SEIS is one of the schemes which is designed to help small or medium-sized companies. This Venture capital scheme is designed to attract investment. They offer tax reliefs to individuals who buy and hold new shares, bonds, or assets for a specific period. This helps the small business to have the fund from the investor and use it to grow the business.
Any business can receive a maximum of £150,000 through SEIS investments. This will:
- include any other de minimis state aid received in the 3 years up to and including the date of the investment
- count towards any limits for later investments through other venture capital schemes
There are certain conditions that must be met to qualify for SEIS Shares and the condition are:
- carries out a new qualifying trade
- must be less than two years old since the time of investment
- is established in the UK
- is not trading on a recognized stock exchange at the time of the share issue
- has no arrangements to become a quoted company or a subsidiary of one at the time of the share issue
- does not control another company unless that company is a qualifying subsidiary
- has not been controlled by another company since the date of your company being incorporated
Your company and any of its subsidiaries must:
- not have gross assets over £200,000 when the shares are issued
- not be a member of a partnership
- have less than 25 full-time equivalent employees in total when the shares are issued
Tax reliefs will be withheld or withdrawn, from your investors if you do not follow the rules for at least 3 years after the investment is made.
What are the Qualifying trades?
Most trades will qualify, including any research and development which will lead to a qualifying trade. However, your company may not qualify if more than 20% of your trade includes things like:
- coal or steel production
- farming or market gardening
- leasing activities
- legal or financial services
- property development
- running a hotel
- running a nursing home
- generation of energy, such as electricity and heat
- production of gas or other fuel
- exporting electricity
- banking, insurance, debt, or financing services
Type of Share
The shares you issue must be paid up in full, in cash, when they’re issued. Your company should have a way to accept payment before shares are issued.
Your shares for SEIS investments must be full-risk ordinary shares which:
- are not redeemable
- carry no special rights to your assets
The shares you issue can have limited preferential rights to dividends. However, the rights to receive dividends cannot be allowed to accumulate or allow the dividend to be varied.
When you issue the shares there cannot be an arrangement:
- to guarantee the investment or protect the investor from risk
- to sell the shares at the end of, or during the investment period
- to structure your activities to let an investor benefit in a way that’s not intended by the scheme.
- for a reciprocal agreement where you invest back in an investor’s company to also gain tax relief
- to raise money for the purpose of tax avoidance – the investment must be for a genuine commercial reason.
Seed Enterprise Investment Scheme (SEIS), encourages investment in qualifying new seed-stage companies by providing individuals with income tax relief at a rate of 50% on the value of the investment. You can only invest up to a maximum of £100,000 into SEIS qualifying companies in each tax year.
In addition to this, investors can also benefit from CGT reliefs within SEIS. Reinvestment relief allows individuals to reinvest any chargeable gains from the disposal of any asset into SEIS shares. This allows for the deferral of CGT which will crystallize on the disposal of SEIS shares. Individuals are then also able to treat up to 50% of the chargeable gain as totally exempt from CGT and the remainder crystallizes on the disposal of the SEIS shares.
As long as SEIS shares are held for at least 3 years, you will not have to pay CGT on the disposal of SEIS shares. If you make a loss on the disposal, you can set this against your chargeable gains or income.
Other types of venture capital
There is other venture capital such as :
- The Enterprise Investment Scheme (EIS)
- Social Investment Tax Relief (SITR)
- Venture capital trust (VCT)
The maximum amount you can raise in the lifetime of your company for:
- SEIS investments is £150,000
- SITR investments is £1.5 million
- EIS and VCT investments is £12 million.
The following table summarised the benefit for an investor
|Eligibility||No more than £ 15 million in Gross Assets||No more than £ 15 million in Gross Assets||No more than £ 200,000 in Gross Assets|
|Less than 250 Employees||Less than 250 Employees||Less than 25 Employees|
|No more than 7 years since first Commercial Sale||No more than 7 years since first Commercial Sale||No more than 3 years since first Commercial Sale|
|Holding Period||3 Years||5 Years||3 Years|
|One year Carry back||Yes||No||Yes|
|Capital Gains tax||Gains excempt after 3 years||Gains exempt||Gains excempt after 3 years|
|Capital gains tax deferral Relief||Yes||No||No|
|Capital gains tax holiday||No||No||Yes|
Get in touch with our team today to find out more.At Outsourced ACC, we helped many businesses in order to undergo the whole process. If your company is either a start-up or has been there for a few years and seeking investment to grow, we can help you to structure the plan, so that it attracts more investment. Few of our client has made substantial growth in their business through these.How can we help