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There are huge benefits to SEIS & EIS for investors and benefits of using the specialist
dns team to advise you, here’s just a few of them…
Our leading SEIS and EIS experts can advise you on investing and also if you’re a start-up or early stage business can advise on if you’d qualify for this funding. Our services include:
Do you need an advice on SEIS / EIS from leading experts who can advise on all aspects of these schemes? Give us a call today on 03300 886 686 to speak to our advisors, we'll find the right solution to all R&D needs.
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For businesses looking for investment to help them achieve their medium to long-term growth plans, usually shares are provided in the company for exchange of cash and must be paid up in full when they are issued and likewise, in order to receive investment under SEIS or EIS, the funds received must be spent for a qualifying business activity.
SEIS is focused on very early-stage companies which are looking to raise up to £150,000 of investment. It’s worth noting that your company should be carrying out a qualifying trade and it must not have been carried out for more than 2 years by either your company or any other person who transferred it to your company.
EIS is aimed at businesses in the growth stage, and a company can raise investment of up to £5 million each year, and a maximum of £12 million in a company’s lifetime. If you have already received investment from the other venture capital schemes, it will count towards your £5m or £12m as per the prescribed limit and your shares for EIS investments must be ordinary shares which are not redeemable and carry no special/preferential rights to your assets or dividends.
Each investment scheme has their additional qualifying criteria such as your business segments, how many full-time employees you employ and the value of your gross assets. You will need to meet these criteria before you apply for advanced assurance from HMRC to issue shares under either of the schemes.
Point to consider- when you are planning to raise funds under SEIS and EIS both, it is vital that SEIS shares are issued before EIS shares. Practically, it means a company needs to issue SEIS share certificates first, or date them appropriately before issuing EIS share certificate and it could be as early as one day.
SEIS offers tax generous reliefs to investors including:
EIS tax benefits for investors include:
Ricky is a higher rate taxpayer. In April 2016-17, Ricky has a capital gain of £80,000 from selling a property. He invested the whole gain into a new SEIS qualifying company. In 2020/21 he disposes of his SEIS shares for £200,000, generating a profit of £120,000.
Taxation benefits in 2016-17:
Income tax relief - £40,000 (£80,000 x 50%)
CGT reinvestment relief - £11,200 (50% x £80,000 x 28%)
Tax Benefits in 2020-21
Provided that all the qualifying conditions have been met, his CGT of £24,000 (£120,000 x 20%) will be fully exempt.
In the above example, the whole of £40,000 gain (circa £11,200 CGT) becomes exempt from CGT because of the reinvestment relief.
In April 2016-17, Ricky had a capital gain of £80,000 from selling a property He invested £100,000 in 2016-17 into an EIS approved company. In 2020/21 he disposes of his EIS shares for £200,000.
Taxation benefits in 2016/17:
Income tax relief – £24,000 (£80,000*30%)
CGT deferral relief - £22,400 (28% x £80,000*100%)
Taxation benefits in 2020/21:
Provided that all the qualifying conditions have been met, his CGT of £24,000 (£120,000 x 20%) will be exempt whereas the taxes on gains made on property in 2016/17, which he deferred crystallises, but taxed at 20% instead of the 28% and he has to pay £16,000 in CGT.
In the above example, the whole gain of £80,000 is deferred initially but becomes payable when the shares are sold and taxed at a reduced rate of 20% compared to 28% tax on residential properties.