The Seed Enterprise Investment Scheme (SEIS) rules allow some business owners to invest in their own company.
However, it is important to be aware of the restrictions on who can and cannot invest in a specific SEIS. Anyone connected with the company can't claim Income Tax relief within the SEIS.
The main restrictions are as follows:
The interests of the investor’s associates are included in these restrictions. The SEIS legislation defines associates as:
HMRC defines relatives as spouses and civil partners, parents and grandparents, children and grandchildren. So, for example, parents could not invest in their children’s businesses.
However, the list of associates does not include ‘family’ members such as siblings, extended family, partners and in-laws. This leaves an opening for new business owners to seek investment from their extended family. Importantly, these restrictions do not apply to directors who can invest. The rule is that they must not hold a substantial interest in the company.
However, HMRC is likely to closely examine the directors relationship with the company to ensure any investment qualifies under the SEIS rules.
HMRC can withdraw the tax reliefs:
In addition, there is a significant body of anti-avoidance legislation that seeks to stop investments made for tax avoidance purposes.
We look forward to hearing from business owners who would like to know if they qualify to invest under the SEIS scheme.
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