Seed enterprise investment scheme
The seed enterprise investment scheme (SEIS) is a government scheme that allows certain reliefs for investors who subscribe for shares in early stage companies. It is intended to complement the enterprise investment scheme (EIS). The rules in many instances mirror those of the EIS.
Investors can receive income tax relief of 50% of the cost of the shares regardless of their marginal rate. Relief is available provided the company meets the SEIS requirements. Investors do not need to be UK resident.
The relief is available for those with a shareholding that does not exceed 30% in such companies and can include directors investing in their companies, although only in certain circumstances and subject to the specific ordering of steps. The relief is limited to £100,000 per investor, with investors able to elect to have all or part the issue of shares treated as though acquired in the previous tax year.
Up to half of the annual amount invested in the SEIS can shelter the gains from CGT. The relief for CGT is only available if some income tax relief has been claimed.
Similar to EIS, relief may be available for any losses made on the disposal of SEIS shares against capital gains tax or income tax and the SEIS shares should qualify for inheritance tax business property relief after two years of ownership.
Your company can use the SEIS to attract investors by offering them ordinary shares. There is a limit of £150,000 on the capital that can be raised using the SEIS. In addition, the company must have not traded for more than two years at the time the payment for the shares is received. In addition, the company must have 25 or fewer employees and gross assets of up to £200,000, which are carrying on or preparing to carry on a new business.
The business must be a UK resident company or have a permanent establishment in the UK.
The company has an overall maximum entitlement to the SEIS investment of up to a total of £150,000 'including' any State Aid funding received prior to the issuing of SEIS shares. State Aid grants therefore reduce the maximum entitlement available under the SEIS.
As with the EIS, the company has to trade in non-excluded activities, for example, not in property development. All SEIS investments will, by definition, meet the requirements of the EIS investments because the SEIS is a subset of the EIS. This means that the new risk to capital requirement applies equally to SEIS investments.