Seed Enterprise Investment Scheme (‘SEIS‘)
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 (which is set to double to £200,000 from April 2023). 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, trading activities and number of employees, and there are limits on the amounts a trading company can receive as SEIS investments. There are also conditions with regard to the use of the sums invested and the age of a qualifying SEIS company (no older than two years, or three years from April 2023). Funds cannot be returned to the SEIS investors within three years from the issue of the shares.