The Seed Enterprise Investment Scheme (SEIS) was launched on 6 April 2012 by the then Chancellor, George Osborne to encourage investment in new start-ups. The scheme was made permanent in 2014.
The SEIS provides for extensive Income Tax and Capital Gains Tax breaks for investors to encourage investment in new businesses. However, outside of the professional investment sector, the SEIS could do with some promotion to make more investors aware of the many benefits of the scheme. There are also many businesses that could benefit from the SEIS but are unaware of its existence.
A taxpayer investing in a SEIS can benefit from the following valuable tax breaks:
- Income Tax relief worth 50% of the amount invested to qualifying individual investors on a maximum annual investment of £100,000.
- Exemption from Capital Gains Tax on disposals of SEIS shares that have been held for three years.
- A 50% exemption from Capital Gains Tax on gains reinvested within the scope of the SEIS.
- Availability of loss relief that can be set against the taxpayers’ income or capital gains.
These tax breaks offer investors the opportunity to make an investment in a potentially profitable start-up whilst at the same time providing tax breaks that reduce the full impact should the business fail or make a loss. It is important to note that the reliefs are only available where there is sufficient liability against which to set it.
The government is also launching a consultation, streamlining and prioritising the advance assurance service. This should help businesses to attract investment. There have also been words from within the investment community to increase the amount invested in a start-up. The current limit of £150k that can be raised by a company is small. Doubling of the limit to £300k would help more start-ups to benefits. The Enterprise Investment scheme (EIS) also encourages investment in smaller, unquoted, trading companies but the limits are significantly larger than for the SEIS.
The main tax relief for investors comes in the form of Income Tax relief of 30%. The maximum annual amount that an individual can invest through the EIS is significantly greater at £1 million.
If you would like to find out more about SEIS we would be more than happy to arrange a free no obligation meeting with you at your office.