Enterprise Investment Schemes (EIS) and Seed Enterprise Investment Schemes (SEIS) are investment schemes designed to encourage investment in small or medium sized companies. They do this by offering tax reliefs to individual investors who buy new shares in your company.
To access the SEIS tax relief and EIS Tax Relief schemes, an investor needs to invest in the shares of a small, unlisted company. ‘Small’ means a company of 250 employees or less, with maximum gross assets of £15 million (before the investment). ‘Unlisted’ means that the company is not quoted on a major stock market, although it can be quoted on a market for smaller companies like AIM.
The two schemes are similar, but have some important differences.
SEIS is focused on very early-stage companies, and allows an individual to invest up to £100,000 per tax year and to receive a 50% tax break in return. The investor will also benefit from a capital gains tax exemption on any profits that arise from the sale of shares after three years.
EIS, focuses on medium sized start-ups. It allows an individual to invest up to £1 million per tax year and to receive a 30% tax break in return. As with SEIS, the investor will also pay no capital gains tax on any profit arising from the sale of the shares after three years.
With both SEIS and EIS, there is no inheritance tax to pay on shares held for at least two years. Finally, if shares are eventually sold at a loss, the investor may offset the loss against their capital gains tax.
In order for an investor to benefit from EIS or SEIS, the company that they are buying shares in needs to qualify for these schemes. By applying for Advance Assurance from HMRC, companies can demonstrate that they will qualify for EIS or SEIS and therefore make themselves more attractive to potential investors.
EIS and SEIS Advance Assurance enables companies to receive a provisional indication from HMRC whether they may be eligible to apply for tax relief for their investors. Advance Assurance was introduced by HMRC as full SEIS/EIS eligibility can only be granted by them after the investment has been made.
We support business in claiming through both the Enterprise Investment Schemes (EIS) and Seed Enterprise Investment Schemes (SEIS). Please contact us for further information.