SEIS (Seed Enterprise Investment Scheme) and EIS (Enterprise Investment Scheme) make investing in your business more attractive to potential investors. Why? Because investors can claim tax relief on the shares they purchase. Following are the respective benefits for investors:

SEIS

Relief is available at 50% of the purchase price of the shares. The maximum annual qualifying investment is £100,000. The relief reduces income tax liability providing there is sufficient tax liability to set it against. It is possible to carry back the relief as far back as the tax year 2012/2013. Capital gains tax relief at 100% can be applied if the shares are held for 3 years or more and the investor has claimed income tax relief on these shares.

EIS

Registration allows individual investors to claim relief on up to 30% of the purchase price of the shares subject to a maximum of £300,000 of relief or 1 million shares purchased in that tax year. There is a provision for carry back in certain circumstances and capital gains tax relief at 100% can be applied if the shares are held for 3 years or more.

 

Which option should you choose?

Below are lists to see if you’re eligible for SEIS, EIS or both.

SEIS

  • Shares must be paid up in full
  • Company cannot be structured with the main purpose of avoiding tax and must have another commercial purpose other than to provide tax relief.
  • Ordinary or preferential shares issued but not preferential shares relating to the company’s asset distribution on winding up.
  • No arrangements to protect investors from the normal risks of investing.
  • The company is unquoted (not on any recognised stock exchange)and there are no arrangements for it to become quoted.
  • Immediately before the issue of the shares the value of the gross assets of (any asset which would appear on the balance sheet) and its subsidiaries did not exceed £200,000. Exclude shares in subsidiaries and loans between group members for this calculation.
  • Must have fewer than 25 full-time equivalent employees, including directors. Discount, students, apprentices, staff on maternity/ paternity leave at the time of issue.
  • The company must not have already registered for EIS or VCT scheme (you can do this after SEIS registration).
  • The company has not traded in the new trade for the previous 2 years.

EIS

  • Shares must be paid up in full.
  • Company cannot be structured with the main purpose of avoiding tax and must have another commercial purpose other than to provide tax relief.
  • Ordinary or preferential shares issued but not preferential shares relating to the company’s asset distribution on winding up.
  • No arrangements to protect investors from the normal risks of investing.
  • The company is unquoted (not on any recognised stock exchange)and there are no arrangements for it to become quoted- but if it does become quoted relief is not lost.
  • Shares cannot be acquired though a loan.
  • Shares cannot have any reciprocal burdens placed on them.
  • Company must not be controlled by another company, must have 50% of the shares unless a property development company than 90%.
  • Maximum gross assets of £15 million.
  • The shares must be held for at least 3 years to retain the income tax relief.

 

Are you eligible?

Some types of business are unable to benefit from SEIS and EIS.

  • Dealing in land, in commodities or futures in shares, securities or other financial instruments
  • Dealing in goods, other than in an ordinary trade of retail or wholesale distribution
  • Financial activities such as banking, insurance, money-lending, debt-factoring, hire-purchase financing or any other financial activities
  • Leasing or letting assets on hire, except in the case of certain ship-chartering activities
  • Receiving royalties or licence fees (though if these arise from the exploitation of an intangible asset which the company itself has created, that is not an excluded activity)
  • Providing legal or accountancy services
  • Property development
  • Providing services to another person where that person’s trade consists, to a substantial extent, of excluded activities, and the person controlling that trade also controls the company providing the services

 

Need help?

WNL can help you with registering your company for EIS or SEIS, contact us and we’ll have a chat about it!

Contact us about SEIS or EIS!