The SEIS scheme has been designed to help small new start-ups attract investment by offering tax reliefs to individual taxpayers that purchase new shares. There are a number of conditions that must be met in order for a company to be able to benefit from using the SEIS. The SEIS scheme helps new small unquoted companies raise equity finance.
The following points outline some of the important SEIS company requirements for using the scheme:
- The company’s gross assets (or of the group assets where the company is a parent company) must be less than £200,000. HMRC’s general approach is that gross assets, means all the assets which would be shown on the balance sheet, without any deduction in respect of liabilities.
- The company must be trading for less than two years.
- The company must have a permanent establishment in the UK as defined under the SEIS rules.
- The company must carry on a genuine new trading venture.
- The company must be carrying on a qualifying business activity. Whilst the definition of a qualifying business activity is wide, activities such as property development, operating or managing hotels and nursing homes and farming will not qualify beyond de minimis
- The maximum amount of funds that a company can raise through investments qualifying for SEIS is £150,000. This includes any State Aid funding received prior to the issuing of SEIS shares.
- The company must not be in financial difficulties.
- 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 or their part-time equivalents. For groups of companies, the limit applies across the group.
- Neither the issuing company nor any qualifying 90% subsidiary may be a member of a partnership.
- 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.
Once the company has satisfied all the necessary requirements, an application must be made to HMRC for the certificates.
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