Enterprise Investment Scheme / Seed Enterprise Investment Scheme

Recent years have seen a major drive from the Government to promote investment from individuals into smaller unquoted companies. The upshot was the Enterprise Investment Scheme, (“EIS”), which provided significant tax breaks for individuals investing in qualifying businesses.

 

More recently, the Seed Enterprise Investment Scheme, (“SEIS”), was introduced providing even more lucrative tax breaks for investing in very early stage companies.

 Enterprise Investment Scheme (“EIS”)

Investors can take advantage of several valuable tax breaks which apply on up to £1M of investment made into eligible companies each year:

  • Income tax relief of 30% of the amount of the investment. This relief can be utilised in the existing fiscal year or carried back one year.

  • Full Capital Gains Tax exemption on shares held for a minimum of three years

  • Loss relief

  • Inheritance Tax exemption on shares held for at least two years

Examples of shares held for at least three years which double in value:

Initial investment (£100,000)

Income Tax relief £30,000

Sales value £200,000

Total Gain £130,000 (TAX FREE)

Companies can raise a maximum of £5M in total in any year provided it has no more than £15M of gross assets and fewer than 250 employees.

 Seed Enterprise Investment Scheme (“SEIS”)

Due to the perceived greater risk of investing in earlier stage companies, SEIS offers even greater tax incentives than EIS:

  • Income tax relief of 50% of the amount of the investment. This relief can be utilised in the existing fiscal year or carried back one year.

  • Full Capital Gains Tax exemption on shares held for a minimum of three years

  • Capital Gains Tax relief of up to 50% if sold within three years but re-invested into another SEIS company

  • Loss relief if company fails

  • Inheritance Tax exemption on shares held for at least two years

Example of shares held for at least three years which double in value:

Initial investment (£100,000)

Income Tax relief £50,000

Sales value £200,000

Total Gain £150,000 (TAX FREE)

As ever, there are many qualifying conditions that have to be met to enable you to take advantage of investing under SEIS and we will gladly guide you through them.

Companies may only raise up to a maximum of £150,000 under SEIS, (although they can continue to raise further monies under EIS if necessary).