There are several benefits for the EIS, or Enterprise Investment Scheme, to make this an interesting...
This can result in a 100% inheritance tax relief on the death of the investor (or on certain lifetime transfers). You just need to make sure you held the investment for at least two years.
For more examples on how we use SEIS companies as inheritance trust alternatives then please see our video here. You also benefit from not having to hand over control of your assets, since you'll gain the tax relief as long as you still hold the share assets at death.
For example, let’s look at an investor who invested £100,000 into a SEIS and passed away after making the investment. If the investor died more than two years after the investment date, there should be no inheritance tax liability on the death of the investor.
Wealthy older investors can mitigate their inheritance tax liabilities by investing using the SEIS as part of their estate planning options.
This inheritance tax benefit is not strictly set-out as part of the SEIS scheme. But it is linked to the inheritance tax Business Relief rules. The Business Relief rules generally relate to the ownership of a business, or share of a business included in the deceased estate for inheritance tax purposes. HMRC rules state that Business Relief of either 50% or 100% applies on some of an estate’s business assets, which can be passed on:
- while the owner is still alive
- as part of the will
100% Business Relief can be claimed on a business or interest in a business as well as shares in an unlisted company. The IHT rate is 40% on anything above the current £325,000 threshold. As with any investment, remember that income, capital gains tax and other tax reliefs can make a good investment look even better. Nevertheless, you must still use proper due diligence.
It is also important to remember that for an SEIS investment to qualify both the company and the investors must meet all the necessary requirements.