SEIS, otherwise known as The Seed Enterprise Investment Scheme, is designed to help small, early-stage companies raise equity finance by offering a range of tax reliefs to individual investors who purchase new shares in those companies.
It complements the existing Enterprise Investment Scheme (EIS) which will continue to offer tax reliefs to investors in larger and more mature companies.
SEIS is intended to recognise the particular difficulties that very early stage companies face in attracting investment, by offering tax relief at a higher rate than that offered by existing EIS.
For companies looking for investors:
If you’re a company just starting out, you can use SEIS to help you. It does this by offering tax reliefs to individual investors who buy new shares in your company.
As a company you can receive a maximum of £150,000 through SEIS investments.
There are various criteria that the company needs to ensure investors can claim tax relief.
Tax reliefs will be withheld, or withdrawn, from your investors if you do not follow the rules for at least three years after the investment is made, or if you no longer meet the criteria.
Your company and any of its subsidiaries must:
If you’ve received investment through the Enterprise Investment Scheme (EIS) or from a venture capital trust, you cannot use SEIS.
The money you raise from the investment must be spent within 3 years of the share issue.
You must spend the money on either:
Before raising your money, let’s talk about Advance Assurance…
To show your potential investors that your share issue is likely to go ahead and qualify for the scheme, you can ask HMRC for Advance Assurance – their agreement that the investment would meet the conditions of a scheme before you actually apply.
Note: Advance Assurance will not tell you if an investor would meet the conditions of the scheme.
For individuals looking to invest:
The income tax relief rules for this scheme have been designed to mirror those of EIS as is anticipated that companies may want to go on to use EIS after an initial investment under SEIS. This scheme provides various types of relief from 50% income tax credit against your personal tax liability to capital gains tax (CGT) reliefs.
As well as the above, an investor must not have a ‘substantial interest’ in the company at any time from the incorporation of the company to the termination date (Period A).