Seedrs Blog

Getting to Grips with the Seed Enterprise Investment Scheme

Getting to Grips with the Seed Enterprise Investment Scheme

18th June 2012 by Thomas Davies

It’s relatively rare to get a lawyer excited. About anything. But, the introduction of the Seed Enterprise Investment Scheme (SEIS) in April was a big enough announcement to elicit wide-eyed disbelief and giggles of excitement from me. And yes, I am a lawyer.

SEIS is designed to help small, high-risk companies raise money by offering a range of generous tax reliefs to investors who purchase new shares in them. Seedrs will have a significant number of Seed EIS eligible companies – and any investment made in such companies through Seedrs will be eligible for relief (to the extent that the investors themselves are eligible). So, finding great, Seed EIS eligible companies in which to invest in will be simple.

We thought it would be helpful to lay out a high-level overview of how SEIS works both for startups and investors.

SEIS for Investors
SEIS offers investors a combined tax relief of up to 78%, which includes:

  • Income tax relief of 50% for investments of up to £100,000 per tax year; and
  • For 2012/2013 only, complete relief on any Capital Gains Tax realised during the year if the gains are reinvested in eligible companies (again up to £100,000). With CGT at 28%, this relief plus the 50% income tax relief means you can get up to 78% of your money back.
  • In addition, you won’t pay any CGT on the disposal of SEIS shares if you hold them for three years or more.

SEIS for Entrepreneurs
SEIS was made with early-stage startups in mind. The main eligibility requirements are as follows:

  • The company must be carrying on or planning to carry on a new business and the shares issued within two years after the company’s incorporation;
  • The new business must be a qualifying trade so excludes a number of activities such as property development, leasing, and the provision of legal services;
  • The company must have fewer than 25 full-time employees;
  • At the time of the SEIS investment, the company’s gross assets must not exceed £200,000; and
  • Qualifying companies may raise up to £150,000 under the scheme though the funds raised must be used within three years.

These changes will take effect for any investments made from 6 April 2012 onwards, subject to the scheme receiving Royal Assent which is likely to be in July.

For more information on SEIS check out our SEIS/EIS Comparison Table for a highlight of reliefs and comparison with the Enterprise Investment Scheme (EIS), which suits slightly later stage businesses. And before making an investment, be sure to check with your professional tax adviser to confirm whether that the reliefs apply to you.

Thomas Davies

Thomas Davies

I'm the Chief Investment Officer for Seedrs.

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