Gross assets test and other requirements

A company hoping to raise finance using the SEIS scheme must meet a number of requirements. Some of these apply only at the time the relevant shares are issued. Others must be met continuously, either for the whole of the period from date of incorporation to the third anniversary of the date of issue of the shares, or in some cases, from date of issue of the shares to the third anniversary of their issue. If the company ceases to meet one or more of those conditions, investors may have their tax relief withdrawn.

This includes the following:

  • The company must be unquoted at the time of issue of the shares. AIM and PLUS Markets listed companies are eligible.
  • The company must have fewer than 25 full-time employees (or part-time equivalents). If the company is the parent company of a group, that figure applies to the whole group.
  • The company must have no more than £200,000 in gross assets.
  • The company must not have had any investment from a Venture Capital Trust (VCT), or issued any shares in respect of which it has submitted an EIS compliance statement.
  • The company is restricted as to the amount of money it may raise under SEIS. It may not receive more than £150,000 in total under the scheme.

In this blog we will look in some more detail at the gross assets test which states that the issuing company’s gross assets (per their balance sheet) must not exceed £200,000 immediately before the shares are issued. It is important to note that this test only applies at the time the shares are issued.

A company’s gross assets refers to all the assets without any deduction in respect of its liabilities.If the company is part of a group the £200,000 figure applies to the total gross assets of the group. However, shares held in subsidiaries and loans to subsidiaries are excluded for the purposes of calculating the gross assets figures.

Within 3 years of the date of the relevant share issue, all the monies raised by the SEIS must be spent for the purposes of a qualifying business activity, carried on either by the issuing company or by a 90% subsidiary. If this condition is not met, investors will lose their tax relief. The condition will be considered to be met if an insignificant amount is used for a non-qualifying purpose, or remains unspent.

Give us a call in the office to find out if you meet the requirements to utilise SEIS.