The Seed Enterprise Investment Scheme (SEIS) is designed to encourage investment into early-stage businesses. Investing in SEIS eligible businesses is a higher risk, higher return investment strategy. To minimise risk, HMRC introduced a range of tax incentives to encourage investment into growth-focused UK businesses. As with EIS schemes, SEIS are an exciting asset class with investors backing the businesses that drive UK growth. To discover more about SEIS and specific tax incentives, download a copy of our free guide.DOWNLOAD YOUR FREE GUIDE
HM Revenue & Customs introduced the SEIS in April 2012. The SEIS offers investors great incentives to invest in early-stage companies. Investors are able to claim back 50% of an investment in an SEIS-eligible business as income tax relief and to halve their capital gains tax liability through reinvesting in an SEIS-eligible business.
SEIS for Investors
SEIS-eligible companies offer investors competitive returns on investment, supported by generous tax incentives both at the point of investment and at the point of exit. SEIS enables investors to incorporate investments in early-stage companies as part of a balanced, diversified portfolio whilst minimising downside risk.
SEIS for Entrepreneurs
The SEIS is configured to assist ambitious entrepreneurs developing business propositions that they believe will be commercially successful. Entrepreneurs require growth capital to execute their business plans. A popular way of accessing growth capital is to release equity to investors; these investors can be institutional, professional or retail investors. More recently, GrowthFunders has enabled these investor groups to invest alongside each other.
What are the benefits of SEIS for investors?
Investors can receive initial income tax relief of 50% on investments up to £100,000 per tax year in qualifying shares issued on or after 6 April 2012
Any growth in the value of an investment in an SEIS-eligible company will not be subject to capital gains tax when it is sold.
The individual investor can be a director of the company, but not an employee
An individual’s stake in the company can be no more than 30%
SEIS tax relief applies only to recently incorporated companies
The company must have 25 or less employees and gross assets of up to £200,000
If you have a taxable capital gain, you can halve your CGT liability by reinvesting your taxable capital gain in an SEIS-eligible company.
Things to remember
First of all, check that the pitch you’re interested in has got SEIS ‘advanced assurance’ – this is a certificate emailed to the investor by HMRC confirming that investors will benefit from SEIS. Secondly, you can claim your money back once the business has been trading for a minimum of four months or has spent 70% of the investment they received. Finally, SEIS relief can be claimed up to five years after the 31st January in the year you made the investment.DOWNLOAD OUR GUIDE TO SEIS
How to claim
When the company you’ve invested in has been trading for four months or spent 70% of the total investment, the company must submit form SEIS1 to HMRC (or, more specifically, the Small Companies Enterprise Centre otherwise known as the SCEC). Once SEIS1 has been reviewed and the requirements met, the SCEC will issue a copy of form SEIS3 for every investor. These are sent to the company of they can be passed on to each investor for them to complete and submit as part of their tax return.