What is SEIS relief?
The Seed Enterprise Investment Scheme (or more often referred to as SEIS) is a tax incentive scheme initiated by the government in order to encourage lending to early stage businesses.
This can be hugely beneficial for investors whilst also making it easier for companies to attract private funding.
What is in SEIS for the investor?
An investor making a qualifying investment under SEIS can gain up to 50% of income tax relief as well as 28% of capital gains tax mitigation.
This means that an investor can potentially gain up to 78% coverage on their qualifying investment.
What are the rules for a qualifying SEIS investment?
The maximum investment allowed under SEIS into a company is £150k in its lifetime although further investment is allowed under EIS (carrying up to 30% of income tax relief).
The company must have been trading for less than 2 years at the point of investment and cannot have previously have used EIS or a venture capitalist trust. Any single investor may only invest up to £100k in each tax year.
The funds need to be spent by the company within 3 years and the form SEIS 1 cannot be submitted until either;
- It has been trading for at least 4 months; or
- If not yet trading, it has spent at least 70% of the monies raised by the relevant issue of shares.