SEIS Benefits

Seed Enterprise Investment Scheme (SEIS) was introduced to encourage private funding by individuals, or ‘Business Angels’, into early stage trading companies.

The key benefits of SEIS are tax related and allow for a potential 86.5% tax downside protection for 45% rate investors into Seed EIS qualifying companies – this equates to a 13.5p in the £1 potential actual cost of investment for the investor!

Seed EIS investors will receive:

  • 50% income tax relief on SEIS investments regardless of the marginal rate of income tax suffered by the individual – so say a 40% tax-payer would receive 50% tax relief under this scheme
  • Income tax relief carry back to the preceding tax year – note that it cannot be carried back to the 5 April 2012 tax year as SEIS did not exist in that year
  • Capital gains tax exemption on ultimate sale of the shares provided the qualifying criteria are satisfied throughout the minimum 3 year holding period – so shares would be sold ‘tax free’ without restriction
  • 50% Capital gains tax exemption on reinvested gains crystallised in the tax year  – this could save further tax at 14%.
  • Inheritance tax protection after two years
  • Income tax relief on he capital loss suffered on the shares subscribed should the investment fail (restricted by the income tax relief received on investment) – so a potential further 22% for a 45% rate tax payer.

The benefits for investors are clear to see and we expect to see significant activity for early stage companies seeking investment via this Seed Enterprise Investment Scheme.

There are certain features and requirements that both companies and investors should be aware of before proceeding.