Seed Enterprise Investment Scheme (SEIS)

Boost your funding for your early stage start-up with 50% income tax relief for your investors under SEIS

This Government incentive applies to the issue of shares for investment from business angels and private investors. Capital gains tax incentives combine with attractive income tax and IHT reliefs to make SEIS a much sought after tax relief for many investors

We can help you secure advance assurance from HM Revenue & Customs that your company qualifies under SEIS and can help provide tax advice in relation to the share structuring and issue of shares to qualifying investors

Enterprise Investment Scheme (EIS)

Similar to SEIS, the EIS tax relief provides attractive income tax, capital gains tax and IHT relief for investors into qualifying trading companies

Many companies seek SEIS tax relief on investments up to £150,000 (max permitted under SEIS) and then follow on with EIS investment as this has much higher investment limits but less attractive income tax relief. There are a number of factors to consider when seeking to combine these reliefs and we can help companies navigate the hurdles

We can help you secure advance assurance from HMRC that your company qualifies for investment under EIS and assist with tax advice in relation to share structuring and claiming tax relief for the investors

SEIS / EIS: Frequently asked questions

SEIS provides investors with the following tax benefits:

  • 50% income tax relief on investment (max of £100k pa)
  • 50% CGT exemption on gains reinvested (typical effective tax saving of 14%)
  • CGT free sale of shares after 3 year qualifying holding (if income tax relief claimed)
  • IHT shelter after 2 year holding period
  • income tax loss relief should the company fail

EIS provides investors with the following tax benefits:

  • 30% income tax relief on investment (max of £1m pa)
  • CGT rollover relief on investments
  • CGT free sale of shares after 3 year qualifying holding (if income tax relief claimed)
  • IHT shelter after 2 year holding period
  • income tax loss relief should the company fail

Aside from the differing tax benefits for investors, from a company or founder’s perspective the key differences are as follows:

  • Companies can raise £150,000 under SEIS (max) and £5m per year under EIS
  • Companies must not have traded for more than 2 years to qualify for SEIS. There is no such restriction for EIS
  • Companies must have gross assets less than £200k and less than 25 employees under SEIS (pre fund-raise) whereas under EIS the limits are £15m gross assets and 250 employees
  • If a company has already raised funding under EIS (or VCT), it cannot then raise funding and issue shares under SEIS. A company can, however, issue shares under EIS after SEIS (so long as 70% of the SEIS cash has been spent)
  • Cash raised under SEIS must be spent within 3 years whereas the limit is 2 years under EIS

Does my company qualify for SEIS / EIS?

SEIS / EIS applies to the issue of shares in unquoted trading companies

An unquoted company is one that is not listed on a recognised stock exchange so private limited companies are permitted (incidentally, an AIM listing is not a recognised stock exchange for these purposes so would qualify)

Unfortunately there is no clear definition of “trading” – instead HMRC have a list of ‘excluded activities’ that help us determine the types of activities that do not qualify

We can help you navigate this area

Does a loan to my company qualify for SEIS / EIS?

Under current rules, loans are not qualifying investments for SEIS / EIS (although there are proposals to include them in the future)

A qualifying investment under SEIS / EIS is a fresh issue of ordinary “full risk” shares in the company with no preferential rights to assets on a winding up.

Care needs to be taken in relation to the share structure both during the initial set up and during the 3 year qualifying period

Where can I find some useful further information on SEIS / EIS?

HMRC have some useful info on their website:

For EIS visit here

For SEIS visit here plus they have a useful FAQ section here

How can you help me and how do you structure your fees?

We can help in three key areas:

  1. Preparation and filing of an application for advance assurance from HM Revenue & Customs (HMRC) that your company qualifies under SEIS / EIS. This is not mandatory but is recommended as most sophisticated investors will expect you to have secured HMRC advance assurance
  2. Advice and assistance in relation to structuring shareholders to ensure that you can maximise relief under SEIS / EIS and do not fall foul of the myriad of traps that exist for the unwary e.g. connection tests, timing of shares issues etc
  3. Preparation and filing of Forms SEIS1 and EIS1 with HMRC on behalf of the company in order to secure tax relief for the investors as they can’t claim the tax relief without these tax certificates

Our fees depend on the level of assistance you would like – we can consider fees in the round if, for example, you will be utilising the funding for R&D purposes which could lead to claims for enhanced R&D tax relief with us

Please get in touch regarding your SEIS & EIS tax requirements