SEED Enterprise Investment Scheme (SEIS): Are you Ready to Grow?


What is SEIS?

The Seed Enterprise Investment Scheme (SEIS), which is similar to the Enterprise Investment Scheme (EIS), formed part of the Finance Act 2012. This scheme will apply to qualifying share issues which take place after 6 April 2012 and before 6 April 2017.

SEED enterprise investment scheme

What is it for?

Getting funding in the early stages of developing a company is difficult at the best of times, but in the current climate it has proved to be even more of a challenge. To try and kick-start investments in fledgling businesses, therefore, the government announced SEIS, which it believes will encourage development and accelerate growth of more start-ups with the backing of SEIS investors. Government estimates the tax breaks for would-be investors for 2012/13 will be worth £50m, and expects that around 300 fledgling companies will benefit in the first year.

Who makes the investments and what are the incentives for investors?

From April 2012 "armchair" investors and business angels are invited to invest in small start-up businesses for which three generous tax breaks are on offer.

  1. Income tax relief by way of reduction of tax liability of 50 per cent of the cost of the shares, on a maximum annual investment of £100,000;
  2. For the tax year 6 April 2012–5 April 2013 Capital Gains Tax (CGT) relief can be obtained on chargeable capital gains arising from the disposal of an asset made in that tax year and reinvested in the SEIS within the same year (subject to the £100,000 maximum investment);
  3. Any gain on disposal of the SEIS shares after the third anniversary of their issue will be exempt from CGT.

But rules do apply:

  • Neither the investor nor his associates (business and civil partners, parents and grandparents, children and grandchildren) can be an employee of the issuing company at any time from incorporation to the third anniversary of the issue of the shares (but a person who is a director will not be treated as an employee).
  • Directors in the investor company can invest and gain the tax relief too, but they must not have or plan to have a substantial interest in the investment company.
  • The investor must not hold more than 30% of the issued share capital, or voting rights, or rights to its assets in a winding-up of the target company at any time from the date of its incorporation until the third anniversary of the issue of the shares.
  • The shares must be held by the investor for three years after they are issued.

What are the disincentives for investors?

One of the requirements that may put investors off is that in order to qualify for SEIS investors must invest in ordinary shares or preference shares fully paid up in cash. These shares have limited rights (as opposed to preferential rights). It is hoped that the generous tax relief element of the scheme will entice investors regardless.

There are also many pitfalls when identifying the right start-up company to invest in; start-ups are considered high-risk investments, having a three-year survival rate nationally of 64.7%.

How do small businesses qualify for the scheme?

  • The total (not annual) amount of SEIS investments made into the company must not exceed £150,000; this must be spent within three years by the investment company;
  • Companies looking for investment must be carrying out a trade started within the previous two years;
  • The purpose of the company must be in a qualifying trade (which are most trades conducted on a commercial basis; for a full list of excluded trades see the HMRC EIS manual), and be a genuine new venture;
  • The company must not be controlled by another company nor be a member of a partnership;
  • The company’s assets must not exceed £200,000 immediately before the shares are issued;
  • The company must have fewer than 25 employees;
  • All of the money raised by the investment must be spent by the issuing company for the purposes of its qualifying business activity within three years after the shares are issued.

In our view at DNS, SEIS could be a great incentive to investors, and a big help to start-ups, but it will take a few years to see the results. If you are thinking of either investing or applying for investment, please contact DNS first so that we can help you consider all the options and help you make the application.

Best wishes,

The DNS Team

Speak with an expert

Any questions? Schedule a call with one of our experts.

About the author
Blog Author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.

  • Book a free consultation
Receive accounting news and updates in your inbox

About the author
Blog Author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.


See how dns can help
you today.

Save tax
Save tax

Our experts will work with you to reduce your corporation, personal or any other tax liability, all within the rules of the UK tax legislations. We’ll ensure you’re claiming all allowances and expense claims that you would be elegible for.

Reduce your admin
Reduce your admin

We give free software to all of our clients. You’ll be able to raise sales invoices, snap pictures of receipts and be MTD compliant with ease. You can even manage your business anywhere there’s an internet connection, thanks to our mobile app!

Grow your business
Grow your business

Successful business owners are those that are on top of their numbers. Businesses are driven by the numbers behind them. If you’re not reviewing your profit & loss or balance sheet regularly, how would you know how your business has performed and how would you make proper business decisions? We can help you make sense of your numbers.

Free Business Software!

Limited time only!

Free Business Software

Say Goodbye to Bookkeeping Hassles: Nomi offers Free Receipt Processing and big savings!

  • Built in payment solutions.
  • Track profitability, debtors and creditors
  • Snap pics of receipts with the mobile app
  • Free Receipt Processing
  • Hasslefree Bookkeeping
  • Cost Reduction
Get Started
Close nomi