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Many of our clients are asking whether anything significant has changed regarding the SEIS scheme in 2018.
Are there any major changes to the SEIS scheme in 2018? The short answer is ‘no’, meaning that the government is still supporting a widely popular funding option for new companies.
There are a couple of minor changes and clarifications that we'll address now.
One of the recent changes allows investment raising from SEIS to EIS immediately. Previously, you had to wait until 70% of the SEIS finds were spent first. This can give a wider appeal to multiple investors, and make new companies reach for a bigger investment target than previously imagined.
Certainly, conversations can start sooner about getting company funding of more than the £150,000 SEIS threshold. However, there is now a time limit of 12 years since the first commercial sale in which to receive EIS or VCT funding.
The one other change to SEIS may potentially cause a few issues. It is rather vaguely worded and unclear who it is trying to target. It says that investors have to be "independent" from the company at the time of the first share issue.
We contacted HMRC for further clarification. Our understanding, at this moment, is that you can't become a director of the company prior to being given the SEIS shares.
This could impact on who incorporates the company. It may even lead to newly formed companies being scrapped and recreated just to cater for this new rule.
It's hard to see how this rule is an improvement. Investors are already prohibited from benefiting from SEIS tax relief if:
- They hold more than the 30% of the shares, and...
- The company starts to trade prior to the share issue.
We also are pleased that inheritance tax planning is still available. Up to £100,000 per year is now available for SEIS tax relief within two years instead of seven.