If you need to know how to claim EIS income tax relief and enjoy what is...
The rules for both the EIS and SEIS schemes clearly state the eligibility requirements for using the schemes.
Raising finance is not just a matter of meeting the eligibility requirements. You also have to ensure that your business can attract investors. However, the two work together. A company eligible for EIS or SEIS will be a more tempting investment opportunity.
The main conditions that a company must meet in order to obtain SEIS/EIS qualifying status are:
- The maximum amount of funds that a company can raise through investments qualifying for SEIS is £150,000. Under the EIS the maximum is £5m in any 12 months with a maximum of £12m over the lifetime of the company. There are higher limits for ‘knowledge-intensive’ companies.
- There is a maximum limit on the number of employees that the investee company can have when shares are issued. The company must have less than 25 full-time employees for the SEIS and less than 250 full-time employees for the EIS or their part-time equivalents. For groups of companies, the limit applies across the group. Again, there are higher limits for ‘knowledge-intensive’ companies.
- The company’s gross assets (or of the group assets where the company is a parent company) must be less than £200,000 at the time of a relevant SEIS share issue. For the EIS, the company must not have gross assets worth more than £15 million before any shares are issued and not more than £16 million immediately afterward.
- There are also time limits as to when investments can be raised by the company and how and when the money must be spent.
- The company cannot have received any investment under either the EIS or VCT scheme before using the SEIS to raise investment. However, the SEIS compliments the other schemes and further investment can be raised using the EIS or VCT scheme after the SEIS.
Pre-Approval & Advanced Assurance
We would always recommend getting pre-approval from HMRC. Technically, it is just an assurance based on the information that you present to them. But it's still a good indication as to whether your company qualifies. Advance assurance service from HMRC is a discretionary, non-statutory, service.
Since January 2018, HMRC no longer provides advance assurance on speculative applications. This leaves some start-ups in a Catch-22 situation where it can be hard to attract investment without advance assurance. However, HMRC does not require the company to have formalised offers of investment. Rather, it must have some potential investors on board who are likely to invest if you get advance assurance.
We would be happy to discuss any questions you may have, contact us now.