The Seed Enterprise Investment Scheme (SEIS) offers very attractive tax benefits to investors, in return for supporting small and startup businesses in the UK.
It is closely linked with the Enterprise Investment Scheme (EIS) which can be used by established, larger companies, although SMEs account for the vast majority of companies in this country and are defined as having fewer than 250 employees.
Both schemes offer generous tax breaks and SEIS was designed to boost economic growth in the UK by promoting new enterprise and entrepreneurship.
How does the SEIS system work?
A new business can obtain up to £150,000 through SEIS investments.
Anyone taking this up needs to follow the SEIS fund rules for at least three years after they have gained investment, to ensure that investors do not meet a tax liability and their investments remain eligible for SEIS tax relief.
These investments are not completely tax free but there is a lot of tax relief available for investors.
For the investor there must an issue of “full risk” ordinary shares and a maximum investment limit of £100,000 pa for individuals
In addition, investors cannot hold more than 30 per cent of the shares in the company.
What are the tax breaks?
Key Requirements for SIES include that the company must not have been trading for longer than two years; must have gross assets less than £200,000 and less than 25 employees.
How is EIS different?
Under EIS, up to £5 million can be raised every year, up to a maximum of £12 million over the lifetime of a company and there is a 30 per cent income tax relief for the investor (current or prior tax year).
Rules for investors
Rules for the company
You must follow the scheme rules or tax reliefs may be withheld or withdrawn from your investors.
Need help with SEIS, EIS and related investment matters? Then call our team today.
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