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Seed Enterprise Investment Scheme (SEIS)

Seed Enterprise Investment Scheme (SEIS)

The Seed Enterprise Investment Scheme (SEIS) is a tax relief scheme for start-ups that was introduced in April 2012. As with the Enterprise Investment Scheme (EIS), SEIS provides business angels with a number of powerful incentives to invest in unquoted start-up and early stage companies. These include:

  • Income tax relief – A business angel who invests up to £100,000 (£1m EIS from April 2012) in a qualifying new start-up business can reduce his or her income tax liability by 50% (EIS 30%) of the amount invested in the tax year in which the investment is made. This means the effective cost of investing £10,000 in a SEIS qualifying company is reduced by £5,000 to only £5,000.
  • Capital gains tax reinvestment relief – There is usually a liability to pay capital gains tax for the tax year in which an asset is disposed. Reinvestment relief allows 50% of the gain arising in tax year to be exempt from capital gains tax if the proceeds are used to acquire SEIS shares.
  • Capital gains tax relief – Disposals of qualifying SEIS shares will also be exempt from capital gains tax provided they are held for at least three years.

SEIS is modelled largely on the existing EIS but with the following key differences:

  • There is no restriction on directors investing under the scheme, providing they hold less than 30% of the issued company shares.
  • The maximum amount that a company can raise under the SEIS is limited to £150,000.
  • Investors will not be able to claim the income relief until the company has spent 70% of the share capital raised.
  • The company must use SEIS investment money within three years.
  • SEIS relief is not open to company employees other than directors.

Companies must also:

  • Have less than 25 employees
  • Have gross assets of less than £200,000
  • Be less than 2 years old
  • Not have raised any money from EIS or Venture Capital Trust investors
  • Carry on a genuine new trade.

Should a company be funded under SEIS and subsequently require a further round of funding, the addition equity can be raised under the Enterprise Investment Scheme (EIS), subject to the company meeting the EIS criteria, and without prejudicing the tax reliefs granted to the SEIS round of funding.

Seed Enterprise Investment Scheme
For further information, download HMRC’s introduction to the Seed Enterprise Investment Scheme. Download here (PDF, 758KB).

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