Capabilities

Tax reliefs and incentives

We advise early-stage and growth-focused UK businesses on how best to attract investors and incentivise management from a tax perspective.

Those businesses that do qualify for one of the three main HM Revenue & Customs approved tax relief arrangements are potentially highly attractive to certain kinds of UK based institutional and high net worth investors.

Businesses that qualify for EMI relief can use EMI options to incentivise management (and compete with larger corporates paying higher salaries).

Skill set

Advance assurance applications for companies and investment managers
Advising on compliance with SEIS, EIS, VCT and EMI requirements
Advising on deal structures from an approved tax relief perspective (including re M&A events, group restructures and investment rounds)
Preparing forms for HM Revenue & Customs

We can help find out if you qualify for one of the tax reliefs:

 



     

    Seed Enterprise Investment Scheme

    SEIS is designed to encourage investment into qualifying seed-stage companies.

    There is potential income tax relief at a rate of 50% on the value of the investment, subject to a maximum of £100,000 of investment per investor per tax year. In addition, investors who are able to claim the income tax relief can also benefit from up to 50% capital gains tax liability relief (up to a maximum of £50,000 on gains which are reinvested in SEIS companies).

    Any gains made on sale of the shares subscribed for under SEIS may also be fully exempt from capital gains tax liability if the shares are held for a minimum of three years. So, gains made on exit may potentially be subject to 0% tax.

    Loss relief is also accessible if the investment fails. So, a loss may be set off against income or other gains made by the investor.

    Strict rules apply to prescribe when a company will qualify for a SEIS investment, including with regard to the company’s balance sheet and number of employees, and there are limits on the amounts a trading company can receive as SEIS investments.


    Enterprise Investment Scheme

    EIS is designed to encourage investment in later-stage qualifying companies.

    There is potential tax relief at a rate of 30% on the value of the investment. In addition, investors can defer a capital gains tax liability up to the value of a qualifying EIS investment until the EIS shares are sold.

    Any gains made on a sale of shares subscribed for under EIS may also be fully exempt from capital gains tax liability if the shares are held for three years. So, gains on exit may be subject to 0% tax.

    Loss relief is also accessible if the investment fails. So, a loss may be set off against income or other gains made by the investor.

    Strict rules apply to prescribe when a company will qualify for an EIS investment, including with regard to the company’s balance sheet and number of employees.

    There are limits on the amounts a trading company can receive as EIS investments, both during a rolling 12 month period and over its lifetime.


    VCT

    Venture capital trusts (VCTs) are public limited companies whose shares are listed on a European regulated market. VCTs raise funds from the public markets to then invest in a portfolio of qualifying trading companies.

    Strict and prescriptive rules apply as regards how VCTs can generate income, the types of investments that they can hold, the use of the sums invested and the age of the trading companies they can invest in (no more than seven years usually, or ten years for a ‘knowledge intensive company’). Funds cannot be returned to the investors in the VCT within three years from the issue of the shares.

    Investors in a VCT can invest up to £200,000 in any one tax year and may qualify for income tax relief on 30% of the amount invested. Dividend relief may then be available on any dividends paid out by the VCT. Capital gains tax relief may be available on a disposal of the shares in the VCT. If the VCT loses its VCT qualifying status then these reliefs may be withdrawn. Strict rules apply as regards when an investor can dispose of the shares.

    Strict rules also apply to prescribe when a company will qualify for a VCT investment, including with regard to the company’s balance sheet and number of employees.

    There are limits on the amounts a trading company can receive in investment from a VCT, both during a rolling 12 month period and over its lifetime.


    EMI Options

    The most tax effective incentive arrangement for management teams and employees of fast growth UK companies is an enterprise management incentive (EMI) scheme, under which EMI options may be granted.

    For companies that qualify, most employees will be able to be granted share options that have fantastic tax breaks – e.g. no income tax or NICs on exercise, automatic capital gains tax entrepreneur’s relief bringing the effective tax rate down to 10% and corporation tax relief for the employer company. Essentially you can get HMRC to pay for your employees’ incentives. This is not avoidance, rather this is a Government sponsored tax incentive to drive entrepreneurial activity in the UK.

    It is verging on negligence not to have an EMI scheme in place if the qualifying conditions are met.

    Some companies cannot award EMI options and some people cannot benefit from EMI. In such cases, it is sometimes possible to create other types of arrangements which have some of the tax benefits (although not all of them).


    The arrangements are only available to those businesses that are companies with a permanent establishment in the UK and the reliefs are only available to certain UK taxpayers, subject to a number of conditions being met. Further, the reliefs are subject to change. All persons seeking to rely on any tax relief should always check with their own tax advisor.

    Tax reliefs and incentives - latest deals and projects

    View all >>

    Tax reliefs and incentives - latest thoughts and opinion

    View all >>