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Seed Enterprise Investment Scheme (SEIS) Refresher

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In this video, we cover the following areas:

What is SEIS?

“Seed Enterprise Investment Scheme”
UK Government tax incentive to help encourage individuals to invest cash into early stage UK companies by giving tax reliefs to the qualifying investors
Must be investment in new issue of ordinary shares for cash (not loans) with no preferential rights

Who benefits from SEIS?

The investor(s) receives direct tax benefits
The company receives indirect benefits i.e. willing investors!

Why is SEIS important?

Most investors will expect you to qualify for SEIS before investing
The tax benefits of SEIS make up for the illiquidity of investing in a private limited company (versus, say, the stock market)

Who is SEIS for?

Vast majority of UK startups (top co)
UK company that has been trading for less than 3 years (Note: incorporation date is irrelevant)
Less than 25 employees and total (gross) assets of less than £350,000
Must NOT be undertaking “excluded activities” to any substantial extent.

Who is SEIS NOT for?

Companies that have been trading for more than 3 years
Companies that have acquired the business that is > 3 years old
Companies that have previously carried on another trade
Companies that are subsidiaries or under the control of another company
Companies that have already raised funding under EIS
Companies that are capital intensive (potentially) and/or excluded activities heavy
“Slimline” companies
Lifestyle businesses

How much can I raise under SEIS?

Up to £250,000 (from £150,000)
Can follow-on / top up with EIS

What are the SEIS tax benefits?

50% income tax relief
CGT-free sale (after 3 years)
IHT benefits
Potential reinvestment relief for capital gains

What are the downsides of SEIS?

Massively complex rules
Form-filling - compliance statement etc
Need to stay compliant for 3 years
Managing investor expectations for exit
Investment limits are relatively low so normally need to combine with EIS (added complexity)

Disclaimer

This is a very high level refresher of the SEIS rules which are highly complex. Please reach out for professional advice specific to your circumstances.


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