- Your company can raise money under the Seed Enterprise Investment Scheme (SEIS) when it is ready 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.
- Creating Seed Enterprise Investment Scheme is intended to boost the UK economy by encouraging entrepreneurship and business expansion.
The following are the rules that apply to firms that qualify for Seed Enterprise Investment Scheme:
- Seed Enterprise Investment Scheme 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 mustbe, 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 subsidary, 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 Seed Enterprise Investment Scheme investment.
- Importantly, Qualifying companies will be able to raise up to £150,000 under the scheme. A qualifying deal must be completed within three years of receiving the funds.. Or in research and development that is likely to lead to a qualifying transaction, or in preparing to carry out a qualifying trade.
- Companies can qualify in certain circumstances if they have subsidiaries.
- In addition to age, trades’ age is a measure of eligibility. The company did not have any deals at the time of this share issue. At the time of the incident, the business or individual conducting the trade had to be less than two years old.
- 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 % subsidary that uses the money for a qualifying business activity.
New qualifying trade
- If the firm already does a qualified trade, it must have been done for no more than two years by the company or by anybody else who later transferred it to the company.
- The company, or any qualifying subsidary, 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.
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