company.

In short, SEIS relief is potentially available for owner-managers, as well as outside investors but not employees. There are other tax efficient ways to provide shares to employees please click here to read more.

Excluded trades

There are a number of trades that are excluded from SEIS relief, these can be found here.

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