SEIS Features

What is SEIS?

The Seed Enterprise Investment Scheme (SEIS) was introduced with effect from 6 April 2012 to encourage investment by private individuals, or ‘Business Angels’, into early stage trading companies.

SEIS offers investors mouth-watering tax incentives with a potential for an effective upfront tax rate saving of 64%.

This is a great opportunity for new companies to access much needed funding at a time when traditional sources of funding are limited.

SEIS key requirements

  • The investee company must have been trading for less than two years and must either be undertaking a new qualifying trade or be preparing to undertake one (there are certain trades that are disqualified such as property investment, legal, accountancy, amongst others)
  • The investee company must have 25 employees or fewer and gross assets of £200,00 or less (pre-investment)
  • The company can only raise up to £150,000 under SEIS in total
  • Investors are limited to up to £100,000 SEIS investment per tax year – the income tax relief can be carried back to the prior tax year (except for investments made in its first year to 5 April 2013)
  • Shares must be subscribed for cash and shares must be ‘full risk’ ordinary shares
  • Investors cannot control the company nor have a ‘substantial interest’ – ‘substantial interest’ for these purposes is more than a 30% shareholding
  • The company must continue to carry out its qualifying activities for three years otherwise the investors’ tax breaks will be forfeited
  • Each SEIS company must request the necessary tax certificates from HM Revenue & Customs for the investors to be able to claim their personal tax breaks – a formal request cannot be made until 70% of the cash has been spent or within 4 months of the qualifying trade, whichever is earlier
  • Companies can request advance assurance from HM Revenue & Customs that they are qualifying SEIS companies before seeking investment – many investors will expect to see evidence of qualifying SEIS status from HM Revenue & Customs before investing
  • A company can follow on with EIS funding after 70% of the SEIS funding has been spent for share issues pre 6 April 2015
  • Additional restrictions and requirements apply that go beyond the scope of this brief summary.

You should seek professional specialist SEIS advice specific to your circumstances from a qualified accountant, ideally a professional who specialises in advising on EIS / SEIS, before proceeding.