The Seed Enterprise Investment Scheme (SEIS)

Is designed to help small, early-stage companies to raise equity finance by offering a range of tax reliefs to individual investors who purchase new shares in those companies. SEIS is intended to recognise the particular difficulties which very early stage companies face in attracting investment, by offering tax relief at a higher rate than that offered by the existing EIS. SEIS applies for shares issued on or after 6 April 2012. The rules have been designed to mirror those of EIS as it is anticipated that companies may want to go on to use EIS after an initial investment under SEIS.

Income Tax relief is available to individuals who subscribe for qualifying shares in a company which meets the SEIS requirements, and who have UK tax liability against which to set the relief. Investors need not be UK resident.

The shares must be held for a period of three years from date of issue for relief to be retained. If they are disposed of within that three year period, or if any of the qualifying conditions cease to be met during that period, relief will be withdrawn or reduced.

Relief is available at 50 per cent of the cost of the shares, on a maximum annual investment of £100,000. The relief is given by way of a reduction of tax liability, providing there is sufficient tax liability against which to set it. The relief cannot be set off against the notional tax credit on dividend income, as that tax credit is not recoverable.

This is the first year of the scheme there are no capital gains tax relief applicable. Though If you sell an asset that gives rises to a Capital Gains Tax liability this can be mitigated by investing up to £100,000.

Criteria

  • It must have fewer than 25 employees. If the company is the parent company of a group, that figure applies to the whole group.
  • It must have no more than £200,000 in gross assets. If the company is the parent company of a group, that figure applies to total of the gross assets of the company and its subsidiaries. Shares in, and loans to, subsidiaries, are ignored for this purpose.
  • The company must not have had any investment from a Venture Capital Trust (VCT), or issued any shares in respect of which it has submitted an EIS compliance statement.
  • The company is restricted as to the amount of money it may raise under SEIS. It may not receive more than £150,000 in total under the scheme. This also take into consideration other State Aid received by the company in the three years preceding the relevant share issue which is de minimis aid according to EU regulations. (HMRC would not expect this to be common and if the company has had any such de minimis State Aid it will have been advised accordingly by the body responsible for administering that aid.) If the relevant issue of shares takes the total over £150,000, then the excess will not qualify for relief.

This guide provides an overview for companies and potential investors. It does not cover all the detailed rules, so companies and investors should not proceed solely on the basis of the information in it, and should consider seeking professional advice.