Attract Investment Under the Seed Enterprise Investment Scheme
Attract Investment Under the
Seed Enterprise Investment Scheme
Companies can consider using the Seed Enterprise Investment Scheme (SEIS) to raise money when starting to trade. Income tax and capital gains tax reinvestment relief are available to investors in the Seed Enterprise Investment Scheme (SEIS). The aim of the SEIS is to stimulate entrepreneurship. The company can receive up to £150,000 in SEIS investment. However, a company that has already received investment through an Enterprise Investment Scheme or from a Venture Capital Trust cannot use the SEIS to raise finance.
Any finance received under the SEIS counts towards the lifetime limit of funding from venture capital schemes of £12 million (£20 million for knowledge-intensive companies).To qualify for SEIS investment, the company must meet certain conditions, be no more than two years old, have fewer than 25 full-time equivalent employees, and have assets of less than £200,000. In addition, the company must:
• carry out a qualifying trade;
• be established in the UK;
• not be traded on a recognized stock exchange at the time of the share issue;
• at, the time of the share issue, have no arrangements in place to become a quoted company or the subsidiary of a quoted company;
• not control another company unless that company is a qualifying subsidiary;
• not have been controlled by another company since the date of incorporation.
Tax reliefs are available to attract investors.
Income tax relief is available to investors who subscribe for shares in a qualifying SEIS company. Shares must be held for three years. Tax relief is given at a rate of 50%. The maximum annual investment is £100,000.
Relief is not available if the investor is connected with the company. Capital gains tax relief is available where gains are reinvested in qualifying SEIS shares. Relief is available for 50% of the reinvested gains. The relief is subject to the £100,000 investment cap. Small higher risk companies that meet the requirements of the SEIS should consider using the SEIS to help them raise finance and attract investors.