Wikipedia: “SEIS was launched, with the goal to stimulate entrepreneurship and stimulate economic activity” – great news for for start ups.
With over 2,000 companies have raised finance via the SEIS since its launch in 2012. Now two years on, the Seed Enterprise Investment Scheme has become one of the most talked about government back schemes ever created. It has raised over £80m from private investors, and has helped raised fund a growing number of businesses.
The Scheme provides some attractive tax benefits to individuals prepared to invest in higher-risk businesses, and can provide funding for businesses which may find in hard to access traditional sources of finance.
The facts you need to know
- SEIS allows investors in early stage companies to receive 50% income tax relief on investments up to £100,000 per year. So for every £1 invested, HM Revenue & Customs will refund 50p regardless of their rate of income tax!
- SEIS investors will pay no capital gains tax on ultimate disposal of their shares so long as the company remains as a qualifying SEIS company for 3 years. So even if your business turns into tomorrow’s Facebook, the investors will not pay a penny in capital gains tax on ultimate exit!
- Your company must have commenced trading within the past two years to qualify for Seed EIS – remember this is aimed at early stage companies only – and must be unquoted (AIM and PLUS listings count as unquoted for these purposes)
- Companies are limited to raising a maximum of £150,000 under SEIS – after this, they may be eligible for SEIS’s Big Brother, EIS.
- To qualify for SEIS, companies must have less than 25 employees and gross assets of £200,000 or less (before the investment round).
- Early indications were that SEIS would apply to loans to startups as well as subscription for shares but the rules as implemented restrict the relief to subscription for ordinary shares only.
- There are material interest limits (30%), certain trades are excluded and there are a fair few stumbling blocks for the unwary as the rules largely mirror EIS.
- You can obtain advance assurance on whether the company is a qualifying SEIS company from HMRC.
- The legislation states that it will run for 5 years so to 5 April 2017 but hopefully it will be extended.