SEIS and EIS – tax incentives
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Schemes that offer tax relief to investors who invest in smaller companies
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 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 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 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 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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Investing in early stage businesses involves risks, including illiquidity, lack of dividends, loss of your investment and dilution and it should be done only as part of a diversified portfolio. CODE Investing Limited is targeted exclusively at investors who are sufficiently sophisticated, or who are judged by CODE Investing Limited otherwise to be appropriate, to understand these risks and make their own investment decisions. You will only be able to invest with CODE Investing Limited once you are registered as sufficiently sophisticated or otherwise appropriate for these types of investment. Investors via CODE investing are not protected from loss by the Financial Services Compensation Scheme against the Company’s default or for any losses they may suffer. Please read the full risk warning for more information. This page has been approved as a financial promotion by CODE Investing Limited, which is authorised and regulated by the Financial Conduct Authority. Investments can only be made on the basis of information provided in the pitches by the companies concerned. CODE Investing Limited takes no responsibility for this information or for any recommendation or opinions provided by the companies.
Tax Wrappers note: Innovative Finance ISA (IFSA), Self Invested Personal Pension (SIPP) and Small Self Administered Scheme (SSAS) : eligibility depends on an individual’s circumstances and is subject to change in the future.