The Seed Enterprise Investment Scheme (SEIS)
The Seed Enterprise Investment Scheme (SEIS) is designed to help your company raise money when it’s starting to trade. It does this by offering great tax-efficient benefits to investors in return for investment in shares in small and early-stage start-up businesses in the UK.
SEIS was designed to boost economic growth in the UK by promoting new enterprise and entrepreneurship.
The rules governing qualifying companies for SEIS are summarised as follows:
- SEIS tax relief applies only to recently incorporated companies
- The individual investor can be a director of the company, but not an employee
- In order to qualify for the SEIS, a company must be, undertaking, or planning to undertake, a new business, established in the UK with fewer than 25 full-time employees, not trading on a recognised stock exchange, having no arrangements to become a quoted company or a subsidiary of one at the time of the share issue, not in control of another company unless that company is a qualifying subsidiary, not a member of a partnership, not controlled by another company since the date of its incorporation and have gross assets of not more than £200,000 at the time of the SEIS investment.
- Qualifying companies will be able to raise up to £150,000 under the scheme, and the funds raised must be used within three years on a qualifying trade or in preparing to carry out a qualifying trade or in research and development that’s expected to lead to a qualifying trade.
- Companies can qualify in certain circumstances if they have subsidiaries.
- Eligibility is determined by reference to the age of the trade, rather than the company. Any trade being carried on by the company at the date of the relevant share issue must be less than two years old at that date, whether the trade was carried on by the company or another person.
- If you’ve received investment through the Enterprise Investment Scheme (EIS) or from a venture capital trust, you cannot use SEIS.
- You cannot use the investment to buy shares unless the shares are in a qualifying 90% subsidiary that uses the money for qualifying business activity.
New qualifying trade
If the company is already carrying out a qualifying trade, it must not have been carried out for more than 2 years by either the company or any other person who then transferred it to the company. The company, or any qualifying subsidiary, must not have carried out any other trade before it started the new trade.
Role of HMRC
When you’ve issued your shares, you must complete a compliance statement (SEIS1) and send it to HMRC. You can only submit your compliance statement when you’ve carried out your qualifying business activity for 4 months, spent at least 70% of the amount raised by the relevant share issue. You must complete a separate application for each share issue.
By way of advance assurance, you can ask HMRC if your share issue is likely to qualify before you go ahead. If your application is successful, HMRC will send you a letter and compliance certificates (form SEIS3) to give to your investors with a unique investment reference number which the investors will need to claim tax relief. If your application is unsuccessful HMRC will write to you explaining why. You then have an option to review or appeal against the decision.
For expert assistance regarding SEIS, EIS, advance assurance or funding your business contact email@example.com or WhatsApp us on 07583452230 and we can connect you to the right professional. Visit www.bizlawuk.co.uk to find out more about how we can help you with our other services. If you find this information useful, please follow our social media platforms, like and share.