SEIS and EIS – tax incentives

by | Aug 5, 2013 | Investment Tips

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Schemes that offer tax relief to investors who invest in smaller companies

SEIS and EIS

SEIS and EIS – What are the benefits?

Many investment opportunities can take part in Seed Enterprise Investment Schemes (SEIS) or Enterprise Investment Schemes (EIS) if they are raising funds in return for equity. Both of these schemes provide benefits to the investor by providing tax relief for investment in smaller companies.

SEIS

SEIS provides a 50% income tax relief at the cost of the shares purchased for investors supporting a nascent start-up. Additionally, it eliminates capital gains tax on an investor’s eventual sale of his/her shares, provided the company remains a qualifying SEIS company for three years.

It’s capped at individual investments of £100,000 per tax year, and each qualifying company can only raise up to £150,000.  As it is designed to support emerging start-ups, it also requires firms have fewer than 25 employees. They should also have been trading less than two years’ time, and not have raised any money from EIS or Venture Capital Trust (VCT) investors previously.

EIS

EIS is the next step up in terms of limits on company size. It provides a 30% income tax relief to investors supporting young (up to 7 years), smaller, unlisted PLCs. It also provides capital gains tax relief on share sell-off after three years.

It applies to individual investments of up to £1 million per year and a per-company limit of £5 million per year (£12 million total).

If a small business owner approaches us with a suitable equity raise, we would suggest they consider offering either SEIS or EIS if applicable. This can help create an added benefit to the investor should they wish to fund them.

To help our investors spot an investment opportunity with tax relief benefits, we have added tags to each of the projects. We use these tags to track the progress of projects as they apply to Small Companies Enterprise Centre (SCEC) for these schemes.

Here is a list of what each tag means:

SEIS tags:

  • SEIS suitable – This investment opportunity meets the criteria for SEIS
  • SEIS Advanced Assurance Applied – This investment opportunity has submitted details of their plans to raise money, their structure and their activities in advance of an issue of shares, so that the SCEC can advise on whether or not the proposed share issue is likely to qualify for relief.
  • SEIS Advanced Assurance Obtained – This investment opportunity has received an Advance Assurance Form, which is an assurance from the SCEC that it is likely to qualify for SEIS tax relief and can show this letter to potential investors

EIS tags:

  • EIS suitable – This investment opportunity meets the criteria for EIS
  • EIS Advanced Assurance Applied – This investment opportunity has submitted details of their plans to raise money, their structure and their activities in advance of an issue of shares, so that the SCEC can advise on whether or not the proposed share issue is likely to qualify for relief.
  • EIS Advanced Assurance Obtained – This investment opportunity has received an Advance Assurance Form, which is an assurance from the SCEC that it is likely to qualify for EIS tax relief and can show this letter to potential investors

Updated on 21st September 2016

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