For more information call
Call today to speak to the team
+44 (0) 20 7422 1800

The SEIS Scheme

Home/EIS/The SEIS Scheme

What Is The SEIS Scheme?

The SEIS scheme, otherwise known as the Seed Enterprise Investment Scheme, is one of four venture capital investment schemes designed to help small companies to raise money when they begin to trade. seed investment tax relief is offered to individual investors, who then buy new shares in the company. For investors to claim and keep the seed investment tax relief related to their shares, there are a variety of rules that must be followed.

The Seed Enterprise Investment Scheme tax relief allows you to claim up to £100,000 invested through the scheme per annum, meaning you could receive reliefs covering 78% of your investment or more.

Benefits of SEIS

There are many benefits to SEIS including:

  • Income Tax Relief– Investors will benefit from income tax relief on the amount invested at 50%, regardless of the rates at which they actually pay tax on their income, up to a maximum annual investment of £100,000. The shares must be held for at least three years from the date of issue or the relief will be withdrawn.
  • Capital Gains Tax Reinvestment Relief– The relief will take the form of a 50% exemption from CGT where an individual realises a gain and invests the gain into qualifying SEIS shares. There is no limitation on the type of asset that may be disposed of. The £100,000 investment limit which applies for income tax relief also applies for reinvestment relief. Please note that the investment in SEIS shares can take place before disposal of the asset. This is a full exemption rather than the deferral of CGT that is available under the EIS. Previously the availability of this relief was only temporary, but the 2014 Budget made the capital gains tax relief for re-investing chargeable gains in SEIS shares permanent.
  • Capital Gains Tax Exemption– This works in exactly the same way as for EIS investment on profits made after the shares have been held for over 3 years and income tax relief has not been withdrawn.
  • Loss Relief– This works in the same way as for Enterprise Investment Scheme investments save for the fact that as the income tax relief is increased under SEIS, the overall investment protection is 72.5p in the £1 for a 45% tax payer if the investor realises a total loss and has not reinvested capital gains.
  • Inheritance Tax Exemption– This is the same as for EIS investments.

Seed Enterprise Investment Scheme Tax Relief

SEIS tax investment relief of up to 86.5% * is available for investments in new small companies under the Seed Enterprise Investment Scheme (SEIS). However, as SEIS applies to high investment risks, it’s imperative to note that the SEIS scheme will not suit all investors. The Seed Enterprise Investment Scheme is similar to the existing Enterprise Investment Scheme (EIS) but is targeted at companies whose trade is not more than two years old and have not carried out any other trades previously, unlike EIS Shares.

Introduced in 2012 by HMRC, the SEIS scheme provides several tax reliefs for investors, including automatic reductions and capital gains avoidance. However, this can depend on your tax bracket, so be aware of the bracket you are in. [* Assuming CGT at 28% and highest rate income tax.

How Does The SEIS Scheme Work?

The company’s gross assets before the issue of the Seed Enterprise Investment Scheme shares must not be more than £200,000 and the number of its full-time equivalent employees must be less than 26. The company must have a permanent establishment in the UK and not have benefited previously from EIS or Venture Capital Trust (VCT) investment. Directors, but not employees, will be able to invest in their own companies provided they own less than 30% of the company’s shares.

To comply with the European Commission’s state aid rules, the company must meet a ‘financial health requirement’ at the time the shares are issued; and SEIS scheme investment cannot be used to rescue a company in difficulty. A company will be able to raise up to £150,000 in total. There must be no pre-arranged exit for investors and the company’s trade must be a genuinely new venture. The Seed Enterprise Investment Scheme will last five years.

Which Companies Can Use The SEIS Scheme?

Providing that your company complies with the following, your business can use the SEIS scheme:

  • If your company hasn’t been controlled by another company since it was incorporated.
  • It was established in the UK.
  • If your company carries out a new qualifying trade.
  • Your company isn’t trading on a renowned stock exchange at the same time of the share issue.
  • At the time of the share issue, the company isn’t looking to become a subsidiary or quoted company.
  • The company doesn’t controls another company, unless the company is a qualifying subsidiary.

If you would like more information about the SEIS scheme, don’t hesitate to contact our team at CSS Partners. We have been raising alternative investment capital for private companies for over 18 years, helping you to make an informed decision regarding convertible loan notes, EIS shares and venture capital.

Claiming Your Seed Enterprise Investment Scheme Tax Relief & Eligibility

To qualify for SEIS you must be a taxpayer at the time of investment. There are 2 main restrictions for eligibility relating to whether you are connected to the company or become connected during the period of your investment:

  • Connection by financial interest. This means you aren’t eligible if you control the company or hold more than 30% of the share capital or voting rights.
  • Connection by employment. If you are an employee or partner of the company, you are therefore not eligible.

    • Before you can claim SEIS tax relief you must have received a SEIS3 form from the company in which you have invested. This form confirms the amount of money you have invested and stated that the investment is eligible for tax relief.

    A company is issued SEIS3s by the Small Companies Enterprise Centre (SCEC) which is a part of the HMRC once it has been trading for four months or if it’s spent 70% or more of its total investments. The company then passes this form on to each investor who then completes and submits it as part of their tax return.

    Seed Enterprise Investment Scheme tax relief can be claimed up to 5 years after the 31st January for the year in which the SEIS investment was made.

     

    Frequently Asked Questions

    What is the purpose of the SEIS Scheme?

    Known as the Seed Enterprise Investment Scheme, the SIES scheme is a form of venture capital investment that is in place to support new businesses. When an investor buys shares in a start-up company, seed investment tax relief is offered to them up to 86.5%.

    What is the different between the SEIS scheme and the EIS scheme?

    Although similar, the SEIS scheme is aimed at new businesses that have been trading for less than two years and have not carried out any other trades. The criteria for each are different, with EIS shares supporting more established businesses and allowing higher investments.

    What is the criteria for a SEIS scheme investment?

    Various requirements must be met to ensure that a company is eligible for the SEIS scheme. If looking to invest in a new business, the company’s gross assets cannot exceed £200k and they must not have benefited from any other forms of investment in the past.

    How much can be invested into an SEIS scheme?

    Anything up to £150K can be invested through the SEIS scheme. If anything over this is required for a company, the EIS scheme is a more suitable route and a professional at CSS Partners will be able to discuss this option.

    How much can be invested into an SEIS scheme?

    SEIS shares are treated just like any other shares that you buy on the stock market. Therefore, when you die, they form part of your estate and can be passed on to whomever you choose. However, there is one small difference: SEIS shares could be IHT (inheritance tax) free.

    If your death occurs within three years of your investment, there is no clawback of any of the tax reliefs. However, IHT relief might only be available if the shares have been held for at least 2 years. Any beneficiary who gains ownership of the shares won’t benefit from any seed investment tax relief, so capital gains tax might be due on any gain compared with the value at the date of death.

    To discover what CSS Partners can do for you call 0207 422 1800 or

    Contact Us

    • The level of tax treatment depends on your individual circumstance. Tax breaks exist under current legislation and are subject to change. EIS/SEIS approval cannot always be guaranteed, or on the assumption that EIS/SEIS relief is actually obtained, there is no certainty that companies will continue to qualify for such relief in the future. Investment in private companies carries a high risk: it is highly speculative and there is no recognised market for these shares. Investors in private companies must have no need for liquidity and must be able to withstand a total loss of investment. Past performance is not an indication of future performance and investments may go down as well as up. Private equity investment and certain investments offered by CSS Partners are not suitable for all investors.

      This document has been prepared and issued by CSS Partners LLP (“CSS Partners”) and has been approved for publication in the United Kingdom by Charles Street Securities Europe LLP (CSS), which is authorised and regulated by the Financial Conduct Authority in the UK. CSS Partners is an appointed representative of Charles Street Securities Europe LLP. This document is intended only to give background information on the subject of the report and is a marketing communication as contemplated by the FCA rules.

      In the preparation of this CSS does not have regard to the specific investment objectives, financial situation or particular needs of any specific recipient. This document is published for information purposes and is not to be construed as a solicitation or an offer to buy and sell any securities or related financial instruments. This document should not be regarded by recipients as a substitute for the exercise of their own judgement.

      Although all information contained in this document has been compiled from sources believed to be reliable, we do not guarantee its accuracy or completeness. The report is selective and does not purport to provide a complete survey of the subject.

      No obligation is accepted to provide any recipients with any additional information or to correct any inaccuracies which may become apparent. Any opinions, forecasts or estimates herein constitute a judgement as at the date of this report. There can be no assurance that future results or events will be consistent with any such opinion, forecasts or estimates. This information is subject to change without notice. Investors must make their own investment decision and not rely on this report.

      Neither CSS nor CSS Partners, nor their related entities, directors, employees or agents accept any liability whatsoever for any loss or damage of any kind arising out of use of all or part of these materials. No part of this document may be licensed, distributed, reproduced or sold on in any manner without the written permission of CSS Partners.

      Certain laws and regulations impose liabilities which cannot be disclaimed. This disclaimer shall in no way constitute a limitation of any rights a person may have under such laws and/or regulations.