The Seed Enterprise Investment Scheme (SEIS)
At SMH Chartered Accountants, our expert staff are on hand to assist with all tax responsibilities. We offer a range of services to help you manage your taxes and can help you with the Seed Enterprise Investment Scheme (SEIS)
What is the Seed Enterprise Investment Scheme (SEIS)?
SEIS relief is very similar to The Enterprise Investment Scheme (EIS)
The SEIS allows individuals to invest in new businesses and receive significant tax benefits in return. Investors can claim up to 50% income tax relief on investments of up to £100,000 per tax year. This means that if an individual invests £10,000 in a company that qualifies for SEIS, they can claim £5,000 in income tax relief.
In addition to income tax relief, SEIS investors can also claim capital gains tax relief. This means that if they sell their SEIS shares after three years, any gain will be exempt from capital gains tax.
To qualify for SEIS, the company must be a UK-based, unquoted company that has been trading for less than two years. The company must also have fewer than 25 employees and gross assets of less than £200,000. Additionally, the company can raise a maximum of £150,000 through SEIS investments.
The key differences are outlined in the table below:
Condition | Enterprise Investment Scheme (EIS) | Seed Enterprise Investment Scheme (SEIS) |
---|---|---|
Income tax reduction | 30% of investment | 50% of investment |
Reinvestment relief | Capital gains can be deferred by investment | Reinvestment exempts half of the capital gains |
Maximum annual investment per investor | £1m | £100k |
Maximum investment per company | £5m from all schemes in any 12 month period; £12m (total) for all companies except for knowledge-intensive companies where the limit is £20m (total)* | £150k |
Age of company | Must be less than 7 years old on receipt of first investment with exceptions for knowledge-intensive companies and follow-on funding. | Less than two years old; company must not have previously carried on a trade |
Maximum number of full-time equivalent employees | Fewer than 250 full-time equivalent employees. | Fewer than 25 full-time equivalent employees. |
Balance sheet gross assets limit: | £15m before and £16m after | £200k before investment |
Date of incorporation: | No restriction | No restriction |
Purpose of investment: | Must be for a qualifying trade | Must be for a new qualifying trade |
Previous investment: | No impact | The company must not previously have received investment under EIS or VCT |
Compliance certificates to enable relief to be claimed: | Can be issued 4 months after trading commences | Can be issued when 70% of the money raised has been spent on qualifying activities or after 4 months trading |
Use of money: | Money raised must be used for qualifying activity within two years | Money raised must be used for qualifying activity within three years |
Directors: | Paid directors (generally) excluded | Paid directors not excluded |
How can SMH Group help?
Our experienced tax advisers can assist with all aspects of SEIS, from determining eligibility to providing guidance on the application process. We can also advise on how SEIS can fit into a wider tax planning strategy and provide ongoing support to ensure compliance with SEIS regulations.
If you are considering investing in a small, early-stage company, SEIS could provide significant tax benefits. Contact the SMH Chartered Accountants team on info@smh.group or 0114 266 4432 to learn more about The Seed Enterprise Investment Scheme and how we can help you.